SPACs Require Best-in-Class Communications From the Get-Go
Though SPAC transactions have long been regarded a previous vacation resort way to go public, they are now thriving and represented about 50 percent of all IPO issuance so significantly in 2020. Today’s particular-reason acquisition corporation promotions have been validated by various substantial-profile sponsors, set up and effective personal providers leveraging the framework to go public, and best-tier institutional traders and investment decision banking institutions taking part in these transactions.
Nevertheless, the SPAC framework is unique. From a communications viewpoint, there are critical nuances providers should look at. In our experience, setting up a powerful trader relations basis and leveraging ideal-in-course trader communications from the start off are vital aggressive positive aspects for providers entering the public industry via SPAC transactions.
Get all set to be a public corporation. Corporations heading public in a SPAC transaction obtain it particularly difficult thanks to the compressed time frame relative to a traditional IPO. Preserve in thoughts that the regular length of time from signing a letter of intent (LOI) to saying a enterprise combination is just a several months.
Regardless of how a corporation goes public, management will have to comprehend what it signifies to be a public corporation and have the infrastructure, devices, and sources in spot. That incorporates setting up a robust IR basis that incorporates everything from generating public corporation insurance policies and protocols to a state-of-the-art IR web page for launch on listing working day. When traders and the press request you why you resolved to go public by using a SPAC, the ideal answer is: “We had constantly meant to go public and ended up public-corporation-all set when we manufactured the decision.” That evidence of idea should be supported by the high-quality of corporation communications and self-confident conversation with these audiences.
Make a specific timeline and anticipate things to transform together the way. A crucial gain of a SPAC transaction is that it frequently permits providers to develop into public more quickly and with extra certainty. That claimed, there are numerous functions involved in the method: the SPAC, the goal corporation, two sets of bankers, two sets of attorneys. At times these groups have competing agendas. There is a large amount of get the job done to get done and numerous unknowns, like industry disorders, peer group general performance, the timeline for the SEC’s evaluate of the Kind S-four, and the SPAC shareholder vote. Alongside the way, selections will have to be manufactured on the timing of vital actions these types of as institutional trader marketing, meeting appearances, and analyst working day. There can be stress all-around balancing the want to do things properly with the want to do things rapidly. It’s critical to identify that the inventory selling price performs a crucial role in figuring out the result of the needed shareholder vote. Due to the fact marketing supports the inventory selling price, the timing and degree of marketing activity may possibly transform together the way primarily based on how the inventory is investing.
Get common with the Wall Road audience. For executives who are engaging with traders and analysts, it’s vital to have a good understanding of what these audiences treatment about the information they want, the varieties of questions they request. Any management group that has not had firsthand experience functioning with Wall Road and the press should depend on trader relations for instruction, assistance, and Q&A rehearsals. Official media or spokesperson schooling can also be very practical in preparing management teams to make the very ideal 1st effect.
Get the message suitable. Messaging delivered in an IPO of any variety sets the tone for the long term and will have to be cautiously crafted. Community corporation messaging shifts from speaking about the capabilities and rewards of a products or company to the capabilities and rewards of investing in the corporation — producing earnings and dollars movement and making long-term benefit for all stakeholders.
Community corporation messaging shifts from speaking about the capabilities and rewards of a products or company to the capabilities and rewards of investing in the corporation.
Crafting a powerful investment decision thesis calls for complete aggressive investigation and a considerate approach to telling the company story in a way that distinguishes your corporation from competing investments. Trader communications should tackle company reason, industry possibility, tactic, development motorists, benefit creation ideas, operational and fiscal general performance, money allocation, human money, and ESG. It’s critical to existing a balanced see of the upside as properly as the pitfalls and the ideas for mitigating them. Also, don’t forget that currently being geared up to provide the trader presentation and fortify messaging when fielding questions is as critical as owning a properly-crafted and properly-made presentation.
Believe cautiously about forecasts. In a SPAC transaction, the goal corporation typically supplies long-term forecasts that are integrated in the trader presentation and Kind S-four. Both of those documents are submitted with the SEC and obtainable to the public. A lot of substantial-development providers heading public via a SPAC transaction are offering specific and frequently granular forecasts wanting out quite a few yrs. Ideally, these forecasts existing the path to constructive dollars movement and show how the proceeds from the transaction will assist the corporation obtain it.
Though forecasts are practical to traders and critical in selling the deal, they will have to be cautiously formulated. They have a long shelf life. The reliability of corporation leadership will be on the line if, at any stage together the way, they are not fulfilled. Though traders price reduction these forecasts to identify the selling price they’re willing to pay for the inventory, we recommend that management issue in some margin for mistake, tackle underlying assumptions, and educate the Road on elements that are inside of and outside of its control.
