With the equity markets expected to strengthen in the first quarter of 2018, energy companies are preparing for anticipated initial public offerings.
So, what are the key concerns of management teams planning to go public?
This topic was discussed at recent roundtables hosted by Opportune in conjunction with Nasdaq and Lockton Partners in Denver, Houston and Tulsa. Executives from both public and private companies in the upstream, midstream and downstream sectors shared their experiences, concerns and proposed solutions.
Top Three Takeaways:
Build the “Right” Team
“The IPO is not a destination, but a starting point.” Going public requires a major change in the way an energy company does business, and it’s important to have the right team in place. One fundamental question to ask is “does the current executive team want to run a public company?” Now is the time to start thinking about corporate governance as well, including the composition of the board of directors.
Act like a Public Company Now
Start running your business like you are a public company now by putting processes and controls in place and ensuring they can be executed. Regarding financial reporting, we discussed the growing pains of closing the books in a timely manner to enable the company to meet ongoing quarterly and annual SEC filing requirements. Executives agreed that implementing a well-thought-out public company closing process prior to the IPO is the best practice and will give the accounting team the ability to work through challenges early. Don’t forget to allow time to prepare and review additional information that will be needed for earnings release calls and board meetings.
Attendees also expressed concerns about audits being done timely, with private company audits seemingly taking lower priority than those of public companies. If you feel like your audit happens in a “black box”, revisit your relationship with your auditor and make sure they are aware of your concerns and plans to go public.
Remember - Investor Relations are Key
Savvy communication with investors and analysts is a competitive advantage and there are benefits of adding investor relations professionals to your team sooner than later. While it’s important to listen to your largest investors, be aware of activist shareholders who can have access to the proxy vote through ownership of as little as $2,000 of common stock once you’re public. Investor relations experts are attuned to the views of investors and analysts and will help keep communications on-point and in compliance with securities laws.
Connecting with peers who are going through the IPO process or have recently completed a successful IPO helps bring to light best practices as well as potential road blocks that you may not have considered. If you’d like to learn more about participating in our future IPO roundtables, please contact Amy Stutzman at firstname.lastname@example.org.