22 April 2022
A roadshow is a sequence of presentations, also known as a sales pitch made to potential investors before an IPO (initial public offering). Roadshows often occur in big cities and intend to increase interest in the forthcoming offer. Read on to learn more about a roadshow in an IPO.
When an organization chooses to go public, personnel of an underwriting company organizes a roadshow to introduce the investment opportunity to prospective investors. Many roadshows occur in large cities such as New York and Chicago cities. The success of the initial public offering is highly dependent on the prosperity of the roadshow.
Visiting different cities allows underwriters to present the IPO market to hedge funds, capital market analysts, institutional investors, and fund managers to entice them into debt securities. Further, the roadshow also allows underwriters to discuss the company, its management, and history.
Retail investors also get a chance to learn about the management’s goals and vision for the organization. Often, roadshow events attract numerous potential buyers willing to acquire more information about the IPO within a physical setting or online. These events include question and answer sessions and interactive media.
Some companies often hold small and private meetings weeks or months before the IPO. Other companies Livestream some of the roadshow events for the sake of people who cannot attend. Additional information that comes up during a roadshow includes:
The roadshow plays a critical role in the IPO process because it provides a platform where organizations can communicate with potential investors to highlight successes or address arising issues. Underwriters also leverage data collected from investors to finalize the book-building procedure, which involves the amount of money potential investors are ready to pay for the offering.
Upon completing a roadshow, the final prospectus is made and issued to the prospective investors. The prospectus also includes the SEC (Securities and Exchange Commission). An initial price for the offering is then set depending on the data collected during the book creation process. The IPO date is then confirmed.
The IPO roadshow presentation is a chance for private companies to assure potential buyers that investing in their firm is an attractive investment opportunity. The core goal of a traditional IPO is to raise capital. Companies can’t achieve that if investors don’t show interest. Roadshows can be critical to your organization for different reasons, as we shall read below.
Every sales account chief executive is passionate about what they do. Roadshows create sales opportunities to surpass email and phone calls and build physical relationships with prospective customers. Conversations often flow well when parties share something in common. Remember to track your return on investment (ROI) from roadshows for future reference.
Roadshows push your demand generation attempts. Roadshows help maintain steady consumer numbers during slow months. If other companies sponsor your roadshows, ensure they promote your event across their networks. You can create a strategy to interact with potential consumers you would otherwise not have interacted with through roadshows.
Roadshows should be a blend of professional and fun. You should strive to ensure everyone in attendance goes home contented. Revolutionary content delivered through an inspirational speaker, delicious meals, an energetic environment powered by a lively band, and an excellent company promotes positivity amongst the attendees, leaving them lasting memories. In the past, the American software company Marketo gave everybody attending their roadshow a Starbucks award card to appreciate them.
Content plays a critical role in roadshows. Through these events, speakers can discuss the latest trends in the industry. The valuable content that thought leaders discuss is one of the key reasons that pulls people to attend.
Often, attendees must find time to attend roadshows which usually occur during the evenings on weekdays. As a result, you need to ensure the event is worthwhile. If you offer valuable content, people will not want to miss any of your circumstances.
Roadshows, also known as pony and dog shows; often last for between 3 and 4 weeks.
Preparing for the roadshow is a meticulous process that sets the stage for a successful IPO journey. It begins with assembling the right team of professionals, including executives, financial experts, and communication specialists, each with defined roles and responsibilities.
Crafting a compelling story is equally vital, as it involves creating a narrative that not only highlights the company’s strengths and potential but also resonates with potential investors. This narrative should be built around unique selling points that differentiate the company from its competitors.
A well-prepared roadshow is not just about the presentations but also about strategic planning and message refinement to capture the attention of potential investors and leave a lasting impression.
Navigating the roadshow IPO journey is not without its challenges and pitfalls. One common challenge is the intense time and resource commitment required to prepare and execute a successful roadshow, often diverting attention from other crucial business operations. Additionally, managing investor expectations and addressing tough questions during Q&A sessions can be daunting.
