What is an initial public offering (IPO)?
An initial public offering (IPO) is one of the methods that companies can use to go public – which will make its stock available to retail traders and investors. The company will decide how many shares it wants to offer, and an investment bank will suggest an initial price for the shares based on the predicted demand for them.
It should be noted that trading or investing in IPO shares can be riskier than getting exposure to established stocks, due to the unpredictability of the new listing.
BRAND and IPOS
However, according to Millward Brown Optimor vice-president of EMEA Anastasia Kourovskaia, all too often companies do not understand the value of their brand when looking for investment. “Marketing and brand have a tremendous role to play in investor relations; in generating interest, eliminating uncertainty and thus driving a higher price,” she says. ”Companies sometimes don’t realise that there is inherent value in their brand and that the brand is as much, if not more, of an asset to the company than the buildings and land that it owns.” Therefore, companies with a strong brand have consistently higher share prices and are less affected by stock market turbulence.
“A good IPO should have a fantastic marketing plan to talk to the investors for the next six to eight months and explain what will be happening, why it will be happening, where the money raised will be going and why it is a good idea”
No matter how companies prepare for an IPO, they should not underestimate the value of their brand and the effect that powerful marketing can have in creating a credible brand, both before and after going public.
The literature investigating the interface of marketing and finance is ever expanding and confirms that marketing activities do influence the market behavior of firms. Amit Joshi, Professor of AI, Analytics and Marketing Strategy and Dominique M. Hanssens, expert in competitive and strategic issues in marketing. (2010) hypothesize that marketing spending not only impacts firm value indirectly by increasing profits via increased sales but also by directly increasing the intangible value of the firm, an increase directly reflected in the firm’s valuation
Moreover, Xueming Luo , Founder/Director of Global Institute for Artificial Intelligence and Business Analytics finds that an increase in marketing intensity in the pre-IPO period helps reduce information asymmetry and results in lower underpricing.
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According to Ruchika Rana Malhotra , Founder and CEO of RepliCM, ever so often, companies—some that have been in the business for decades—that have started their IPO journeys only to realise that their brand is not strong enough to attract individual investors. Some of these companies are established players in their segments. But marketing has been of little interest to them because the revenue was growing and profits were decent.
Now, with a deadline to do an IPO within 12 to 24 months, several such companies want to establish a brand name as quickly as possible and are thus forced to make heavy investments to achieve this goal.
According to Ruchila Rana Malhotra, these processes could be much easier and far more streamlined if only marketing was seen as an important function from the start.
In fact, even if we leave an IPO aside for a moment, research proves that having an established and well-known brand improves cash flows and profits for a business. Indeed, a 2019 white paper by New York-based Marketing Accountability Standards Board said : Increases in customer brand strength can translate into several advantages in the marketplace: a higher unit market share as people will choose it more often over other options, a higher price point as customers will be willing to pay more for it, and increased distribution as retailers are apt to carry the brands people want most. This results in a greater velocity of sales given the size of the category and a higher margin for each of these sales. Together these lead to greater operating cash flows for the firm.
IPO status and marketing best practices
Marketing and brand building do not need to include a multi-million-dollar annual commitment or high-profile hiring. There are, in fact, small steps that can go a long way in helping most businesses—big or small, private or state-owned, startup or legacy—ensure they’re IPO-ready always.
Build an image: It may not be important to be a household name, but it is important to be a trusted brand. Having an established and trustworthy brand name can go a long way in making both retail and institutional investors believe in you. Of course, there is a lot of financial due diligence that goes into making an investment decision, but a good brand image can make a company stand out in a crowd and pull a potential investor’s attention.
Everybody needs marketing: Very often, the leadership teams of business-to-business (B2B) and business-to-government companies feel it is not important for them to invest in building a public image. After all, their clients know them and that’s all that matters. But if you look at the top B2B companies across the world, they are brands that would have at least some recall even among those who have never done business with them.
Create a digital footprint:
In today’s savvy world, the first thing most people do when they hear of something for the first time is to look it up on the internet. The top results that Google throws up when a company’s name is searched are like the critical “first impression.” This impression must at all times—IPO or not—reflect what the company stands for. An impressive digital footprint will not only please investors that a company is actively wooing, but also catch the attention of others who may be looking for investment avenues
A communication dossier is as important as a financial dossier:
Before a company launches its IPO, its leadership spends several months finalising financial presentations and projections that they would share with regulators and bankers. But in all this number crunching, an important aspect that is often overlooked is the need to tell your story. Nothing connects people better than real stories told with passion. Having a well-planned communication dossier handy at all times can set a brand apart. Such dossiers need to be thought out strategically so that they share enough information without overwhelming the receiver.
Sources:
https://www.marketingweek.com/going-public-ipos-and-the-power-of-the-brand/
https://www.imaginisbd.com/where-does-marketing-sit-in-the-ipo-process-front-and-centre/
https://qz.com/india/1978858/how-brand-building-marketing-can-contribute-to-a-successful-ipo/
https://www.linkedin.com/pulse/marketing-strategy-pre-ipo-companies-e%C3%B3in-brazier/
