Roadshow (IPO) - Explained
What is a Roadshow?
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Table of ContentsWhat is a Roadshow in an IPO?How does a Road Show Work?Roadshow EventsInformation Presented in a RoadshowAfter the Completion of the Road ShowNon-Deal RoadshowExample of a Successful RoadshowAcademic Research on Road Shows
What is a Roadshow in an IPO?
A roadshow refers to sales presentations pitched in different places to make up an initial public offering. A roadshow is also defined as a series of meetings held across different locations between the executives of an issuing company and potential investors in an initial public offering. A roadshow is organized to enable an underwriting firm and top executives of a company pitch sales to investors that are likely to partake in an IPO. This gives an opportunity to the top executives of the company to talk to investors about the intention of the company to go public.
How does a Road Show Work?
Roadshows are important in an initial public offering, these are a series of presentations held when a company is about to go public. A roadshow requires that an underwriting firm and the top executive of the issuing company travel around a country or continent to make presentations to potential investors about the IPO. The objective of a roadshow is to create awareness and wet the appetite of investors towards in IPO. The level of impact that a roadshow generates determines the level of participation in an IPO. In a roadshow, the top executives of a company and the underwriting firm in charge of the IPO travel to different locations in the country to introduce an IPO to potential investors.
Typically, roadshow events are crucial to the success of an IPO. this is because during a roadshow, a series of presentations about an initial public offering is made to potential investors to create awareness about the IPO and also introduce investors to the top officials of a company. During a roadshow event, potential investors in an IPO gather and listen to presentations and talks about the offering. Many companies in Boston, Los Angeles, New York City and Chicago, have used roadshow events to have a successful IPO. A roadshow event can be held virtually or physically. Companies who leverage the internet hold their roadshow presentations online through online videos and podcasts.
Information Presented in a Roadshow
The major events in a roadshow include the introduction of the company to potential investors, as wee as its top executives. During the presentation, the history of the company and plans of the company are revealed to the investors. Presentation in a roadshow is often done orally and through multimedia presentation which include the use of video and digital media. There is always a question and answer session in a roadshow where investor ask general questions about the company. The major information that investors get from a roadshow are;
- The background of the company and its history.
- Information about the top executives of the company.
- Vision and mission
- Future plans and goals
- Financial performance and history on earnings
- Future sales and investment projection of the company
- Potential growth
- IPO goals and targets
After the Completion of the Road Show
After presentations in a roadshow are completed, a company proceeds by creating the final prospectus of the initial public offering. The company must have reached a conclusion on the price for the offering and the target of the IPO before the final draft is made. The date of the IPO must also be reached. The final draft of the prospectus is filed with the Securities and Exchange Commission (SEC). All potential investors are entitled to get the final prospectus of the IPO, this is distributed by the company.
A roadshow does not necessarily mean that a company offers securities to potential investors. When a company holds a roadshow without offering equity or debt securities to potential investors, it is called a non-deal roadshow (NDR). The objective of an NDR is to create public knowledge about a company and give updates about the achievement and financial performance of the company. In general, an NDR provides update about a company to its potential investors, future plans and visions are also revealed. Here are the major things you should know about a roadshow;
- A roadshow refers to a series of presentations about an initial public offering made to potential investors in different locations and at different times.
- A roadshow allows an underwriting firm make sales pitch about an initial public offering.
- It also creates an opportunity for potential investors to meet with the top executives of the company that is about to go public.
- The events in a roadshow include multimedia presentations about the history of the company, visions and future plans, financial performance, IPO target, among others.
Example of a Successful Roadshow
Quite a number of companies have held successful roadshows, here are the prominent ones; The Alibaba Group Holding Limited (BABA), an ecommerce company in China has the record of holding the largest IPO. This was as a result of the positive impacts of the roadshow held by the underwriters. A sum of $25 billion was raised from the IPO and the underwriters had a share of $300 million. Through roadshow, the IPO was received with excitement by potential investors, even before the company started the issuance of its stock. During the roadshow, the history, financial performance and earnings of the company were presented to investors by the cofounder of the company, contributing to a successful roadshow and IPO.
Academic Research on Road Shows