How to IPO Commercial Real Estate on IPSX - Part 2

Choosing to undertake an initial public offering (IPO) for a commercial real estate company doesn’t need to feel like a daunting task. IPSX can help make the process straightforward for issuers.

Why join the world's first regulated stock exchange for commercial real estate?

Seeking capital from public markets is an important step in the life of a real estate owning company. IPSX provides a robust and proven market for issuers seeking to raise capital from the broadest pool of investors. Companies that successfully achieve admission to trading on IPSX will create greater flexibility to raise capital, including the ability to retain a controlling or minority interest in the underlying asset.

The benefits of a diverse investor base

Given the range in size of commercial real estate companies that IPSX can admit to trading, an IPSX admission has the potential to appeal to the widest range of investors including retail, institutional, family office and private banks.

IPSX attracts international investors to the UK which provides deep pools of capital, previously unavailable, that companies can potentially access.  IPSX is underpinned by its regulatory framework as a Recognised Investment Exchange, regulated by the Financial Conduct Authority. As a result, IPSX provides both real estate owners and all investors with the protections and benefits of a regulated market.

A commercial real estate ecosystem

IPSX is supported by a highly experienced and knowledgeable community of adviser and trading members. These will support the company throughout its life on IPSX, from the admission process, through its life as a publicly traded company.

Once the decision to join IPSX has been made, the company needs to appoint a lead adviser, who will guide the company through the admission process. They advise on all aspects including the preparation of the prospectus or admission document. They can also be appointed as your broker (where licensed to do so). A broker would be expected to advise and support the company in setting up and managing an effective investor relations programme, providing potential investors with periodic access to the company’s decision-makers. They should also serve to provide investors with a flow of information about the company and complement any research published. They will also provide the company with market and investor sentiment and feedback. For companies admitted to one of IPSX's markets under the Market Maker model, the broker will act as a market maker for the company. In this capacity, it provides a two-way price in the company’s shares to enable investors to buy and sell the shares seemlessly.

The importance of all these activities means that a company seeking admission to trading on IPSX will build up a long-term relationship with its broker. The broker plays an essential part in the initial fund-raising (at the time of the IPO) and in ongoing support to the company, its shareholders and the market to ensure the company’s continued success.

Selling the proposition to investors at IPO

Investor presentations and roadshows are the management team’s opportunity to sell the proposition to potential investors. Presentations are normally delivered by key staff responsible for delivering the company’s strategy and business plan. The unique aspects of the specific value proposition should be easily identified and understood. The presentations will be drafted with the company’s brokers and verified by its lawyers for accuracy and completeness of relevant content.

Interest in the planned IPO becomes increasingly apparent during the investor roadshow, when ‘book-building’ commences. This involves the broker obtaining orders from potential investors and managing this interest to match the number of shares available at the IPO price to meet the objectives of the company and its shareholders. After book-building, the company and the broker enter into a placing agreement setting out the terms and conditions associated with the IPO.

The broker then takes responsibility for administering the IPO paperwork and for arranging for the company’s registrar to register the new shareholders’ interests. This takes place alongside the collection of payments from new shareholders for the IPO shares and the transfer of funds raised to the company and any vendor shareholders.

Operating a company with board-level diversity

One of the first decisions is to assemble a board. The board will lead the company as it prepares to become public and thereafter. Every issuer is responsible for selecting board members who will best serve the needs of the operating companies and the shareholders. Research suggests that assembling a board with ‘cognitive diversity’ – with different perspectives, knowledge, abilities and insights – leads to better decision-making and a greater tendency to reach the optimal strategic conclusions.

Early communication with investors

Some companies looking to access the public markets often consider communications through the narrow prism of the road-show and admission day itself. In reality, potential investors, key media and other stakeholders start paying attention to a potential new publicly-traded company well before the shares begin trading. A seasoned management team should leverage its track record, publish thought leadership and talk openly about the positive attributes of its asset or assets well in advance of the IPO, so that the company doesn’t start ‘cold’ during the road-show. Fundamentally, this takes careful planning, management and organisation. Communications should be considered an integral part of the process from an early stage.

Developing effective messages

In this competitive and challenging market environment, credibility is king. Companies must develop and articulate a strong story that clearly explains why investors should believe in the company, its management and its future prospects. A financial PR company can advise on the company’s communications strategy before and after the IPO. Any publicly-traded company should be prepared for its share price to be affected by factors beyond its control, including economic or political developments or changes in its sector of operation, and be able to respond swiftly to investor concerns.

How long does the IPO process take?

The IPO process takes as long as it needs to. The timeline for taking a company public through to an IPO can vary depending on a variety of factors. With IPSX, an IPO could take as little as 8-12 weeks (compared to the typical timeline of between 6-9 months). This timeline must include the preparation of the necessary documents, the review process by regulatory authorities and/or the exchange, the marketing of the IPO and the actual admission to the exchange. The process is well-trodden by the advisory community. If all parties are aligned and all the necessary steps, including reporting requirements, are correctly followed, the time taken can be significantly reduced.

The process of seeking admission to trading on IPSX requires commitment from the directors of the business. Once the admission has been achieved, they will recognise the benefits of raising the profile of the company, attracting new investors and increasing the liquidity of their assets.