An IPO roadshow, viewed from inside
First published in the Financial Times on 6th May 2014.
Floating a company costs a fortune, but this is necessary in order to list on a reputable exchange
This week there has been just one subject on my mind: the flotation of our company Patisserie Valerie. It is an all-consuming undertaking. Together with my business partners I have been immersed in meetings with investors all day for the past five working days. In total we will do a whirlwind of about 40 presentations back to back, meeting dozens of prospective institutional shareholders.
Our journey started almost eight years ago when we bought a six-strong chain of London patisseries. Since then we have expanded our group to almost 140 branches across the country. Now feels the right time to go public: the economy is thriving and the stock market has rediscovered its purpose – providing capital for flourishing enterprises. It is all very exciting.
I have a sense of déjà vu about the whole experience. Twenty-one years ago I undertook the same exercise with a couple of colleagues, promoting a restaurant concept to the stock market called PizzaExpress. We floated it for about £25m, not fully realising what a fabulous opportunity the transaction represented: it was a formative moment in my career, and made everything else possible. Ironically, last week it was reported that PizzaExpress is for sale once more – valued this time at a reputed £1bn . . .
A few of the fund managers I’ve been meeting recently are familiar faces. In the intervening years they have backed countless winning and losing propositions from entrepreneurs involved with every type of endeavour. I come away from the question and answer sessions with renewed respect for their diligence and insight. It is unquestionably a field where time in the trenches counts. Youthful enthusiasm for the latest deal or technology has its place; but wisdom comes from analysing hundreds of companies, meeting countless management teams, learning which ventures will make most money. It is no coincidence that Warren Buffett, the best investor of all time, has been doing it for more than 60 years.
Our roadshow is the culmination of months of preparation. Accountants and lawyers have been crawling all over our books, producing reams of detailed documents. There are rooms full of contracts, verification papers, warranties, indemnities, leases, health warnings and who knows what else. An analyst has carried out a 50-page study of our company. Public relations agents have been discussing our merits with the media. The whole circus costs a fortune in fees but is, I suppose, necessary if a company wants to list on a reputable exchange.
We are looking for investors who understand our company and will hold for the long term. We present to a few hedge funds: the contrast with mainstream institutional investors is stark. The hedge funds occupy much grander offices and have exceedingly glamorous receptionists, while the partners appear far more laid back. None of that means they are better investors, however.
The key when pitching one’s tale is to retain a sense of enthusiasm and be prepared for some tough probing. At least we are raising only tens of millions – not hundreds. Then it would be necessary to hawk our story all around New York too – and perhaps even Geneva. A dog-and-pony show that elaborate sounds exhausting: all we are doing in addition to the City of London is a swift trip up to Edinburgh on Thursday.
There are floods of other companies looking for money. One fund manager complained that we were the third new issue she had met that morning. I pitied her having to wade through piles of
200-page prospectuses full of tiny print, trying to make the right decisions involving many millions of pounds.
The system is somewhat mad, but much healthier than a stock market that neglects British industry. After all, savers need a mechanism to channel their cash towards risk takers who aim to deliver a return to those providers of capital. We are attempting to play a small part in that process.
Next week we close the subscription list, work out the price for our shares – then trading starts. As usual with capitalism, demand and supply will determine the outcome: it all feels rather dramatic. Wish us luck in our new adventure.