I’ve got my audited accounts done, historical revenues are good – so I’m ready to IPO… right?
Well, maybe. Past performance looks good, but where does your line of sight take you (and investors) and are you really ready to kick it up to the next level?
A glance at ASX’s Upcoming Floats list (published on their website) suggests that many of the proposed listees are struggling to hit the mark. Of the list of 40, two applications have been withdrawn and approximately 45% are ‘TBA’ with listing dates yet to be determined. Some of these have expected offer close dates some months past.
Going to IPO is a big risk. Taking your company public too early, or without the internal ground work being solidly laid can be devastating.
The stakes are high, so here’s some fast tips on the absolute MUSTs before the risk/reward profile makes sense:
- You have built predictability into your company before your IPO.
- You can forecast with reasonable accuracy – missing last period’s financial guidance, even by a small margin, can wipe off hard earned value. (Remember, even if you don’t intend to publish forecasts in your prospectus, ASX may still expect to see them to understand your suitability for listing).
- You have good underlying growth potential and a strong probability of (and plan for) this being realised in the post IPO environment.
- If you want your share price to hold (and grow) you will need to demonstrate scalability. Even if you don’t have the big revenues now – ensure that you can show the vision and line of sight to get them.
- You have the right leadership – the CEO and CFO will be put to the test in the public environment. A good reputation for being reliable custodians of capital, and for positive and strategic leadership will stand them in good stead.
- You have a good advisory team – this one’s a given!
- You have an engaged internal management team – an internal ‘Listing Champion” (or Champions) if you like. Without this, even the best advisors will struggle to deliver your end-goal – not to mention the time and cost blow-outs that will almost certainly ensue.
- You have rigorous systems of governance and financial reporting – public company periodic and continuous disclosure will keep you on your toes and can be relentless – is your Company Secretary up to the task?
- You can withstand competitive pressures – after all there is no where to hide on the public market.
Of course there are many more economic and other factors that can impact the success of your float, but without the above fundamentals it is unlikely that you will ever find out.
Remember, an IPO is only a good exit if the company is going strong after the release of Founder’s shares from escrow (often not until 2 years after listing) – and the market perceives that there are good prospects to sustain this.
In other words – aim to go long. Your IPO can’t be your end game!