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The Initial Public Offering Road Show
This is part of a larger Initial Public Offering - IPO site provided by Equity Analytics, Ltd.
About Our Company | About Our People On 21 March 1997, Frederic Rosen, CEO of Ticketmaster responded to a question on CNBC that one of the problems facing his company and the poor stock price performance was related to a poor performance when he went on his "Road Show" prior to the IPO. He said that investors just don't understand his company and that he's not getting the appropriate message out to the right investors.
Quite often, company managers do not understand the importance of the "Road Show". Many times it can make or break your IPO.
About one month prior to the actual effective date and the day the company actually becomes a public company, the management team is going to have to go on the road. This is commonly referred to as the "Road Show" or the "Dog and Pony Show".
This is supposed to be difficult and it generally is. It is a test of management's mental and physical endurance as well as their competence. It will involve meetings in several different cities over a short period of time. Management will be questioned by brokers and analysts in the syndication group, as well as other institutional analysts, portfolio managers, and institutional traders.
Part of these meetings is to show off the company to potential investors which will hopefully improve price performance in the aftermarket. However, the other part of these meetings is to see how well the management team holds up under intense questioning by seasoned professionals.
During these meetings the management team has to present all the good and bad information about the company to the participants in the meeting. The management team has to explain what their market position is, how the business plan explains how and what the company will be doing and the impact that it will have. The management team needs to "show off" the high quality of the management team. Keep in mind that analysts consider top management to be one of the most crucial aspects of any company. Some meetings will be large and some will be small. They will take place early in the morning through late at night. Never has the expression, "you never get a second chance to make a good first impression" so true.
Be credible at these meetings. Credibility is far easier to build than it is to rebuild. Don't make optimistic forecasts if asked for them. Be conservative in presenting estimates. The presentation part of these meetings will be rehearsed. However, the question and answer part will be spontaneous. The management team needs to be well prepared, well spoken, more knowledgeable than anyone else in the room about the industry and the competition. And remember that you're not allowed to give revenue and earnings forecasts at these meetings. However, the participants will want to know about historic earnings growth, revenue growth, R&D expenditures, % gain in market share, growth in return on equity, growth in assets, and financial condition. And they are going to ask very detailed questions about your markets, competition, and aspects of the business plan.
Don't forget, it's not until after all these meetings that the underwriter is able to determine what the pricing for the issue might be. It's not until after all the meetings that he can determin