To help leaders at late-stage technology and biotech companies prepare for a planned public listing, Fenwick capital markets partners Ran Ben-Tzur and Per Chilstrom, and associate Joshua Damm, sat down recently with John Orta, Chief Legal Officer and Head of Corporate Development at Nextdoor (NYSE: KIND), and Raj Aji, Chief Legal and Compliance Officer at BILL (NYSE: BILL), about the strategic steps a company can take 18+ months prior to listing day, including how to think about public company readiness in today’s uncertain climate.
The wide-ranging conversation spanned how to choose the best route to the public markets for your company, the importance of educating employees about public equity and equity compensation, working with transfer agents and software tools to consider for managing the going public process.
Key Takeaways Included:
- Alternate Routes to the Market. The IPO process has evolved since alternate listing transactions took the spotlight in 2018, as Spotify, Virgin Galactic and Draft Kings, to name a few, eschewed the traditional IPO route. In response to the heightened appeal of the direct listing and de-SPAC transaction, the traditional IPO process has evolved to include modified lock-up structures and increased company involvement in investor selection and transaction pricing. Ultimately, the route a company chooses will depend on its objectives for the offering and the right choice for one company might not be the right choice for another company.
- Think Longer Term. With 97% of last year’s technology focused market entrants trading below their IPO price today, many companies are currently hesitant to join the public markets. Despite currently depressed prices, companies should be thinking ahead about how they can best position themselves to take advantage of the next open IPO window because preparing for an IPO could take up to 18 months.
- Public Equity and Equity Compensation: No Such Thing as Too Much Information. The importance of communicating with, and educating, employees around equity compensation, the potential for stock price volatility, what happens when IPO lock ups release, the effects of pre-IPO stock splits, restricted stock units (RSUs) and other important topics cannot be overstated.
- Educate Investors About Your Company. It’s never too early to begin conversations with investors and educate them about your company. Companies that are engaging with investors will be “top of mind” when market conditions change. Learn from investors which company metrics they find the most valuable, then track and report on these metrics internally so that when those metrics are publicly disclosed they will support your company’s story. Start preparing quarterly earnings reports as a private company, to build that public company muscle in advance.
- Plan For a New Board Makeup. The composition of your company’s board of directors, as well as the chairs of its various committees, should be decided months before a going-public transaction. Companies should aim for a diversity of expertise and backgrounds, create a skills matrix and have an audit committee chair on board.
- New Tech Tools. A newly public company will have new reporting requirements, new stakeholders and a range of new procedures to learn. The business software that suffices for a privately held company may not properly serve a public company, so executive teams should get acquainted with new software and technologies that they may want to use. The speakers weighed in on what worked and didn’t work at their companies.
Watch their full discussion here.
Fenwick is proud to have advised NextDoor and BILL in their public listings. Considering going public or taking steps toward that milestone? We’d be happy to connect. Please reach out to Ran Ben-Tzur, Per Chilstrom or any of your Fenwick contacts.