Why being ready for an IPO doesn’t mean you’re IPO-ready

In 2021 there were 1035 IPOs worldwide, which represented a new all-time record with global IPO proceeds gaining a record $608bn as global IPO activity surged and valuations were pushed higher by strong investor appetite for equity. There have been 5,823 IPOs between 2000 and 2022, representing the increased want of businesses to move to provide an IPO. Providing an IPO is no small decision, it is something that should be meticulously considered by a company before being offered, with the consequences of a rushed move to an IPO being substantial for companies.

Businesses face setting themselves back years if they are impatient and decide to launch an IPO before being properly prepared. Ill-preparation for IPOs can leave companies without necessary capital and with the management structures that led to their original success in a state of disarray. Deliveroo lost more than a quarter of its value on their first day of trading in 2021, with shares in the food delivery app closing the day 26% down – erasing almost £2bn from its opening market capitalisation. Adding to this, after an announcement of a terrible earnings report from Uber’s competitor Lyft, Uber’s stock sunk 6.7% by closing on their IPO day, losing investors a cumulative $655 million in one day.

UK businesses have expanded rapidly since the end of restrictions caused by the pandemic, but they have discovered the complications and significant workload in balancing a successful IPO. Moving forwards – as IPOs continue to remain an integral part of successful companies’ equity stories – professional service firms are proving themselves essential in securing capital and maintaining seamless expansions.

Effective and adaptable professional service firms offer an opportunity for leading CFOs and CEOs to share their workloads with financial experts, securing their needed working capital and allowing them to continue to focus on their day to day management and general corporate expansions.

Chris Biggs, Partner at Theta Global Advisors – an accounting and consultancy disruptor – has commented:

“We have been instructed on a number of deals in the past year, seeing companies looking to expand via IPOs, bringing us on to help see their expansion and IPO process occur seamlessly as part of their general goals, as opposed to sacrificing one workload for another.

“The UK is seeing a blitz of IPOs from promising tech start-ups, and more are in the pipeline, a trend that could transform the staid image of London’s old-economy-heavy stock market. However, as these startups expand so rapidly, it will be essential for them to bring in diverse teams to help manage their IPO processes so that they don’t sacrifice what has worked so well for them and allowed them to see this expansion in the first place as CEO’s and CFO’s balance the competing responsibilities of their general business and financial management with the significant workload and pressure that comes with an IPO.

“It is of paramount importance that the firm does not lose sight of their growth targets in favour of getting ready to list, this is often the cause of disappointing results in the first public reporting period. Firms should really aim to be able to operate as a public company almost from day one of trading, this will make the job much easier in terms of compliance at the stage of IPO. Agile professional service firms will be essential here in transforming the landscape of the British economy as these businesses seek IPOs, allowing for a more seamless process and the maintenance of strong activity in both the private and public markets.”