As Published in Marketing Computers

GUEST COLUMN

IPO PR: Making The Most Of A "Quiet Period"

Barbara Heffner

Public relations efforts related to an initial public offering (IPO) have taken on a mystique befitting ancient tribal rituals, but not a routine business event. As a communications professional, you can dispel the mystique and help your company or client make the most of an IPO from a public relations standpoint, without running afoul of the Securities Act of 1933 and the regulations implementing the Act.

The IPO process is made up of three distinct phases, each with its own unique restrictions: the pre-filing period; the pre-effective (or "waiting") period; and the post-effective (or "quiet") period. Your job is to create opportunities, while living within these restrictions.

Pre-Filing Period When your marketing team is notified that your company or client has tentatively engaged an investment banking firm (a.k.a. the underwriter) to take the company public, the company has entered the pre-filing period. This period lasts until the company has filed a registration statement with the Securities and Exchange Commission (SEC). The registration statement includes a cover page, the preliminary prospectus (a.k.a. the "red herring"), and other information required by the SEC.

A critical step early in this process is a conference call or meeting with the appropriate marketing and PR professionals and the company's legal counsel to discuss the ground rules for external communications during this period. Many attorneys have written guidelines they'll tailor to your particular situation and timing, but here's an outline:

Until the registration statement is filed with the SEC related to a securities offering, it is illegal to "offer to sell" that security. "Offer to sell" is defined very broadly. Attorneys refer to any attempt to generate publicity that would stimulate investor interest as illegal "gun jumping." For this reason, the company must be circumspect in discussing aspects of the business with any financial implications. As a practical matter, this means pitching corporate or executive profiles at this time is strictly taboo. Still, it is important to maintain visibility for the company by continuing to issue press releases regarding factual product developments, maintaining product reviews programs and continuing to advertise. Speeches or comments by company officials should be examined by counsel to see whether they attempt to generate interest in the company's securities.

Pre-Effective Period Once the registration statement is filed, you've entered the pre-effective period. During this time, also known as the waiting period, companies begin to market their securities via the preliminary prospectus, or red herring. To this end, the underwriters take company executives on the fabled "road show," which is the moral equivalent of a press tour except that company executives meet with prospective investors instead of reporters. The communications team should work with senior executives to develop a slide presentation, which usually includes information such as a description of the company's business, its position in the marketplace, sales figures and competitive dynamics. Even though this presentation must be consistent with the information included in the red herring, the company cannot leave copies of the presentation (or any other written materials except the red herring) behind after road show meetings.

Business publications will often pick up the news of the filing from Dow Jones Federal Filing Service and other sources. It is customary to issue a press release via a wire service after filing to advertise the availability of the red herring. The contents of this release, which is usually drafted by the legal counsel, must strictly comply with the SEC's Rule 134, limiting what it may contain to a brief description of the company's business, the type of security offered (generally common stock in an IPO), the offering price (or range), the lead underwriters, and the approximate date of the proposed IPO. Rule 134 also requires a cautionary statement, in very specific language, to the effect that the registration statement is not yet effective, that the securities may not be sold and it must be stated that the press release does not constitute an offer to sell the securities.

This release usually generates a round of calls from the press. These calls should be handled by one or two senior spokespersons at the company, such as the president and CFO. PR and legal counsel should work together to prepare a Q&A for these spokespersons so that they are ready for the types of questions they will have to field.

During the waiting period, it is generally considered acceptable to maintain a normal, ongoing PR effort that is in keeping with the level of activity prior to filing. Press releases and other announcements must be consistent with the red herring. For example, if the registration statement says the company is "a" leading vendor, you cannot refer to it as "the" leader. The company should not issue forecasts or projections relating to revenues, income or earnings, or comment on the company's valuation. If your company or client routinely briefs industry analysts on product announcements and technology direction, you should continue to do so. Again, it is advisable for any written materials to be reviewed by legal counsel.

Post-Registration Period Once the SEC has declared the registration statement effective and the offering is priced, the company will issue a release via a wire service disclosing the number of shares issued and the price per share. This will trigger a flood of calls, particularly from local publications. It is appropriate for the company to respond, but company executives cannot divulge business-oriented information beyond what is conveyed in the prospectus. Once again, stick with one or two spokespersons.

The first 25 days following the date of the prospectus, which is generally the date on which the registration statement is declared effective by the SEC, make up the "quiet" period. Despite the name, during this time the company has somewhat more latitude with written materials if accompanied or preceded by a final prospectus. Since scrutiny by investors and regulators is particularly intense during the quiet period, it's still important to have legal counsel review all written materials.

Your company's or client's new-found status as a publicly held firm will open doors at business publications. Once the quiet period ends, your PR team or agency can begin a more aggressive program to generate corporate coverage in the business and trade press. Reporters who were reluctant to cover the firm when it was privately held will be more receptive to a good pitch.

The key with the business press is focus. Brainstorm for angles that make the company unique. The road show presentation often provides good fodder for angles, since it was written for the investment community business reporters target. Next, develop a matrix of targeted publications and angles. Then, begin systematically pitching the targeted publications, being careful not to pitch competitive publications with the same angle. As always, do your homework, researching a year's worth of past issues and the targeted reporter's past stories. Polite persistence often pays off, but there's no substitute for knowing the publication and understanding a particular reporter's stories.

Happy pitching.

Barbara Heffner is principal of CHEN PR, a high tech PR firm in Waltham, Mass. Email her at bheffner@chenpr.com.

©1998 ASM Communications Inc.
Used with permission from Marketing Computers

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