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Post flotation challenges - 19/11/14

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Bailey Fisher hosted its latest CFO Dinner on the subject of ‘Post Flotation Challenges’ and were delighted to welcome Chris Mayo from LSE to chair discussion, with Max Hartley from City brokers, Cenkos and Mark Edwards from City PR Firm Buchanan invited to share their knowledge on the issues that can arise following a listing.

In a candid discussion, guest speakers and the 20 CFOs covered a lot of ground, from the importance of planning for life after flotation, beginning with getting the right IPO project team in place, and being able to back fill the CEO and CFO with high level cover to enable ‘business as usual’ all the way through to what happens if you don’t hit the expected numbers.

It was agreed that a company needs to be able to build a story.  If strategy can be delivered then growth, and additional external investment to fund that growth will be available from investors as a result.  Hitting the numbers is of course critical, but so is the ability to communicate any variance both to financial performance and also to the strategy.

Businesses must be able to tell their investors why things change, and for there to be no negative surprises. Interestingly, there was a general feeling around the table that ‘positive surprises’ are not always seen as positive, but more an indication that there isn’t a deep understanding of the business, and that by continually outperforming the stated objectives/forecasts, it can reflect negatively upon management’s credibility.

The  important considerations when pitching and setting the price of an IPO were of course on everyone’s agenda, and a discount to fair value of 10% was generally seen as sensible, leaving the stock sufficient room to continue to rise, but achieving a sensible, sustainable outcome for the management, the business and its shareholders.

The topic of social media was raised, and Mark was keen to advise that a social media policy, and an agreed/designated ‘poster’ was very important. He advised to approach social media with caution. Steer clear of blogs, tweet factual information only and stick to facts. Never respond nor take opinion. He went on to say that IR relations are often overlooked, the time and burden taken by a CFO may well be better served in the hands of somebody with a defined role, and both Max and Chris agreed that often the IPO PM is the best resource to take this role on.

In conclusion, for a successful flotation, management need to be incentivised and motivated to stay, the valuation must be sensible and it is vital that there is a platform for immediate and sustained growth. As Max sagely said ‘Everyone needs to leave the party with a balloon.’

The CFO Dinner was sponsored by Deloitte, Silicon Valley Bank and Taylor Vinters.

Attendance at the CFO Dinner is by invitation.  If you are a CFO in the technology sector and would be interested in finding out about future events, please contact Andrew Moore, Partner: Finance & Operations at Bailey Fisher Executive Search.

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