What does Wall Street mean when it discusses “a window” for initial public offerings?
“The IPO window is infamous for opening and closing,” said Ellen Bancroft, office managing partner at Morgan Lewis & Bockius LLP.
If any Orange County lawyer knows about IPO windows, it’s Bancroft, who’s been involved in about 50, including some of the most famous in OC, like Broadcom Ltd., Buy.com Inc. and The Ensign Group Inc.
Determining when to go public is a difficult timing decision for any company. Jump in at the wrong time, and it won’t raise as much money as it needs, or worse, its share price falls.
Companies and investment bankers often do road shows to promote shares, but the key test may not even involve them. Instead, investment bankers might advise timing based on the market reaction to the IPO of another company and financial press coverage, Bancroft said.
“When you see one company go out and the stock price goes up, institutions want to jump into them. Then the window starts creeping open, and people start getting deals out.”
IPO Go-Go Years
OC’s two-year IPO drought ended last year when a few companies, including Alteryx Inc. and FivePoint Holdings LLC, took the plunge.
Today’s IPO market is “tentative,” with pricing lower than some would prefer, Bancroft said.
It’s certainly not as active as two decades ago.
“I don’t think we’ll see anything like the late 1990s, when my group alone was doing three a quarter. It was crazy.” She’s hopeful IPO activity will pick up, pointing out former employees of Broadcom and Allergan PLC who are involved in their own startups.
“You have a lot of people with money who are starting their own companies. We’re seeing people in the startup mode who are doing really interesting things.”
Private equity investors and investment banks are looking at OC companies in fields like artificial intelligence, cybersecurity, digital media, medical devices, consumer products and life sciences, she said. Some OC companies are considering going public, but she declined to identify them.
Capital-Raising Lawyer
Bancroft, who grew up in St. Louis and graduated with a law degree from Vanderbilt University, moved to OC in 1990. She previously worked as a partner at Brobeck, Phleger & Harrison LLP and Dorsey & Whitney LLP and won a Business Journal Women in Business Award in 2012.
She joined Morgan Lewis in 2013. The firm has almost 2,000 legal professionals in 30 offices around the world who can give her advice on a wide variety of subjects within minutes.
The firm last year added Jeff Moorad, a legendary sports agent and a former minority owner of the San Diego Padres, as chairman of its global sports initiative. The Costa Mesa office also includes Chris Cox, chairman of the Securities and Exchange Commission from 2005 to 2009.
The Costa Mesa office employs 31 attorneys, up from 29 last year, and is looking for associates. Clients include JPMorgan Chase & Co., Sempra Energy and Solis Capital Partners.
Bancroft’s practice focuses on helping companies through life cycles, from raising venture capital to managing private equity acquisitions to going public.
Signs a company is ready for an IPO include increasing revenue and profitability, new products and a strong management team, she said. She’s sometimes seen management concentrate too much on an IPO, neglecting the business and leading to declining sales.
“The worst thing you can do is have a down quarter when you’re trying to go out” into the public market.
IPOs have gotten easier in recent years, thanks to Regulation A+, which circumvents many SEC requirements, said Bancroft, who indicated her firm has handled more than 10 such financings. By using the alternate method, companies can accelerate the IPO process by more than a month, with a streamlined disclosure filing, and at considerable cost savings.
Her advice to companies considering an IPO is to start the legwork months before filing the registration statement with the SEC by putting in place a strong management team, engaging the best legal and accounting advisers with significant IPO experience, completing audited financial statements, and installing strong corporate governance structure and controls.
The initiatives can make a significant difference in helping a company seize the moment when Wall Street is receptive.
“When the window opens, you’re ready to go.”
