The Intelligent Edge - Helen Brown Group

August 11, 2022 By Helen Brown

How to know there’ll be an IPO

Today’s article picks up where Michele Borucki left off last week discussing the intricacies of initial public offerings. Last week we learned how to value them; this week we learn how to pick up on the clues that an IPO is imminent. Thanks for explaining this, Michele! ~Helen

Michele Borucki

Last week we looked at the process leading up to a private company going public, reviewed some pros and cons, and listed some ways to track upcoming IPOs with links to lots of great resources. This week I’m sharing a few clues that indicate a prospect/donor and their private company may be going public soon, talking about how the success of an IPO is measured, and the best timing to give a green light for the solicitation process to begin.

An interesting way to proactively look at our pool of prospects or beloved donors is to monitor their companies for indicators that they may be planning to go public. When a private company makes these plans, there is usually little fanfare or advance notice.

Some of this is due to the SEC requirements in relation to official filings of notices, while some of the silence is simply because a company going public is big news and puts the corporation under a magnifying glass. It’s easier for a company to prepare quietly and anonymously out of the public eye. There are, however, several signs prior to the official notification and filing that can indicate that a company is about to make the leap.

Before making the required SEC filings and announcements, etc., private companies will signal their intentions by taking actions in preparation for the IPO. They may implement procedures to tighten record keeping and accounting in an effort to show they have strict financial policies and internal controls that prevent fraud and mismanagement.

We may not notice that kind of thing, after all, we are fundraising experts, not accountants. But here is the big one for us prospect researchers: they may change up their senior management and begin to hire new executives with proven track records for leading companies through the IPO process.

Another pretty telling one that we’d notice is that they may sell off non-essential business segments and take all allowed accounting write-offs in order to present improved financial statements.

After all is said and done, once a company has gone public, the last thing to do is to judge how successful the IPO was. Researchers get asked a lot by gift officers “how much did so and so make off of their company’s IPO?” The metrics used to determine an IPO’s financial success are the market capitalization (or “market cap”) and market pricing.

Market cap refers to the total dollar market value of a company’s outstanding shares of stock. It can be calculated by multiplying the total number of a company’s outstanding shares by the current market price of one share. The IPO is considered successful if the difference between the offering price and the market cap of the issuing company 30 days after the IPO is less than 20%.

That is a lot of math, and I’m an English major so I tend to the let the professionals handle this type of thing for me (think smarter not harder, right?) Usually by the time we are asked how an executive did post-IPO, a financial publication Forbes or Fortune has already calculated it for us so be sure to check there as well as the SEC documentation!

Now that we know an IPO was successful and our prospect or donor has done really well, we aren’t quite ready to make that major or principal gift ask. Another important data point to be aware of and track are lock-up expirations. These are restrictions which prevent major shareholders and company insiders from selling shares in the company for a specified numbers of days following the event to prevent the market from being flooded with too much supply of a company’s stock.

The timeline for lock ups is usually 90 – 180 days depending on the company. Two resources you can use to monitor these are MarketBeat and IPO Monitor (paid subscription.) We want to be aware of windfalls in advance because this lock-up period obviously affects a person’s liquidity. They may not be able to cash out right away.

The process of taking a private company public is definitely not easy or cheap. It certainly isn’t one that is simple for us to research and wrap our heads around, but I hope with a little help from this post you will be on your way to connecting those dots with a bit more ease.

Once you know that a prospect you’ve had your eye on has done well in their company’s IPO and that their lock-up period has ended, you can confidently add them to the gift officer’s portfolio in hopes of someday (soon!) receiving a gift to further the incredible mission of your organization.

August 4, 2022 By Helen Brown

What to know about an IPO

This week Michele Borucki walks us through the sometimes-confusing world of initial public offerings, or IPOs. How do they happen? What are the steps that companies have to take, and why do they take them? What resources can we use to find out more? Michele explains all! ~Helen

Assistant Director of Research, Michele Borucki

In the prospect research world, we know a lot about the stock market, probably more than any of us liberal arts majors ever anticipated we would need (or want) to know. Fairly early on in our careers we learn to search EDGAR, paid resources, and even company websites for financial filings (though it may take a few years to completely understand which filing is which, and what the heck are those footnotes actually telling us??)

It can take hours of digging at times, through hundreds of different forms to find what we are looking for, but there at the very beginning is the one form unlike all of the others: the form S-1. The S-1, or “red herring”, is the start of it all for a public company, it’s the initial form filed with the SEC right before an initial public offering, or IPO.

