Evaluating the IPO Window for Small Cap Companies

Is the IPO window open? What should a high-growth private company do to be ready when it is? Prepare your company for going public. Here's how to start now.

November 29, 2023

At Gateway, we’ve seen all types of market cycles. From bull market runs fueled by a highly accommodative Federal Reserve to the current market gridlock brought on by rampant inflation and skyrocketing interest rates.

While our clients don’t expect us to predict the future, they do expect us to make sure they’re ready for when the IPO window does inevitably open.

So, for all the great, like-minded, high-growth private company management teams out there, this post is for you.

Read on for our top three recommendations on what companies should be doing today to prepare (like, literally, right now).

1. Perfect Your Pitch

When markets turn, as they always do, you need to make sure your equity story is bulletproof. That work should begin now.

Crafting this narrative onto the pages of an investor presentation, and then rehearsing the pitch amongst your C-Suite, is paramount.  

Are the problems your business is trying to solve easily understood on the slides? Are you calling out the right KPIs that an investor in your industry will expect? Does the aesthetic of your presentation match the quality of the business you have built?

These are just a few of the questions we ask the companies we work with. Why? Because investors will too. There are too many companies with great ideas that can’t translate their opportunity into a well-conceived investment case. You have one chance at a first impression — make sure it’s unforgettable.

Ultimately, beyond having a strong presentation, you need to be battle-tested for the concerns an investor will bring up. How you prepare for this is arguably more important than the actual words on the page.

Our team of capital markets professionals and communications experts have been in the room for hundreds of these pitches. We have seen many great businesses and talented executives miss the mark on foundational elements of a company’s story. Gateway’s Equity Story Development and Branding & Creative practices were purpose-built for this need.

2. Don’t Wait to Tell the World Who You Are

When a company goes public, oftentimes we encounter a huge backlog of press-worthy news, media angles, and overall storytelling moments that were waiting to be told until a transaction was completed (or maybe never even developed at all).  

While companies need to abide by quiet periods, we think a steady drumbeat of news, executive visibility, media placements, and investor and analyst introductions should be earned and placed many months before a transaction.

Pull quote: Wall Street is a game. Cody Slach, Senior Managing Director, IPO Advisory Specialist.

We don’t want your future shareholders (and existing shareholders, for that matter) to rely solely upon an S-1 filing to learn about your business. The first thing an investor usually does when hearing a new idea is conduct an internet search. What will that search show them?

Create a trail of breadcrumbs in the public domain for an investor to connect the dots between your brand story and your S-1 filing, the latter of which is masked by endless legalese. The true elements of your story are often much more digestible, and accessible, in a Forbes article or CNBC interview.

Our Public Relations team is a group of outcome-oriented storytellers helping clients build enduring connections and trust with their audiences. To be authentic and well-known, this work needs to be developed over time.

3. Pretend You’re Already Public

Lastly, why not prepare an earnings release, call script, and presentation to hold a mock call at the end of the quarter like your public peers? This allows you to build muscle memory while forcing you to respond to challenging narratives that may arise once you’re public. Navigating these obstacles in a private setting will only better prepare you for when you’re public.

A saying we often use is: “There’s a big difference between a great company and a great stock.” Essentially it means: Wall Street is a game.

Companies are valued on the expectations of Wall Street analysts. Great stocks have durable earnings that consistently meet or beat Wall Street expectations. This fuels the Wall Street ratings game and financial algorithms that trade on these expectations. Great companies might in fact be great companies, but if their earnings are inherently lumpy or exposed to huge downside revisions, they’re not likely to be great stocks.

Treat your business as if you were public now and think hard about how each quarter’s earnings would be received by the market.  

Start Networking Now

Additionally, you don’t need to wait for the IPO window to open to start cultivating relationships with investors and equity analysts. Speak with this audience now to not only get awareness out but also understand what they’re saying about other companies and the broader industry. Plus, it’s a great way to refine your pitch and prep for questions you may face on your IPO road show.

The Right IR and PR Teams Will Help You Prepare

In summary, these are just a few things your company can do regardless of the current market cycle. The right teams of investor and public relations professionals will help you start planning now, so when the IPO window does open — you’ll be ready.

The famous phrase “victory loves preparation” pairs quite nicely with the financial communications industry. And we take great pride in making sure our Gateway clients are prepared to tell the world about their great businesses.  

Have questions about taking your company public? We’re here to help.

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