The IPO is back, and so are the PR challenges that go with it. By Tom Acitelli.The once-dormant IPO market is back in the headlines and in the minds of individual investors, as well as PR and financial communications professionals. Tempered by the famously short-lived IPO boom in the 1990s, this go-round proves to be more muted, if not more challenging for shepherding - and buying into - an IPO. The opportunities come with several caveats for investors and for financial communications pros. Chief among these is navigating the so-called quiet period before an IPO, where PR professionals can tout a company's stock prospects only so much and where retail investors often get their first tastes of a company's products and services. "Public companies are reaching out to financial communications firms more than ever," says Hollis Rafkin-Sax, vice chairman of Financial Dynamics. The late 1990s juggernaut of tech IPOs created a siren-like mystique of fast cash for savvy retail investors in an environment where every fresh innovation was hailed by the pliant media as the Next Big Thing. That hoopla, of course, turned out to be bunk. Now, as the economy emerges from recession and Google's upcoming IPO has re-ignited media interest, the IPO market is seen by experts as gaining momentum. And the improving economy, as it trickles down, is reassuring individual investors - retail investors - that they can get in on the action if they want to. But it's not always easy. "The hot IPOs usually don't go to small investors," says Tom Taulli, founder of CurrentOfferings.com and a finance lecturer at the University of Southern California. "I think [the hot IPOs] are kind of prized possessions for investment banks, and they don't give those out lightly. Even if they did, you wouldn't get a lot of shares, most likely no more than 100 shares of a real hot one. If you request an IPO and don't get it, that's probably a good sign that it's a good one." Taulli's lesson can be learned in what is perhaps the most successful IPO so far this year. Shares of Blue Nile, the Seattle-based online jewelry company, jumped 39% on its first day of trading in late May. Blue Nile's 3.7 million shares had been offered at $20.50 each to mostly institutional investors. Quiet period communications Companies are tempering their IPO-related PR efforts this time around because of stricter oversight from the Securities and Exchange Commission (SEC). This might take the edge off some of the hype common in the 1990s. "I remember back in 1999, when all these big IPOs would take off, we'd all stand around our Bloomberg terminal and just watch as the stock on the first day of trading would go to $150 in 20 minutes," says Jeff Corbin, managing partner for IR at KCSA Public Relations and author of Investor Relations: The Art of Communicating Value. "That's not happening anymore. It's going to be a much more balanced and deliberate type of trading that's going to be taking place." Corbin says his own firm has seen a spike in IPO business that had disappeared after the tech boom went bust. KCSA's IR practice a few years ago was about 25% IPO-related. Since the start of this year, the firm has handled "five or six" IPOs, says Corbin. The quiet period before an IPO presents a challenge for PR professionals, Taulli says. SEC rules prevent a company from talking much about itself before the IPO and for a month afterward. Too much chatter about a company's stock prospects, experts warn, and the SEC may start investigating, giving the company all the bad news that's fit to print, as evidenced by Salesforce.com's recent woes. Its IPO was delayed after its CEO gave an interview to The New York Times. "The quiet period, that's kind of a nightmare word for a PR person," Taulli says. "From a PR standpoint, from a communications standpoint, the rule of thumb is, do what you would do in the ordinary course of business." Firms going public can still carefully garner media coverage, though. "The company can still make announcements and issue press releases in the course of what has been normal and customary for the company historically, but should be extremely circumspect about editorializing beyond the basic facts," says Gregory Pettit, SVP and director of financial communications at Hill & Knowlton. "Proactive media outreach can have many benefits, but one of them is that if you have a level of awareness among investors before you go public, you are not an unknown quantity to your new audience should you decide to access the public markets later on. That can be an advantage during the IPO process." Pettit adds that the SEC is much stricter about IPO-related communications than it was five to 10 years ago. Under this tougher scrutiny, the role of financial communications firms has become more advisory, taking the emphasis away from media relations. Firms now help companies going public navigate the regulatory minefields more than they handle media relations, says Rafkin-Sax. Setting up road shows for a company to pitch its IPO is one of the most important things a PR person can do, Taulli says. "And that's really the communications you see from an investor's standpoint," he says. "Communications professionals, you really need to be an expert in this area. This is an area that you don't want to just try to wing it." Done right, successful communications behind an IPO can be a PR boon. "I think any time a company goes public it helps them," says Bruce Fenton, president of Atlantic Financial, an investment firm out of Westboro, MA. "They will have sort of a PR phase, the dog-and-pony show, which isn't so much to get people to buy the IPO, but to get publicity. The IPO can serve as a publicity vehicle for the company that can help its own sales that, in turn, can help it with corporate relations and [with] banking relationships." In other words, the corporate image of a company very quickly can become media fodder that drums the company's offerings into the retail investor's mind. Signs for retail investors In the US, 81 IPOs each were launched in 2002 and 2003, according to data compiled by IPO Monitor. For December 2003, the SEC recorded 20 IPO filings, giving this year a running start in the IPO market. In March, more than 40 IPOs launched. "It may have gone into hibernation," says Rick Anderson, SVP and partner at Fleishman-Hillard, "but I think with the interest in Google, the interest in Blue Nile, and also a number of the smaller biotech offerings, it's clear that not only is there a latent interest, it's a more thoughtful and cautious interest." One of the surest signs of whether an IPO is worth pursuing or not to a retail investor is how much money it has on hand for going public. Less than $20 million, Taulli says, and it probably doesn't have enough to sustain itself as a standalone company. Post-IPO performance is important, Anderson says, and the savvy retail investor will track it. Those who did in the 1990s did better than your average retail investor, who, despite the razzmatazz of get-rich-quick coverage, got burned a lot. "I think it's a myth that retail investors made out like bandits," Taulli says. "For retail investors, [the 1990s] were probably good for day traders who understood how to trade in and out of these types of issues, and were very smart in doing that. For the average player, they were usually the ones who got dumped on. They bought at the high and rode it to the bottom." Retail investors should also keep an eye on the financial underwriters of IPOs, especially smaller ones. "If the underwriters, or the Wall Street firms, are firms you've never heard of," Taulli says, "that's probably a danger sign right off the bat." Most stocks that shoot up that first day or so of trading usually settle back to reasonable levels, with market forces replacing the IPO launch as the guiding force in the stock's fate. While retail investors are not commonly targeted in much IR work, there are plenty that are hungry for information about any IPO that might potentially mean a windfall for them, and word of mouth is one of the most powerful tactics. "I think the retail investor is looking for certain signals," Anderson says, "and the issue is, what will prevent another repeat of the herd mentality that we experienced three or four years ago, where all it took was the first sheep to run down the meadow and everybody followed?" These signals can be especially valuable for retail investors who couldn't get in at the ground floor of an IPO. One signal is the coverage an IPO receives from sell-side analysts, typically working at brokerage firms. A bigger signal is the actual performance of the stock after the IPO. "These companies recognize the importance of having cash on their balance sheets in the form of equity," Corbin says. "I think a lot of companies had been waiting for the market to open up, and here they are."