6. Life as a Public Company 53

Maintaining investor enthusiasm
Once your company has been taken public, considerable effort must be expended to maintain its market position. If investor enthusiasm for your company is not maintained, trading will decline. Should that happen, and as a consequence your company’s shares are thinly traded, the benefits sought from the IPO (such as liquidity through a future secondary offering) will not be realized. Thus, effective distribution and support of the stock, as well as continuing security analyst interest, is necessary after the IPO.
A strategy for after-market support can be determined with the assistance of a financial public relations firm. This strategy usually includes choosing an individual within your company to handle shareholder relations. This process
ensures that your company will release information that is uniform and accurate.
A public company’s performance, as perceived by the market, is reflected in the value of its stock. Management faces the pressure of balancing short-termproductivity with long-term goals. Negative developments, such as the release oflower-than-expected earnings, may adversely affect the stock’s value. Management will need to ensure that all communications with external parties
explain fully the results of the company. This transparency in reporting will in turn create greater market trust.
Earnings are not the only factor that affects the public’s perception of your company. Even after your company goes public, it should strive to maintain (or improve) the characteristics that it desired to possess prior to becoming a public company.
These characteristics, modified for a post-IPO company, are:
Is your company demonstrating a sustained or increasing growth rate that is high enough to attract/satisfy investors? Your company must continue to grow at a rate satisfactory to investors; its share value will be determined to a large extent by the earnings potential of your company.
Are your company’s products or services highly visible and of interest to the consuming and investing public? Your company should project a positive image to its investors, customers, and community. This is important, since the attitude of the public may sway the stock’s value.
Is management capable and committed? Management plays a key role in the way a company performs; therefore, it is essential that management remains innovative, committed, and capable.
PricewaterhouseCoopers LLP Roadmap for an IPO
53

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