In the first half of our two-part IPO series, Jennifer Flynn, Senior Global Capital Markets Director at Broadridge Financial Solutions, got together with industry leader Yvan-Claude Pierre or “YCP,” to discuss the history of — and their experiences with — IPOs. As a partner and leading public offerings counselor at Cooley LLP, YCP has over 25 years in practice advising clients on hundreds of public offerings, mergers, acquisitions, and other significant corporate transactions across the U.S., Europe, Australia, and Asia. His experience — along with Flynn’s deep industry knowledge — offers the perfect introduction for companies preparing to take their stock public.
In today’s follow-up conversation, Flynn and YCP take a deep dive into the current landscape and IPO best practices. With a full understanding of how the IPO landscape has evolved over the years, here’s a closer look at how to take that knowledge and run with it, making your own IPO the best it can be.
Jennifer: YCP, it’s great to chat with you again. I’m looking forward to digging into the weeds a bit more and providing some essential tools for companies that are preparing for their own IPOs. We ended our last conversation talking about how things were looking in general for 2024. I’d like to start this conversation by drilling down more specifically on the IPO developments that we should all be aware of. Besides the IPOs you’re already involved in, are there any companies that have announced plans for an IPO that you’re keeping an eye on, whether that’s because they might open a floodgate in their industries or some other reason?
YCP: Hopefully, the Rubrik IPO, which priced last month, is viewed as another catalyst for tech IPOs given the shares opened at $38.60 and rose as much as 25% from the IPO price before closing at $37, giving Rubrik a market value of $6.5 billion. Given the tailwinds created in Q1 2024, there will be a few others to watch out for on the East and West coasts, as well as in the Midwest, some of which we represent, but they have yet to flip publicly. There’s a massive pipeline of companies in registration, which means they filed with the SEC, but they haven’t publicly flipped their S-1s. Regardless of how 2024 plays out, I believe that 2025 is likely to be a significantly more active year, assuming certain unforeseen events do not arise.
Jennifer: Let’s talk a little bit more about your experience with IPOs and some of the things you’ve learned. For example, you’ve worked with Broadridge several times over the past few years to help companies achieve their goals.
YCP: We’ve worked with Broadridge on many transactions, not only with respect to IPOs but also with respect to the whole suite of services offered. It’s more of a lifecycle organization that evolves with the company versus a single transaction firm. And more specifically, Cooley has worked with Broadridge quite a lot on the transfer agent and print side. In fact, I recently closed a SPAC transaction where Broadridge was involved as the transfer agent.
One of the places where Broadridge differentiates from other service providers — and something any new company might want to consider when entering the IPO process — is the fact that you’ve taken the lead with respect to the ability to make and process efficiencies with timely changes and work with the client through the entire IPO process. This includes both pre-IPO and post-IPO, whether that’s setting up the Virtual Data Room and files for Typeset Edgar and Print or acting as their Transfer Agent and helping them navigate the waters of their first annual meeting. That’s a unique solution that has tremendous value.
Jennifer: We do work hard to ensure we’re there to guide our clients from beginning to end. That’s one of the reasons why we’re constantly looking at technologies that will help us increase our efficiency, speed up the process, and advance our clients’ needs. I always joke that in this market you need to sleep with your cell phone on your chest because things are happening 24/7. Communication and efficiency are key!
Given this fast-paced environment, how can companies effectively communicate their value proposition to potential investors?
YCP: I’d say it’s all about the story. I think the compelling elements of a company’s story helps reveal how its business differs from its competitors and its total addressable market (TAM). And that story should be told as soon as reasonably possible. Communication with potential investors begins long before the IPO roadshow. Most companies raise a substantial amount of money first and then usually complete what’s called a crossover financing with many of the same investors that will either anchor or participate in their IPO. Companies should use these prior interactions with investors to communicate their differentiated, compelling story. It’s essential for companies to talk to investors earlier on. Gone are the days when the IPO is the first time you meet an investor.