Roadshows also entail significant costs, including travel expenses and marketing efforts, which can strain a company’s budget. Moreover, market volatility and unforeseen events can impact investor sentiment, potentially affecting the success of the IPO. Companies must also be cautious of overpromising during the roadshow, as failing to meet investor expectations can lead to negative consequences post-IPO. Therefore, careful planning, risk assessment, and adaptability are essential to mitigate these challenges and navigate the roadshow process successfully.
Private companies seeking to boost revenue by issuing securities can do so through a private placement or presenting securities to the public. Publicly traded securities are usually more regulated by securities laws than private placements.
While both roadshows and private pavement offer the required capital, the method of issuing current financial reporting and the availability to investors vary with each issue type. Here are other differences between private placement and a roadshow.
The SEC (Securities and Exchange Commission) regulates an IPO. It demands a strict and regular financial reporting strategy to ensure it is always available for investors to trade with. In an initial public offering, the issuer needs an underwriting organization to assist them in determining the security type they should issue, the number of shares to place on offer, the best offering price, and the appropriate time to avail it to the market.
The underwriting organizations that present the issue to the market retain some shares to start trading in the secondary market. IPOs can be a risky undertaking for investors for the lack of past market activity to analyze. This explains the importance of reading the prospectus IPO report before investing.
IPOs became more favorable to small businesses due to the Jumpstart Our Business Startups Act, whose objective was to promote hiring and reduce the comprehensive financial reporting difficulty that small businesses faced while filing for an initial public offering.
On the other hand, private placement offerings are securities discharged for sale to certified investors only like mutual funds, pensions, or investment banks. Some wealthy individuals can also, but the shared via private placement.
Often, firms using private placements require a small amount of capital from a small number of investors. These securities are immune to numerous financial reporting demands, as with public offerings, which saves the issuing firm money and time.
A private placement issuer can offer comprehensive security to certified investors who understand the potential reward and risks. That allows the company to maintain its privately owned status, meaning they don’t have to file annual disclosures with the Securities and Exchange Commission.
Marketing can be challenging for private placements because they are overly risky and have lower liquidity than roadshows. Private placements can be executed faster than IPOs, regardless of the business model. Private entities value their position and don’t need to sacrifice their privacy. However, they can still access cash and liquidity from the deal.
A roadshow presentation often occurs from in-person consultations between the CFO and the management team of a company looking to raise capital and the institutional inventors searching for an investment opportunity.
Not every roadshow involves an IPO. Sometimes companies travel to different regions to meet investors even when they don’t plan to go public. Such is referred to as Non-deal roadshows (NDRs).
These roadshows happen when the top executives hold discussions with potential and current investors, but no debt security or equity is offered. Companies conduct Non-deal roadshows to avail public information such as updates on the organization’s mission, vision, and business of the future. The management team also keeps leading investors informed on the company’s performance.
Some companies have run successful roadshows. For example, Alibaba, the Chinese eCommerce company, holds the record for organizing the biggest IPO. This success resulted from the influence of the roadshow that underwriters held. The company raised more than $20 billion from the IPO, with underwriters earning up to $300 million.
Potential investors received the IPO excitedly through the roadshow before the firm launched the stock brokerage issuance process. During the roadshow, the co-founder of Alibaba presented the company’s history, earnings, and financial performance to the investors, accelerating the success of the IPO and roadshow.
Robinhood held its virtual roadshow on Saturday by streaming it online, allowing people with access to the internet connection to listen in. seeing that many companies run roadshows during weekdays, Robinhood’s unusual strategy caught the interest of Wall Street.
While other companies have held virtual roadshows during the pandemic, such digital events are unavailable in public Livestream. During the Robinhood IPO, prospective investors submitted questions in advance, meaning they chose what to answer or skip.
Still, a big percentage of the questions the company answered were less helpful. However, potential investors seeking to know Vlad Tenev’s preferred planet learned that it is Pluto. Vlad is the CEO and co-founder of Robinhood. Through the roadshow, the company reiterated that its focus was to make investing available to a wider audience. Vlad’s answer could violate traditional thinking, especially because Pluto is not a fully developed planet (NASDAQ Inc. All rights reserved).
The success of a roadshow IPO depends on customer demand for a specific firm’s shares. A huge demand triggers a high stock price. Other factors that help determine an IPO valuation include the company’s story, growth prospects, and industry comparables.