Page 144 - Initial Public Offering - An Introduction to IPO on Wall Street

Although this example is not unusual, it indicates that the priorities and objectives of board
members often do not match with the medium to long-term objectives of an organization.
Sadly, working through this time of discussion on whether or not to go public can lead to
unforeseen short-term repercussions of mishandling the business.

In contrast to the management of board members of private companies driven by a potential
liquidity event, public markets (while comprising of thousands of viewpoints) are sufficiently
powerful to usually achieve consensus.

Public investors eventually want a clear and productive communication approach with a degree
of accountability that helps them to understand the company's risks. If management can achieve
results reliably based on what has been conveyed, investors will provide the organization with
a favorable valuation given the firm's predictability.

If and when outcomes miss the mark, the response of the investment community is much more
forgiving than one might anticipate. While high-quality investors recognize that businesses are
not flawless and that quarterly losses are unavoidable, a message that is constantly contrary to
the fact will not be accepted.

While this may sound like an overly simplistic explanation, by speaking the truth and
maintaining transparency, management's aim should always be to preserve credibility.
As it applies to the COVID-19 pandemic, a recurring theme that executives of private firms are
concerned about is the increased interest of public investors about the effects of COVID-19
and how the business plans to come out of it.

Many executives in private companies today tend to invest as little time as possible on the
consequences of COVID-19 and as much time as possible on the business’s long-term
prospects—and rightfully so.

Intriguingly enough, private firms have a misunderstanding that, during an IPO process,
COVID-19 would dominate the debate, leading to a lower valuation. The reality is that public
investors will want to analyze the short-term risks of the business properly but will value and
have much more interest in the long-term possibilities.

Public investors would be more likely to look towards a more normalized 2021 and beyond if
management has done its job and adequately conveyed the risks of COVID-19, saving a lot of
time that investors may spend contemplating the effects of COVID-19 and how the business
plans to come out of it.

7.2 Advice on Timing Your IPO
Most of the timing problems associated with your IPO pricing, such as industry
competitiveness and VIX levels, are not within your control. Although these factors cannot be
controlled by you, understanding them will help you to know when IPO windows are ‘open’
and when it might be safer to wait.

When considering the variables that impact IPO timing, your business can also utilize the
experience of your underwriters. Your underwriters can advise you on timing variables specific
to the situation of your business.

7.2.1 Delay If Necessary
One way to avoid unfavorably joining the market is to get into a position that allows you, if
possible, to postpone your IPO. If you have a vital need for money, you may have no option

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