Prepare properly for PIPE trader conferences. Community investment decision in personal entity (PIPE) transactions, which are concluded right after the letter of intent is signed and right before the combination announcement, are a common and desirable element of SPAC promotions. They serve to (1) validate the goal company’s valuation (two) deliver further money at the time of the transaction to be certain that the goal corporation is sufficiently capitalized to execute its development tactic and (three) jumpstart the method of making a powerful base of institutional trader assistance. A lot of best-tier, long-term investment decision managers these types of as Money Team, Fidelity, Wellington, Franklin, Neuberger & Berman, and other individuals are taking part along with hedge funds and more compact traders. Securing just one or extra noteworthy traders to participate in the PIPE transaction lends large reliability to the transaction and should be a best objective.
Make the most of the enterprise combination announcement. In a SPAC transaction, the enterprise combination announcement is the 1st public disclosure about the transaction and is the debut instant (vs. listing working day in a traditional IPO). It’s also the instant when an aggressive and sustained Wall Road and media marketing initiative to construct broad-primarily based recognition of the transaction starts in earnest. Corporations want to be geared up with a (1) press launch that introduces the goal corporation, describes the transaction details, provides the motives why the goal corporation offers traders a powerful investment decision possibility and is positioned to provide development and returns in the potential, and names direct steer traders that participated in the PIPE transaction (two) public trader simply call to explore the transaction and evaluate the trader presentation in depth (three) strategic trader and analyst targeting system and media tactic and (four) system for speaking with personnel, shoppers, partners, and other individuals about the information. Announcement working day is an action-packed working day that is ideal managed with advance planning, a specific timeline, and all-fingers-on-deck.
Make Wall Road marketing a substantial priority. In a SPAC transaction, the issuer and their IR group engage in a significantly extra well known role in marketing than in a traditional IPO, in which IPO marketing is managed by the underwriters. To correctly construct common Wall Road assistance, the IR group will have to have powerful know-how of the landscape and the means to achieve the suitable traders and analysts. Management will have to also be geared up to dedicate a sizeable volume of time and exertion to fulfill with them. Information announcements, industry conferences, and activities, Wall Road conferences, and press interviews are all wonderful cars. Corporations that system to leverage press and particularly broadcast information will have to be guaranteed to media-prepare executives with crucial messages and questions about the corporation, the transaction, and the SPAC framework.
Begin get the job done on Kind S-four as quickly as the LOI is signed. The Kind S-four, submitted with and approved by the SEC in advance of the transaction shut, is critical for a few of motives. Initially, numerous traders and analysts evaluate it as part of their thanks diligence in generating the decision to make investments in or initiate protection of the corporation. 2nd, it establishes a precedent for all potential SEC filings. We recommend generating the Kind S-four obtainable as early as achievable to assistance the marketing exertion. At the same time, management has to make guaranteed it’s cautiously crafted, displays properly on the corporation, and correctly communicates the investment decision thesis. The Kind S-four calls for a considerable dedication of time and exertion as properly as shut collaboration among the all functions involved in the deal. Offered these elements, providers should start off get the job done on drafting the Kind S-four at the very starting of the preparation method.
Prepare cautiously for analyst working day. Following the combination announcement, the goal corporation should host an analyst working day where by management fulfills with a group of promote-aspect analysts who could perhaps include the inventory. Trader relations can take the direct in (1) curating the invitation record with a target on attracting participation from analysts at substantial-high-quality corporations outside of these that ended up involved in the transaction and would do the ideal position covering the corporation and (two) preparing management for the party.
Critical targets of analyst working day are to (1) be certain analysts obtain a favorable effect of management and a substantial degree of confidence in the team’s means to execute the development system (two) inform the story the way management would like it informed and (three) deliver the information analysts want to construct accurate fiscal types. Offer-aspect analysts are structured by sector, so they generally have a substantial degree of industry know-how and request specific questions. They have a eager means to evaluate forecasts and will want a specific understanding of your tactic to obtain the forecasts furnished.
Prepare to strike the ground functioning as a public corporation. In a SPAC transaction, the path to listing working day is arduous. On the heels of it, providers launch suitable into their first year as a public corporation. This typically involves numerous “first,” setting up with the 1st-at any time earnings simply call. On the simply call, the Road will consider if the corporation is ready to “walk the walk” and be a effective public corporation. A effective IR system calls for careful planning and execution across the board, from quarterly earnings calls to Wall Road marketing and a dedication to making interactions with a new established of stakeholders.
Very best-in-course communication can make or crack a company’s changeover to a public corporation and the means to obtain money to assistance development. There are a great number of positive aspects to having it suitable from the start off. It can take exertion, time, and consideration, but the payback is worth it.
Moira Conlon is the founder and president of Financial Profiles, a strategic communications business that produces benefit via powerful communication. Company know-how spans traditional and substitute IPOs like SPACs, spin-offs, reverse mergers, and direct listings. Remember to visit www.finprofiles.com for extra information.