Jennifer: That’s so true. In fact, the entire start-up landscape is changing rapidly, and it’s important for companies hoping for a successful IPO to keep up. For example, ESG. How would you say ESG should work into some companies’ IPO strategy?
YCP: Certain companies are very focused on their ESG story, especially when it comes to consumer brands. With the new SEC climate disclosure rules, I think companies are sort of waiting to see where this all goes, given how the current political landscape is also in flux. That being said, the new SEC climate disclosure rules provide exemptions for “emerging growth” companies — defined as businesses with gross revenue of less than $1.23 billion, and historically, 90 percent of U.S. IPOs have been by emerging growth companies since the enactment of the Jobs Act. Right now, it seems ESG is something companies are doing because they want to do it, and it’s a part of their story.
Jennifer: That fluctuation regarding laws and politics can be really frustrating for pre-IPO companies, especially when they have so many other things to focus on. I think that’s also where working with the right partners comes into play. For companies planning an IPO in the near future, what are some of the most important things they can do right now to overcome potential challenges?
YCP: One of the best things a company could do to overcome challenges is to work with the best service providers. They should be looking for those service providers and law firms that are leaders in the IPO space. To have a smooth process from start to finish is everything. Financial consultants are also important and often overlooked by unseasoned advisors. Some companies always seem to underestimate the need for a financial consultant who works with the company’s finance department and acts as an intermediary between the company and its outside independent auditors. If you have a lot of people around the table, who’ve all “been there, seen, and done that” over and over, that kind of expertise can help mitigate challenges or complex issues that arise. When the SEC sees who’s representing you, they automatically know which firms have been repeatedly through the process before. That’s some assurance that they aren’t going to have any insurmountable issues. The importance of having the benefit of the doubt is something people underestimate.
At Cooley, for example, we’re not all things to all people, but we are well-known as leaders in the tech and life sciences sectors, where we set our focus. We know all the market participants — from many of the management teams and the boards to the investors, bankers and all the industry players. So, we’re able to not only provide legal services but also a lot of the business acumen and know-how, especially with the IPO process. Plus, because of our volume of capital markets transactions, including IPOs, we can tell you how financing terms are changing in the market on a day-to-day basis because we are in the market every day.
Jennifer: This has all been really helpful. Before we go, could you elaborate on how SPACs influence traditional IPOs and what considerations companies should make regarding them?
YCP: I don’t believe SPACs are going to be influencing traditional IPO markets in the near future. I think, given the SEC’s new rules, the SPAC process will be as arduous and thorough as a traditional IPO process. We’re still going to see them, but we’ll see them return to their intended use for small to lower-middle market companies, although much more challenging to complete given the new SEC rules. If you’re thinking about going public and you’re a seasoned company, you’re not going to think about SPACs. In the life sciences sector, you’re always going to have the traditional IPO versus a reverse merger in challenging markets and market downturns. I think the recent market downturn these past two years has really illustrated to potential issuers that they need to most likely take the traditional path to public rather than looking for shortcuts or alternatives.
Jennifer: That’s another helpful bit of advice to keep in mind. As we wrap up, what thoughts would you want to leave legal leaders with that might help them as they head into the IPO process?
YCP: Companies should educate themselves early in the process and bring in some members of the management team, investors, and CFOs, in particular, who have been through the IPO process before.
Also, and I know I’m biased, but I do believe the tech and life sciences sectors will continue to drive the industry, just like they have in the past. Their disproportionate outperformance has attracted investors to those stocks, especially where there is an AI component to their story, and that trend will probably continue as investors look for the next mega-tech stock. The strong returns in those markets will continue to guide investor appetite for more technology and life sciences.
Jennifer: YCP, thanks again for taking the time to catch up and chat about a topic I know we both have a lot of passion for. Hopefully, any companies that are considering entering the IPO process will pick up some of the wisdom we’ve earned over the years.
YCP: Exactly. And hopefully, our paths will cross with them, too.
As the IPO market continues to change and evolve, legal teams need to be aware of the shifts. Working with the right partner can make the difference between being proactive and getting left behind. Reach out to a Broadridge partner today.
