Taking your company public is one of the most pivotal decisions you can make when it comes to determining its future. You have to consider what your operations will look like under the microscope of public investors, which means shoring up any shortcomings before you put forth your Initial Public Offering (IPO).
One of the biggest concerns for companies going public in today’s modern era is their ability to collect, handle, and manage crucial data. Investors now expect executives to disclose important business metrics and information to investors, which means having systems in place to obtain and appropriate this data. Before an IPO, it’s important to execute a robust data management plan.
Why take your company public?
Any company can benefit from going public. Oil and gas companies especially need to consider factors like:
- Access to shareholder capital
- Inclusion in major index funds
- Stock optionality for current or prospective employees
- Indirect advertising through market reports
- Better opportunity for mergers and acquisitions (M&A)
In the energy industry — which is relatively isolated from general investors because of its industrial nature — all of these benefits allow an oil or gas company to flourish beyond what might be possible as a private entity. But before embracing these benefits, you need to make extensive introspection a top priority.
Preparing for life as a public company
A company doesn’t become public overnight. The IPO process is an arduous one filled with scrutiny from analysts, regulatory bodies, and, of course, the United States Securities and Exchange Commission (SEC). Here’s a succinct outline of what the roadmap to an IPO generally looks like:
- Internal vetting: Your company will need to make its financial standings and management structure public for an IPO, which means getting this information cleaned up and thoroughly organized. It also means generating a scalable process for reporting key metrics and finances quarterly.
- Coordinate your offering: Transparency and consistency are crucial when you’re a public company. Before an IPO you’ll need to choose investment bankers and make sure you have systems in place to be able to provide updated information about the financial health of your business. Finally, you’ll need to address tax concerns and liabilities that may mar your balance sheet.
- Prepare for your IPO: Investors will want to know why you’re taking your company public and what you plan to do in the interest of shareholders. Drafting a prospectus is a must-do before an IPO, alongside filing the appropriate paperwork with the SEC. From there, pricing the IPO and setting your share structure will determine how investors will be able to participate in your offering.
Once you’re ready to declare an IPO, you’ll have the chance to meet with institutional investors who may purchase preferred shares of your soon-to-be-issued stock. After that, it’s straight to one of the major stock exchanges: NYSE, NASDAQ, or AMEX.
Reinvesting in IT and data systems
With so much required work before an IPO, it makes sense to make a few strategic investments in your company before you seek public funding. Chief among these is an investment in better data management and IT.
The right data management system will give you instant insights into the crucial financial data you need to appease investors and analysts. Before you start reporting financials to the market, you’ll also want to establish the validity of previous quarters. Implementing a data management system can help you identify and reconcile any inaccuracies, avoiding period adjustments that may throw up red flags to investors (legitimate or not).
More than financial data, being able to report key metrics to future shareholders is also hugely reliant on having data collection and reporting systems in place. Commodities analysts may use specific metrics to gauge the health of your business — having these metrics as up-to-date and relevant as possible means a more accurate valuation for your company on the open market.
Even more importantly, your oil and gas company will need to show that it’s maintaining compliance through monthly regulatory report filings. This data needs to be consistently tracked for current reporting, which requires structured data systems in and of itself. The stock market isn’t kind to public entities that aren’t transparent with their reporting. Not only will shareholder selloffs drive down the price of your stock as confidence wanes, but not keeping up on these filings could even result in delisting by the SEC.
With integrated, viable data collection, management, and reporting systems in place, your newly publicly traded company will be in a better position to flourish.