Making the Most of the IPO Road Show
It's the ultimate sales trip. Only this time you're not selling software or coffee or consulting services or whatever you normally sell to your customers. This time, you're selling the company. It's the road show, the frenzied prologue to the moment when your stock actually starts trading. Typically a CEO and CFO spend two weeks or more traveling across the country -- and sometimes to Europe -- to talk up the company to potential investors.
Chris Mottern, the CEO of Peet's Coffee, took his company public in January 2001, raising $18 million to pay off company debt. During Peet's road show, Mottern says, he made some 63 presentations in three weeks. Inc.com asked him for a CEO's-eye view on what it takes to make the most of being on the road.
Keep the Home Fires Burning
"The biggest thing for me was to make sure that I didn't have to speak with the organization back in California frequently," says Mottern. "They knew exactly what they needed to do. For roughly a month and a half I was out of the business and only checked in occasionally and picked up E-mails. The [road-trip] process is really tiring. You want to be on your toes. You want to give a good presentation every time. I wanted to make sure that between presentations I wasn't trying to do business."
Have a Good Story to Tell
Most of the meetings followed the same pattern: after Mottern spoke for 20 to 25 minutes, CFO Mark Rudolph followed with 5 minutes of financial details. The rest of the hour was taken up with questions from investors and analysts.
"For me it was pretty miserable, because I had to do most of the talking," says Mottern. "You have 20 minutes. They don't know anything about coffee." It was Mottern's job to educate the audience about the coffee industry and the company's prospects. An outside consultant had prepared a briefing book and a PowerPoint presentation and coached Mottern to get him ready for prime time.
"As we did our road show, we had, from the profit standpoint, some fairly unsightly numbers, so that was something we had to explain," Mottern says. In 2000 Peet's had a net loss of $2.3 million on revenues of $84 million. But Mottern still had a good story to tell. Peet's had gone into the red to position itself for future growth, he says, by building up physical and IT infrastructure, opening new stores outside of core markets, and developing multiple channels of distribution. "Part of the road-show documentation was to lay out the fact that we had spent $23 million in the past three years to get done what we needed to get done," Mottern says. In the wake of the dot-com crash, he adds, "I think it actually helped us that we had spent a lot of money honing our business."
Set Realistic Expectations
"The big thing is to make sure that the analysts' and investors' expectations are reasonable. When we went public, one of the most significant strategies was to go out with a plan that we had a very good chance of achieving," Mottern says. "As a small company and as a new company in the stock market, you really need to do what you say you're going to do, and you need to do it within the time frame you predicted. That's the hardest part. As a small company, you're a very small part of someone's investment portfolio. My thinking is, if you disappoint them, they'll get out right away."
Related links: The Road to Wall Street