Business Insider
- Companies face challenges like shifting investor expectations and regulations when preparing for IPOs.
- Staying private longer helps companies better prepare for IPOs.
- Experts from Hinge Health, Fidelity, and more participated in a Business Insider virtual event to offer advice on IPO strategy.
Fidelity Investments is a sponsor of “Beyond the Bell: Navigating The Path to Public.” This article was specially created for Fidelity Investments.
As companies prepare for an initial public offering (IPO), they face “shifting investor expectations, new regulatory demands, and the challenge of keeping culture intact through the transformation,” said Melike Atil, a financial journalist and founder and CEO of Mel Strategies, kicking off Business Insider’s “Beyond the Bell: Navigating the Path to Public.”
The event, held on September 30 and sponsored by Fidelity Investments, brought together a group of experts to discuss best practices for a successful IPO transition.
Companies today are staying private for longer, so they have “a longer runway to get ready for their IPO,” said panelist Emily Cervino, head of industry relationships and thought leadership at Fidelity Investments. “That might be hard for founders and investors and employees at times, but the silver lining here is that the longer a company is private, the better equipped they can be for IPO.”
Here’s some of the experts’ advice for companies preparing for an IPO:
‘Overpreparing pays off.’
“Don’t underestimate the need for focus,” said panelist Bianca Buck, head of investor relations at Hinge Health, which went public in May. She said the company brought in experts to lead their IPO process, so employees didn’t have to manage it alongside their day-to-day responsibilities.
“That allowed us to really be thoughtful across the board,” Buck said. Hinge Health started by running quarterly reviews to better understand how to discuss the business externally, build multiple-year timeframes, and proactively meet with investors.
“You can’t dictate the market, but you can make sure you’re operationally and strategically ready,” she said.
New public companies also face regulatory reporting, along with shareholder and disclosure requirements, which can be overwhelming, Cervino said. They also need to consider compensation strategies for employees. And many need to seek help with that.
‘It takes a village.’
“Companies underestimate what is required to become a public company,” said panelist Raul Villar Jr., CEO of AuditBoard. It can take 18 to 24 months, and it “takes a village,” he said.
Company leaders must think about having the “right people in the right seats,” the right tools and technology, and the right compensation packages to support talent retention, Villar said.
Finding that “balancing act” can be difficult for CEOs to manage themselves, Villar said. It’s crucial that they surround themselves with the right investors to guide them through the process successfully.
‘Your needs change dramatically.’
Going public is an exciting journey, Villar said. “But the minute you go public, life changes, and you have to be able to systematically deliver results on a quarterly basis while rewarding your associates.”
Also, whatever companies initially decide to use for a capitalization table or equity plan management for their IPO, it will likely evolve after going public as their needs change, Cervino said.
Many rely on captive brokers for help, but it’s important to find the right one for the company, she said.
“You need a broker involved to unlock liquidity,” Cervino said, so make sure you’re “working with a broker and a dedicated team with expertise in this space.”
‘Ensure employees share the benefits.’
In his previous role, Villar was CEO of Paycor, which he helped take public in 2021. As part of that process, he said the company was dedicated to making sure employees benefited from the success of the IPO.
After each quarterly public call, company leaders explained to employees what went well and not so well, what investors think, what the company forecasted, and how everyone’s daily jobs were tied to its success as a public company, he said.
IPOs are often “wealth creation opportunities” for employees, who often need help with financial and tax planning and charitable giving strategies, Cervino said. The right partners will enable you to “deliver excellent service to your employees who really are what brought you to IPO in the first place.”
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