A traditional IPO. A merger with a special-purpose acquisition company. A direct listing. Finance chiefs these days have a range of options to lead their companies to the public markets, with each approach bringing its own set of pros and cons to consider. Bankers, executives and analysts last week offered tips on going public and a host of other issues that chief financial officers may face, at the SoftBank Vision Fund’s FinConnect Summit near Los Angeles.
Speakers talked about what CFOs should look for in a bookrunner and how they should communicate with investors and employees when a company’s share price falls on day one as a public company, among other topics.
The Vision Fund has poured billions of dollars into startups and later-stage companies. Twenty-three of those went public this year, and more than a dozen other Vision Fund-backed companies have announced plans for an IPO or merger with a SPAC. CFOs and other executives of about 80 of its portfolio companies attended the conference last week, including executives from office-sharing firm WeWork, Singaporean app company Grab Holdings Inc. and autonomous-driving company Cruise, which is majority owned by
General Motors Co.
Balance cost control with growth
Finance chiefs should enable growth by allocating funding but also keep a tight lid on costs, said
chairman and chief executive of Vision Fund parent SoftBank Group Corp. “We always have to have that healthy debate. Do we have enough cash? Do we have enough [customers]? Do we have enough liquidity?” Mr. Son said, adding that CFOs play an important role in balancing a company’s expansion with its cost base. “You have to tell your CEO…‘Don’t waste the money. Don’t spend too much money.’ But, when it’s necessary, you’ve got to say, ‘We’ve got the money,’” Mr. Son said.
Select bankers and bookrunners early
Panelists at the FinConnect summit advised CFOs to start preparing a public listing early by making connections with bankers and analysts. “It’s good for you to get to know these potential bankers well before you’re going to go public,” said
a former CFO who now sits on the board of several technology firms. “Getting to understand the analysts is a very important component of going public—who is supporting you on the analytical part?”
When it comes to selecting a bookrunner to assess company financials and market conditions for setting the initial value and quantity of shares, Ms. Ceran recommended selecting a few top candidates. “[Have them] prepare the business section of the S-1 [a securities filing] and say, ‘How would you tell our story if you were us?’” CFOs should coordinate with other executives and the board and choose a bookrunner based on the outcome of that exercise, she said. Finance chiefs also need to be tough negotiators, especially in cases where there are two or more bookrunners, Ms. Ceran said. “I was just transparent and said, ‘This is what we are going to pay,’” she said, referring to a previous CFO position she held.
Stick to your projections
Finance chiefs at companies looking to go public need to build out their forecasting and planning capabilities early in the process, said Laura Onopchenko, CFO of car-sharing platform Getaround. That is important to win credibility among investors, she said. “You have to build long-range plans that have six-quarter forecasts,” Ms. Onopchenko said, adding that providing visibility into future performance is essential for building a relationship with Wall Street. “If you don’t have [Wall Street] on your side, it is such a game changer,” she said.
This remains true once a company is public, said Darlene Pasquill, head of
Mizuho Financial Group Inc.’s
equity division. “Everyone knows the importance of under-promise and over-deliver on growth and earnings,” Ms. Pasquill said. “Set expectations properly, be flexible and update in real time if there’s any material changes,” she said. “You don’t want to surprise,” she said.
Companies need to be able to meet their guidance after they go public, said Eric Hackel, global head of alternative equities solutions at
Deutsche Bank AG
. “We spend a lot of time preparing our companies,” Mr. Hackel said. “You cannot miss Q1, Q2,” referring to the first and second quarterly earnings report after a listing on the markets.
Get your accounting in order
Companies should build out their reporting and accounting functions at an early stage to prepare for a potential IPO or SPAC merger, said Richard Tame, vice president of finance at
Aurora Innovation Inc.,
a provider of autonomous-vehicle technology. “If you make choices when you’re earlier in the journey, then when the time comes, you’re not scrambling around,” Mr. Tame said. Aurora, which has about 1,600 employees in total, with around 23 in the finance function, closed its merger with a SPAC earlier this month and now trades on the public markets.
Focus on the right metrics
CFOs should think about which metrics to use in communicating information about their company and preparing for a listing, said Cassandra Bujarski, managing director at Sard Verbinnen & Co., a communications firm. This is particularly important after a company files its S-1 to the SEC, Ms. Bujarski said. “We see that it’s extremely important to have something out there on the business, whether it’s a key metric that you think is going to be extremely important to investors, or if it’s something about the makeup of your business,” she said.
Companies should actively seek out investors and analysts if there is a problem, for example if they don’t meet their targets after a listing, said
an analyst at Mizuho. “Make sure that you diffuse the issue before it becomes an issue,” Mr. Dolev said, adding that market sentiment is driven largely by narratives. “If you just assume the problem will disappear, it will come back up,” he said. Executives can manage their companies’ messaging further by reaching out to particular analysts after they report earnings. “I think that dialogue helps them fine-tune and refine the message over and over again,” Mr. Dolev said.
What about the stock price?
CFOs should prepare for the first day of trading and have strategies to manage employee expectations, especially if the stock doesn’t pop or if it falls shortly after the listing, Ms. Onopchenko said. “Every employee is going to be obsessed with the stock price,” she said. “We need to get ahead of the day when the stock price is not where you want it to be,” Ms. Onopchenko said.
Aurora’s Mr. Tame recommended trying to avoid getting emotionally attached to a certain share price. “If you look at it every day…you are just going to waste energy,” he said. Still, CFOs need to keep track of their company’s share price so that they can respond to questions from investors.
Finding a new CFO job
It is important for finance executives to stay in touch with peers to find future career opportunities, said
the CFO of Fair.com, a used-car leasing platform. “Don’t call me once every two years,” Mr. Long said. “Keep an active dialogue and grow that network.”
Write to Nina Trentmann at firstname.lastname@example.org
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