Our Investor Engagement Counsel Christine Bowen explains why entering the public market is not the end game.
When the business grows, we intend to list the company. Being a public company shows “we’ve made it!”.
There are many valid reasons why company founders might aspire to list on a public exchange – access to more capital and/or the release of invested capital; profile and improving opportunities for growth - and these reasons are fostered by a vast array of companies that have successfully made the leap from private to public, such as the recent listing of Prospa Group (ASX: PGL)
However, many aspirant companies fail to recognise that listing is not the end game. In fact, it is simply the first step towards the start of a new journey in a company’s history and one that requires an increased level of accountability and stakeholder engagement.
Prescriptive listing rules and corporate regulations drive an increased level of accountability. While these rules are often unfamiliar and undoubtedly onerous for companies, they are in place to serve the interests of shareholders and other stakeholders and are fundamental to market integrity and investor protection.
So, there’s no doubt, compliance with the rules and regulations is legally adequate, and many listed companies do just that. But is it enough? We would advocate for more.
The key, and often challenging first step however, is accepting that being a public company shifts expectations. No longer can the business, once privately-owned, “fly under the radar”. Stakeholders, be they shareholders, employees, regulators, the community, or the media, expect to varying degrees, to be kept informed about the company’s strategy, operations, and financial results.
Enhanced stakeholder engagement has the potential benefits of driving broader interest in a company, better valuations, and a quality investor base. The latter is key in providing support for growth plans, future capital management needs, and business challenges such as market downturns, industry disruptors, or corporate actions.
So, what does a stakeholder engagement plan look like?
Like corporate strategies, every stakeholder engagement plan will, and should be specific to a company. However, there are key elements that will form the basis of any sound plan.
A recognition the company is owned by its shareholders. This recognition typically sets the basis on which the company communicates with its stakeholders at all levels, in some instances even contributing to framing the culture of a firm.
A commitment to communicate on a regular basis - typically quarterly but always in a timely manner. Most companies will, by necessity, comply with regulatory expectations, including continuous disclosure obligations. However, often meeting these obligations goes no further than reporting financial results. An enhanced engagement strategy looks to create an ongoing dialogue about a company’s strategy, financials, and operations through a variety of communication platforms.
Set time aside to meet with shareholders and the broking community. If not managed properly, this can be a time-consuming activity – but it does not need to be. Typically, there is significant value for a company, including an understanding of market views of business performance and governance, the potential to grow the investor base, and hear ‘street talk’ about competitors.
Consistency. Communicating with consistency and regularity provides the opportunity for a company to set and report on key metrics, which stakeholders can use to assess the company’s performance. Additionally, it helps investors assess the company’s positioning relative to its competitors.
Prepare for contingencies. Being able to communicate with shareholders effectively and quickly is critical should the unexpected occur, such as corporate actions or events that adversely impact the company’s operations.
I’ve been helping companies enter the public market and succeed once listed for over a decade. Having a sound stakeholder engagement plan as the foundations of a company’s interactions has proven to be the key, consistently.
If you would like some help, get in touch firstname.lastname@example.org