So, why do companies even decide to go public? Well, it’s essentially a fundraising method used by companies. They are able to sell deeply discounted shares to investors, then those shares are traded on a stock exchange at a (generally) higher value. The main motivation to pursue an IPO is that these companies can raise capital from the sale of shares to the public and provide liquidity to company founders and early investors and take advantage of a higher valuation.

There are many steps companies have to take to see their name on an exchange and it can take anywhere from six months up to a year. The process looks a little something like this:

Proposal – Underwriters present proposals and valuations, best type of security to offer, offering price, number of shares, and estimated time frame for market offering.
Underwriting – The company chooses an underwriter, (a financial institution that will buy the shares and then sell them on the open market), formally agrees to terms, and signs an agreement with their chosen underwriter.
Team – IPO teams are formed (underwriters, lawyers, CPAs, and SEC experts).
Documentation – Information about the company is put together for the S-1. The S-1 has two parts, the prospectus and the privately held filing information.
Marketing and updates – Materials are created for pre-marketing of new stock issuance. The team markets the share issuance to estimate the demand and establish a final offering price. Underwriters can make changes to their financial analysis throughout the marketing process which can include changing the IPO price or issuance date.
Board and Processes – A board of directors is formed to ensure processes for reporting auditable financial and accounting information every quarter.
Shares Issued – The company issues its shares on an IPO date.
Post-IPO – Some post-IPO provisions may be instituted. Underwriters may have a specified time frame to buy an additional number of shares after the IPO date. Meanwhile, certain investors may be subject to what are called “quiet periods”. The purpose of the quiet period is to preserve objectivity and avoid the appearance of a company providing insider information to select investors. With an IPO, the quiet period stretches from when a company files registration paperwork with U.S. regulators through the 40 days after the stock starts trading.

There are a lot of pros to companies going public. Of course, the capital raised! They usually get great publicity. Companies can attract better management and skilled employees, have an increase in market share, an increase in transparency, and it’s a great exit strategy for founders.

But there are also some downsides to going public. It’s incredibly expensive. While the financial reporting can be a pro for transparency’s sake, it can also be a con in that not only will board members be held to rigorous standards, but periodic audits are required and public reporting can bring on scrutiny from shareholders, which sometimes results in lawsuits.

There are also distractions caused by the IPO process. If the leaders of a company are focused on going public and wrapped up in that process, they may miss opportunities to enhance a product or overlook an up-and-coming competitor. Lastly, there is investor appetite. Not all companies have a large following, so boards have to decide whether or not there will be enough interest in an IPO to make the shift worthwhile.

Proactive research when it comes to our prospects or donors who are involved in an IPO can be really fun! There are some pretty great resources out there to track upcoming IPO’s:

Exchange websites – The New York Stock Exchange (NYSE) and NASDAQ both maintain dedicated sections for IPOs. NASDAQ has a dedicated section called “Upcoming IPO” and NYSE maintains an “IPO Center” section. Exchange websites will also provide access to the official IPO prospectuses.
Google News – Single source for all global IPOs, regardless of the exchange or country where an IPO is listed.
Yahoo! Finance – Has a dedicated IPO section with details on the IPO date, symbol, price, and links to IPO profiles and news items. It also offers performance tracking of past IPOs.
IPO Monitor – Dedicated website that provides specific news for tracking IPOs. Apart from the usual IPO information, it also provides broader market-level statistics under the section called “Current IPO Market Dashboard.”
IPO Scoop – Offers information related to upcoming IPOs. Paid subscribers also get access to SCOOP’s ratings for upcoming IPOs.
Renaissance Capital IPO Center – Maintains a dedicated IPO section that has a weekly calendar for IPO offerings. It also offers other related content such as articles about the largest U.S. IPOs and the largest global IPOs, in addition to dedicated sections like “IPO News” and “IPO Poll.”
And Fidelity has an excellent glossary of IPO terms!

July 21, 2022 By Helen Brown

So you’re going to a conference!

It’s conference season again! The Apra conference (aka #ApraPD2022) is next week and several members of my team are already checking out the app and getting ready for steamy Hotlanta.

It’s been a loooooong time since many of us have been to a conference, and there will be lots of folks going to a professional gathering this year for the very first time. (First timers at Apra traditionally make up about a third of all attendees!)

What can you expect? What should you do to prepare?

BEFORE YOU GO

Download the conference app if they have one. If there’s a place to load in your details (and you’re comfortable doing that) add in your information so that you can share it with others you meet. Look over the agenda, pick your sessions, and get your schedule set on the app so that you’re not making hasty decisions when you arrive. If there’s no app, print out the agenda before you leave home and highlight the ones you’ve decided on.

Pre-arrange a conference buddy or meetup. If this is your first conference with a new professional association – and even if it’s not – it’s always nice to have someone to hang out with at meals. If a colleague you know through work, your local chapter, or social media is planning on being there, arrange to meet up with them for coffee or to have breakfast together.

