My first three months as CEO of a listed company
Despite the low number of IPOs made in 2016, the sky should be clear and IPOs will follow one another this year. Many CEOs will then see their sweet dreams come true. I did it myself in July 2016 by carrying out the IPO of Talend, a ten-year-old company specializing in Big Data and Cloud integration solutions. Despite an unfavorable climate for IPOs, ours was a resounding success, both thanks to our balanced approach to growth, but also because our offers correspond to growing demand in the fields of Big Data and Cloud integration.
Achieving an IPO has been a goal of mine since I was a teenager, and in an effort to better prepare for the changes brought about by this transition, I had the opportunity to discuss what the future holds with mentors and colleagues. . Talend has been listed on the stock exchange for more than a quarter now: I can now take a step back to reflect on this transition and the lessons I have received, but also to share my feedback with you.
Prepare your management team to ramp up
You will need competent executives to prepare for your IPO, and this will be even more so after this operation. I now have less time for day-to-day management activities, and I spend more and more time outside in meetings with investors, analysts and our board of directors. I would advise any CEO to surround themselves with a top-notch management team capable of meeting the challenges that will arise once you too have less time to devote to management, and more to leadership.
Start running your business as if its capital was already open
Nothing can replace good preparation. So I recommend any company considering doing an IPO to “practice” it for at least a year. Just as some presidential candidates prepare with the help of mock debates, the leadership team should practice organizing quarterly corporate earnings conferences. This is what we have done, with our board members playing the roles of investors and analysts. We learned a lot by practicing answering tough questions and providing projections. This experience is as precious as it is invaluable, but even with such preparation there is a high probability that you are entitled to some surprises (we have even experienced it).
Things don’t always go as planned
By revealing your quarterly results, traditionally private conversations are now the subject of lengthy conference calls with fully prepared analysts. In addition, anyone can access their transcripts, read your press releases and comment on your results. “Bots” will even publish automated articles on the subject, just seconds after your advertisement. This process can be confusing at first, and it takes a bit of getting used to.
Less than four weeks after our IPO, we made our first earnings announcement. Despite nearly a year of training, we were treated to an experience that neither bankers, accountants, or our board of directors expected, and which may require inclusion in IPO manuals. Indeed, the introduction of Talend had the particularity of taking place during the first month of a quarter. So we did not yet have any final results to present for this period in our prospectus. Thus, a month later, during our first conference call, we presented and commented on the results of the quarter preceding the opening of our capital. The resulting discrepancy between our number of ordinary shares before and after IPO has caused confusion between the press and analysts (a technical accounting aspect to which we had not paid attention and which according to which all the profits or losses of (a company are allocated to its ordinary shares). When we went public, all of our preferred shares were converted to common stock and of course we had sold additional common stock to new investors. In total, our number of common shares literally increased sevenfold when we went public, which is fairly standard for a venture-backed company. In fact, analysts had created their own EPS (earnings per share, or EPS) estimates for this quarter as a company private taking into account our number of ordinary shares once listed, and we did not realize this discrepancy. As a result, some So reports incorrectly announced that we had not reached analyst consensus, which created confusion over a strong first quarter, with sustained growth. In particular, we had exceeded our revenue estimates, reached the breakeven point, and our growth targets for the following quarter had been revised significantly upwards.
For my part, I have learned two lessons from this situation. The first (and most obvious) is that number of stocks and EPS are essential metrics for a publicly traded company. So much more attention needs to be paid to these elements than in the past. Last but not least, make sure that your first announcements of results get in front of as many people as possible, including people who have been through this situation before, in order to spot this type of problem in advance.
About the course of your action …
Now that your business is publicly traded, your instincts may dictate that you constantly monitor your stock price. After all, you talked about it every day until the IPO. However, this value is only one way for you to measure the performance of your business, and it does absolutely not part of those you need to control on a daily basis. Indeed, this course is influenced by a number of factors, and some of them have none of the fundamentals that you can master. For example, buyers might just acquire shares issued by each company that goes public. Other factors can also play their part, such as currency effects, market fluctuations, political instability, the overall economic outlook, and even the performance of your competitors. Watching your stock price go up or down can be overwhelming. Either way, whether you’re the head of a private or public company, in the end, you need to focus on the long term and keep an eye on the road (not your wipers).
Maintain a long-term vision
Now that we are listed, a lot of people ask me “So what’s next for Talend?“. To this question, I answer “business as usual“. Getting listed on the stock market is obviously an important step for any business, but it is only one step among many in the growth of a company. Quite frankly, with the exception of this operation, my goals are the same as before, and I try to convey this mindset to all of my teams by encouraging them to put their performance in the context of ‘a long-term vision.
Private or listed: anything can happen
Yes, now you are even more in the spotlight than before, but the error is nonetheless prohibited. On the other hand, you will need to know how to take responsibility. As a listed company, if a mistake has been made in your reporting and your board knows about it, there’s a good chance the general public is too. Impairs will inevitably be committed; it is above all your approach to repairing them that will be scrutinized. If you recognize and take responsibility, and speak openly about the problem in order to discuss and analyze it, your entire organization will come out of it. In addition, your transparency will inspire the confidence of your customers, shareholders, and analysts.
I have to admit that even though my loved ones behave to me like before, I feel something different. When it comes to taking on more responsibility, becoming CEO of a listed company is probably one of the most stimulating moments in a manager’s career. You can be proud of having successfully put your business on the path to success; to have opened up access to the stock market and given it financial power; and for increasing its visibility to an unprecedented point. Be proud of these achievements and enjoy every moment.
Mike Tuchen is the CEO of Talend.
Read also: Going public: a giant leap for a CEO