Preparing for an IPO? Train employees on 3 areas of public company disclosure
This year is on track to be one of the best ever for the IPO market, with $9 billion raised in January alone – the most capital ever raised in January on record. The momentum grew in the second quarter and is anticipated to continue throughout the remainder of the year. In fact, in a recent interview, New York Stock Exchange President Stacey Cunningham commented on the strength of the market, noting the NYSE alone has raised $19.3 billion on 41 IPOs so far in 2018, and expects a number of companies to come to market next month and even more at the end of the third quarter.
For the investor relations leads helping companies navigate the IPO process, it is a busy and exciting time to say the least. So much to do as you prepare your organization for the moment shares begin trading. One crucial component is training the management team and employees on what it will mean to be a public company and the expected impact on their roles. For some groups, the training should focus on how and when to talk to investors, what you can say to various stakeholders and when you can say it, and the pitfalls of not carefully following the rules. For employees who are not authorized spokespeople, the focus should be mostly on the “don’ts” and the importance of complying with company policies.
We recommend conducting one or more training sessions prior to going public to focus on the following areas:
1. Communicating in Accordance with Regulation Fair Disclosure (Reg FD).
C-Suite executives and those named as company spokespeople must have a solid understanding of Reg FD and how it impacts their communications with all company stakeholders. Training should help provide clarity on what they can and cannot say, as well as the implications of violations for both companies and individuals. It is also important for employees to have a general understanding of public company disclosure regulations and the need to be mindful of how and when they share company information.
2. Complying with Your Insider Trading Policy.
Management and employees need to understand that having access to material non-public information comes with a responsibility to understand SEC rules on timing and insider trading. Conversations with other employees, family members and friends will now require a different level of awareness and sensitivity. We should all be wary of what happened to Martha Stewart and several C-level executives at Equifax.
3. Protecting Confidential and Competitive Information.
All employees have a role in protecting a company’s reputation and competitive position in the market. Becoming a public company is also an opportunity to remind employees to protect information that, if disclosed, may harm the business or help the competition in a substantial way. The company should have a disclosure policy, train to it, and require employees to sign annually to acknowledge compliance.
While training is imperative for companies preparing to go public, offering a “refresh” session can also be valuable as you onboard new management team members, SEC regulations change and trends (e.g. social media, cybersecurity, etc.) emerge that have an impact on how you communicate.
Contact me if you are interested in receiving a list of Public Company Disclosure Do’s and Don’ts to share with your management team.