10 steps to IPO success
As China goes global, good investor relations are becoming an increasingly important issue for Chinese companies seeking to list on foreign markets, says Rachel Catanach
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 In uncertain times, investors will seek out leadership – and companies – that are willing to engage in a public dialogue about the future. Studies show that companies see a bigger impact on revenue and stock price from positive versus negative messages.
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While the number of Chinese companies pursuing IPOs in Hong Kong has increased relative to earlier in the year, when the pipeline was almost completely dry, the mixed rate of success suggests that investors are becoming more selective about where they put their money.
This is not surprising given the events of the last year and the challenging global environment. In today’s market, an unprecedented level of scrutiny is being cast on all companies wishing to attract investors or improve shareholder value. So what should a company do to ensure it gets a good hearing from potential investors?
It has never been more important to review your company’s investor relations strategy to ensure the right messages are being communicated to the right people at the right time. In this environment, those organizations that follow best-in-class investor relations practices will have an edge on those that do not.
Challenging economic situations should not be an excuse for companies to hide their light under a bushel. In uncertain times, investors will seek out leadership – and companies – that are willing to engage in a public dialogue about the future. Studies show that companies see a bigger impact on revenue and stock price from positive versus negative messages.
Here are ten things your company should do – irrespective of whether it is considering an IPO or seeking to improve its value advantage:
1) Review your investor story. If you are a mature company emerging from an economic crisis, your investor story likely needs revitalising. Discussions about how your company managed through the downturn should also include strategies for future growth. In Asia, investors want to know how companies are taking advantage of the economic upturn and various government stimulus packages.
If your company is considering an IPO, it is important to identify your company’s key points of differentiation. Investors are not only interested in the fundamentals, i.e. p/e ratio, balance sheet, profit growth, and cash flow, but also how your company has demonstrated leadership in areas such as compliance, governance, and disclosure.
2) Assess leadership credibility. Communicating a company’s depth of expertise can sometimes be even more important than having a strong leader. In China, many companies are built on the personality of one person. This works well in a strong economic environment but is not sustainable over the longer term, particularly if a company has global aspirations. Savvy investors want to understand senior management’s track record including how it has managed its business through both upswings and downturns in the economy. The strength of a company’s leadership story is critical in gaining investor confidence and sustaining long-term shareholder value.
3) Secure senior management support. Senior management commitment is critical to a successful investor relations programme. Leaders must not only understand and buy into the company’s investor story, they must also be available to maintain an ongoing dialogue with key investor and analyst audiences via industry conferences, investor meetings, and telephone briefings.
4) Ensure employees understand your vision and strategy. Establishing a cohesive internal communications programme is critical to a successful investor strategy. While companies take great care in putting together a team focused on external audiences, many in Asia do not support a similar function that targets internal staff. Employees can be a company’s greatest advocate. A first step to conveying messages convincingly to investors should be ensuring your internal audience understands, supports, and is able to articulate the company’s vision and strategy.
5) Communicate innovation and R&D successes. While R&D often receive less attention in difficult economic times, studies show that Global 500 companies that focus on organic growth through innovation are often better positioned to profit in a downturn. In the three challenging years following the 2000 recession, R&D-focused companies experienced a faster rate of growth in sales and a significantly better return on equity than their peers. Traditionally, Chinese companies are not considered strong innovators; however, many are becoming more so in their processes and product development. Communicating the innovation journey – even if a company is in its initial phase – will help to create a unique investor story and build brand equity.
6) Understand your investor audience. To create a best in class investor relations programme, companies must know their investors. This may include research to understand, for example, how they pick their stocks or categorize your business. Once the right investors have been identified, they should be segmented to ensure effective communications to each group.
7) Engage the broader community. Never has it been more important to get off the sidelines, engage with the broader business community, and participate in discussions about regulatory changes. Regulators traditionally focus on individual firms. Companies must help lawmakers to connect the dots at a systemic level in a way that does not create unintended consequences for its business. As a part of the policy process, your company will have a better chance of turning regulators away from knee-jerk legislation and helping them assess the impact of their actions on your business.
8) Monitor the online space. Most companies employ sophisticated media monitoring processes for traditional media but have neglected to devote the same attention to the online world. The Internet is changing the way perceptions are made. A negative online story – true or not – can undermine your company if it is not quickly identified and addressed.
9) Focus on customer service. Investors are also customers. Often, the first sign of distress at a company can be felt at the customer service level. Do not neglect this vital contact point for investors and customers alike, and ensure service representatives are well trained and have a process for delivering feedback and inquiry trends to management.
10) Turn economic downturns into positive stories. As a company emerges from a dynamic economic environment, it is okay to talk about once taboo subjects such as downsizing. How did your company weather the storm? What customer and employee-focused activities drove your success? What lessons can your company share? Take the time to craft your story and talk to investors about how lessons learned from the economic crisis laid the foundation for your company’s future success.
Rachel Catanach is senior vice president, partner and general manager of Fleishman-Hillard Hong Kong
The Thought Leaders Forum is brought to you in association with Fleishman-Hillard, one of the world's leading communications consultancies
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