investor sentiment toward stocks has been negatively influenced by the
recent volatility in the financial markets, interest in IPO's has remained
The number of global IPO
filings in 2010 is about 120 and indications are that there are many to
follow. Of the companies that already have filed, a staggering 65% have
come from Asia, with China leading the pack. So the uptick in filings
year-to-date is a global phenomenon, which speaks – in part – to the
resilience of the global economy.
Asia, Europe or North America – the benefits of going public are fairly
universal: greater and more inexpensive access to capital, enhanced
opportunities to pursue mergers and acquisitions, increased liquidity for
shareholders, a stronger corporate image and another tool to incentivize
executives and employees.
A benefit of being a public company is the opportunity to earn
significantly more interest and coverage from business and financial
information channels –major newspapers, business magazines, TV, radio,
financial and business web sites and other media outlets.
However, the benefits of enhanced publicity comes with the increased
responsibility of communicating appropriately – leveraging newfound
media attention to support strategic business goals but all the while
playing by fair market rules and maintaining corporate transparency.
Following are a few guidelines to help you become aware of how to take
advantage of the benefits and avoid the obstacles.
LEARN THE RULES
Media relations is vital if you know the rules. While an effective
media relations program can help increase demand for company stock, newly
public companies learn quickly that the rules of the road are infinitely
more complex than when operating under the protection of private
1. Audiences Change
Once a company lists its shares on a public exchange, its key
stakeholders extend far beyond media, market researchers, customers,
business partners, and employees to include financial analysts,
shareholders, shareholder interest groups, and government regulators.
2. Scrutiny Increases
Not only does the communications landscape scale once a company goes
public, it also has the potential to become more hostile. Public
companies often come under intense scrutiny and attacks in traditional
as well as new media, such as in the blogosphere, which can provide
forums for “watchdog investors” and disgruntled employees.
3. Regulations Prevail
Quiet period rules strive to lower company awareness in the market, just
as media and public interest may be picking up. The cost of
noncompliance with quiet periods and numerous other restrictions can be
devastating. Regulation Fair Disclosure, known as Reg FD and
Sarbanes-Oxley can be daunting, and a company must be sure to fit its
strategies within these regulations.
A NEW APPROACH
If a company's stock exchange senses hype in the media, the exchange can
ask the company to temporarily retract its offering. While second
chances do exist, filing for an IPO takes significant resources, and can
take away focus from day-to-day company operations. There's a premium on
doing it right the first time.
New public companies can avoid costly missteps by adopting a new
communications approach that addresses all stakeholders and encompasses
all pertinent communications disciplines.
1. Employee Education
Employees are an especially important group. Experience has proven that
employees are more motivated when they clearly understand company
actions and decisions and have a sense of personal stake in the outcome.
The employee communications discipline can take the form of a program
aimed at educating employees on behavioral changes and expectations
within a newly public company. For example, once a company goes
public, employees have no right to material information before other
2. Using Communications Teams
Investor relations, corporate affairs, public affairs and crisis
management must be equipped to manage and contain media reactions during
turbulent times though the rapid dissemination of accurate,
comprehensive information. It's much easier for a company to keep its
credibility than to rebuild it.
Communications team members need to function as strategic counselors to
management teams and ambassadors to broader staff. They need to clearly
understand and advocate the subtle differences between media activity
that is advantageous and “safe,” versus potentially risky and
damaging during a quiet period – helping to maintain and build company
awareness in the market while simultaneously abiding by new regulations.
3. Social Media
Social Media as practiced with tools like Facebook and Twitter creates
an entirely new set of uncharted disclosure issues. On one hand,
companies may opt toward transparency and provide information in direct
opposition to fair and equal disclosure requirements. On the other hand,
some companies simply restrict using social media for investor
communications, despite the widespread popularity and advantages of
these media in crisis situations.
Despite the desire for
transparency, we advise clients that corporate legal and IR teams must get
involved in social media to protect the company from violating disclosure
requirements. The risks simply don't outweigh the benefits.
Barbagallo is a partner at 3Point
a global communications consulting firm specializing in creating
content centered public relations campaigns for technology brands.
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