In today's economy, online companies are moving from launch to initial public offering faster than an urban legend can make the rounds on the Internet. Even with a recent chill toward dot-com IPOs, online entrepreneurs still have visions of making big bucks in time for their next high school reunion.
Such accelerated timeframes and greater scrutiny from a Securities and Exchange Commission wary of financial neophytes put more pressure on the investor relations professional. With personal wealth and pride riding on the success of the IPO, it pays to plan ahead.
"When you're in the startup phase, you have to develop a PR strategy that will carry you through the IPO," says Geoff Ossias, vp of corporate relations for Mypoints.com, an online rewards company that went public Aug. 20. "That means establishing your operations for your quiet period before you're even a real company."
For example, Ossias learned, his company had to set a track record of its press release frequency six months - if a company averaged two releases a month before the quiet period and jumped to six per month during the quiet period, the executives probably could expect a call from the SEC. Also, figure out what type of metrics you're releasing - rankings, revenues, etc. - before you hit the quiet period. If you've never put out a release about membership, it's going to be difficult to announce you hit the 1 million member mark if it falls during the quiet period, Ossias says.
"And don't expect your lawyers to help you. Silence is their golden rule," he says. "I found that's the wrong message for us as PR professionals. We need to go on with business as usual. It just so happens that we've always been a fairly loud company, so we were able to operate a little more freely in our quiet period."
Mypoints also had the advantage of utilizing its PR staff in its registration statement with the SEC, the S-1.
"A lot of people look at the S-1 as a legal document," Ossias says. "It's not. It's PR. You have to be truthful and you can't hype yourself too much, but you have to look at it as a sales pitch to investors. You don't want to leave it to the lawyers or chief executives to write. It's a great opportunity to tell your story, so you want your best storytellers on it."
Incidentally, Ossias wrote the business section of Mypoints' S-1.
Still, even all his planning couldn't combat a market poised for a backlash against the spate of dotcom IPOs.
"When we went public, half of all the IPOs were deciding not to go forward [fearing no takers]," says Steve Markowitz, founder chairman and CEO of Mypoints. Even online giants were being slapped with a dose of reality. Amazon.com, the tech world's best business model, had a stock price of $71 in mid July, then plunged to $46 on Aug. 10. Suffice to say, the investment arena Mypoints began in had changed dramatically, making it inevitable to shift strategy gears.
A Tough Call
It was an obvious decision, but hard for some execs to agree to. When the market can't bear your price, you have two choices, change or die. Mypoints adapted by cutting their offering price, a move which could be viewed by the investing community as a hedge against the current state of the market or a lack in confidence on the earning potential of the company. Mypoints began around $12, was cut to $10 and finally offered for $8.
"Our view was that it was better to get out of the gate and price at an attractive level than pull our offering and wait around to see what happens in the market," says Markowitz. "I think we had a different philosophy than other companies. Some file and say, 'If I can't go public with what I priced then I don't want to go public.' Our view was, 'well the market is weak right now, let's make this an attractive offer and let's get out of the gate."
Going public also has its advantages, beside boastful brags at cocktail parties. One was allowing Mypoints to satisfy its appetite for acquisitions.
"We want to acquire other companies, bring them into the family and continue to grow," says Markowitz. "Without having a public currency it's very difficult, which is where our competitors were. They hadn't gone public. So we thought there was this huge advantage to being the first company in our space to do so."
Sure, they could have gone the private way of getting money. But who has an uncle worth $42 million, the amount Mypoints wanted by going public. Which, of course, wasn't all for the company. There were IPO bills to pay. Of the prospective $42 million, lawyers, underwriters, accountants and filing fees needed to be satisfied. If all went according to plan, the company hoped to have about $38 million to play with.
Mypoints got their $42 million nut. The bulk of it (over 4 million shares) came from the road show. The remaining 550,000 shares were reserved for 'friends and family' (250,000 shares) and 300,000 shares were set aside for Mypoints' members who could invest through the online broker Wit Capital.
The stock opened at $8 a share, climbed to $19 and then closed in the $12 neighborhood. Currently it hovers a little above $15 a share.
Although he hasn't yet retired to a life of luxury, Ossias feels enriched by the experience.
"There's a substantial stake, emotionally as well as financially," he says. "Going from abject startup-hood through an IPO is kind of a badge of honor in this business."
(Steve Markowitz and Geoff Ossias, 415/676-3700.)
Mypoints.com [MYPT]
Founding Date: Nov. 1996: 0 members
Launch Date: Summer 1997;100,000 members
Today: 4.2 million members
123 employees; all PR done in house