What a Roadshow Is and How It Creates a Successful IPO
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Contents
What a Roadshow Is and How It Creates a Successful IPO
What Is a Roadshow?
A roadshow is a series of presentations in various locations leading up to an initial public offering (IPO). It is a sales pitch or promotion by the underwriting firm and a company’s management team to potential investors before going public. Roadshows take place in major cities and generate interest in the upcoming offer by introducing the company, its history, and key personnel to potential investors.
- A roadshow is a series of presentations in various locations leading up to an IPO.
- The roadshow is a sales pitch to potential investors by the underwriting firm and a company’s executive management team.
- Alibaba’s roadshow contributed to the overwhelming enthusiasm surrounding the company’s IPO.
Understanding Roadshows
When a company decides to go public, the investment firm responsible for underwriting the IPO travels around the country in a roadshow to present the investment opportunity to potential investors. Roadshows include stops in major cities like Boston, Chicago, Los Angeles, and New York City.
A successful roadshow is critical to the success of the IPO. Its goal is to generate excitement about the company and its IPO. By traveling to different cities, underwriters introduce the IPO to institutional investors, analysts, fund managers, and hedge funds to interest them in the security. The roadshow also provides an opportunity for underwriters to introduce the company’s management and for investors to hear management’s vision and goals for the company.
Roadshow events attract prospective buyers interested in learning more about the offering in face-to-face and online settings. Events may include multimedia presentations and Q&A sessions. Some companies hold smaller, private meetings leading up to the IPO, while the majority livestream some of their events to those who can’t attend. Topics covered during a roadshow include the company’s history, future plans, a video or digital media presentation, meeting the executive management, the unique value proposition of the company, earnings and financial performance, prior sales growth with projections and forecasts, the investment opportunity and growth potential, and the IPO stock price target.
The roadshow is essential to the IPO since it provides a forum where the company can communicate directly with potential investors to address concerns or highlight successes. Underwriters also use information gathered from investors to complete the book-building process, which involves gathering prices potential investors are willing to pay for the offering.
Once a roadshow is complete, the final prospectus is created and distributed to potential investors. This prospectus is also filed with the Securities and Exchange Commission (SEC). An initial price for the offering is set based on the information gathered during the book-building process, and the IPO date is solidified.
Special Considerations
Not all roadshows involve an IPO. Companies may travel across the country to talk to investors even when they aren’t going public. These non-deal roadshows (NDRs) provide public information to investors, including updates on the company’s existing business and vision for the future. NDRs involve meeting with key investors to keep them updated on the company’s performance.
Example of a Roadshow
Chinese e-commerce giant Alibaba Group (BABA) posted the largest IPO ever by raising $25 billion in 2014 while the underwriters involved took home $300 million. The IPO was so successful that the stock price surged 38% in its debut. The roadshow included the financial numbers and a video history of the company narrated by co-founder and Chair Jack Ma.
The roadshow was such a success with investors that it’s likely the reason why the IPO price range was increased to $66 to $68 from the earlier published $60 to $66 range. Although the increase in the price range may not appear impressive, it’s important to remember that the company sold over 300 million shares during its IPO.