The hotel meeting space will be cold. Or maybe it will be hot. The vendors hall will be freezing and the session rooms will be stifling. Or the other way around. Pack a sweater or a wrap of some sort. Long pants are advisable unless you’re used to chilly a/c. My go-to is a sweater or blazer over short sleeves.

Pack a lanyard. Sometimes conferences provide lanyards, sometimes they don’t, and using the alligator clip (or safety pin – ugh) to attach a nametag to a top can be awkward at best. If you have a lanyard from a previous conference, bring it along just in case. It doesn’t even have to be the same conference you’re going to! You can take your old BookCon or Comic-Con lanyard if you want to – it might spark a conversation!

If you like or need particular food/medicine, make sure to pack it. Personally, I like having Trader Joe’s nut packs with me at conferences in case I get hungry around 11:00 am. (note: I’m always hungry at 11:00). I usually pack one for each day of the conference and one for the plane in my shoulder bag. I also pack some chocolate just because no hotel room should be without chocolate. And it doesn’t have to be food – I know someone who once had a case of Red Bull delivered to their hotel room before an Apra conference – they clearly didn’t want to miss a single moment!

Pack a mask for every day of the conference. There are going to be a lot of people there and I care about you – please be as safe as you possibly can.

SOON ON ARRIVAL

Do a reconnaissance mission. If you’ve arrived early, go check out the conference venue. Where will the vendors hall and food be? Go find the room where your first session or two will be. If registration is open, go to the desk, pick up your packet, and say hi and thanks to the awesome volunteers. Don’t be shy about identifying yourself as a newbie – pick up the badge ribbon that says “First Time Attendee” and stick it onto your nametag. It will help you and others in the same boat spot each other and make friends.

Go for a walk. If the area around the hotel feels safe to you, get outside and find the closest food/coffee/outdoor space. Is there a store nearby to stock up on things you may have forgotten or want to have in your room? (spoiler alert for Apra attendees: there’s a CVS a block away from the Atlanta Marriott Marquis). The Marriott Marquis has mini-fridges in each room, so you can stock up on snacks or maybe fresh milk for your morning coffee/tea if you prefer that to packets of that white dry powder stuff.

DURING THE CONFERENCE

Go engage with the vendors and check out their products. I know that you hear board members and room monitors say this at every. single. conference, but it’s not just a bunch of words. Without vendors supporting fundraising conferences there wouldn’t be fundraising conferences. And vendors really do have cool stuff that helps us do our work better. So go say hi and don’t be shy about picking up a pen/squishy ball/cool desk item. (Insider tip: they really do want you to take them because then they don’t have to schlep them home on the plane).

Make new friends! Sit at a table with people you don’t know. Say hi to the people sitting on either side of you in the session. As an introvert, I totally get it – it’s not easy. But if you’re on social media, see if you can meet up with folks you’ve only known up to now on Twitter/LinkedIn/Insta, etc. Go to your chapter’s social event, grab a buddy and then go to a vendor party. You never know – you might meet your future colleague or presentation collaborator!

Don’t skip sessions. Seriously, go to all of the sessions you mapped out. It’s easy to get overwhelmed and want to take a break, but that session you skip might be the one that inspires you. Also, your organization has invested in you – show them love for supporting your continuing education.

Do something really fun. Don’t sit in your room – take advantage of the city you’re in and being with your awesome colleagues. Apra attendees: Feeling like afternoon tea at the Ritz? It’s right around the corner. Want to see the Olympic park? It’s 4 blocks away. Fancy a trip in a gondola on Sky View Atlanta, the city’s giant ferris wheel? It’s 5 blocks away. There’s generally lots to see and do within walking distance of any conference, and there’s usually someone else interested in doing it, too. If there’s nothing organized, use the message board to get up a group.

AFTER THE CONFERENCE

Welcome home! Maybe avoid seeing your old grannie or family members with compromised health for a week, and take a test to be sure you’re okay, okay?

Follow up with folks you met. Did you connect with a vendor or make a new friend? Send them a quick email or link up on LinkedIn to solidify the connection.

Report back what you learned. Here at HBG we have learning meetings every third Tuesday of the month. Our 3T in August will be all about the Apra conference and our favorite takeaways. If your department is just you, or if your organization doesn’t have a way of sharing learnings, maybe take some time to collect, write down, or synthesize the key takeaways. Make a list of books or articles that were recommended so that you can have it as a checklist to go from. Even if you’re just reporting back to yourself, it’s valuable to capture what you think is important.

What have I missed? I’ll post this on LinkedIn and you can add your pro-tips there!

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