Doing the IPO – Closing the Sale

Up until the point where the underwriters give their nod and your lawyers tell the SEC to declare the S-1 effective, there has been a very large burden on your shoulders as the CFO. As important as the final sales push is, once you get to this stage most of the remaining work shifts away from you and onto the banks and, more importantly, to your boss — the CEO.

There are two activities that typically happen before the roadshow itself formally launches.

The first is any “wall crossing.” This is a process where the banks preview the deal with a small number of qualified institutional investors. It does not happen every time, but when it does, the goal is to gauge demand, see how well the marketing message resonates with the target audience, and infer valuation. Valuation is not supposed to be discussed explicitly, but both the banks and the investors involved know how to read and give signals.

Wall crossing usually happens before the S-1 is declared effective, but typically when it is close to ready. Other than the fact that these are often among the first presentations you will do — so you may not sound as polished yet — they are not materially different from the presentations you will give once the roadshow officially begins. If something has gone seriously wrong earlier in the preparation or underwriting process, an overwhelmingly negative reaction could stop the IPO. But if you are this far along, that really should not happen.

Even if you enjoy conspiracy theories and think the banks are just looking for a graceful exit, the reality is that the funds you are talking to do not have time for games. What you usually get instead is constructive feedback, some tightening of the pitch, and an early indication of how strong demand — and therefore valuation — might be.

The other common special presentation is the recorded version of the deck that can be shared with accounts where an in-person or live meeting cannot be scheduled, usually due to geography. Some investors will watch the recording simply to get the canned material out of the way so that they can spend their live meeting time asking questions and engaging with management. The banks almost always have a preferred vendor for this. Other than being prepared to be on camera, there is not much additional advice to give.

At the end of this phase, your Board will need to meet to formally accept or reject the banks’ offer, so that meeting needs to be scheduled in advance. Sometimes pricing authority is delegated to a committee, but for IPOs the full Board often votes.

Then your lawyers ping the SEC, the S-1 flips to effective, and you are officially off.

Well before this point you will have selected your lead bank — usually referred to as the “lead left” bank, which reflects their position in the underwriting syndicate. They are almost always the stabilization agent as well. You probably relied on an external advisory firm to help with this selection process.

Once chosen, the lead bank becomes the primary administrator of the IPO and controls the master order book. In my experience, they bring in the majority of the orders. The other banks generally make a good-faith effort, attend meetings, and provide advice, but because the lead controls the book, the investors they want to prioritize tend to take precedence.

Interestingly, I have found that smaller banks often punch above their weight. They tend to be hungrier and try harder, and it is not uncommon for them to deliver more orders than their share of the fees would suggest.

The IPO I worked on was during COVID, so it was conducted entirely over Zoom. Today, roadshows have largely shifted back to in-person meetings. Zoom is still used for geographically isolated investors, but many meetings now take place at investor offices or group venues, often over lunch. This reintroduces a meaningful amount of travel planning, which the banks will manage. Having done enough deal and non-deal roadshows in person, I have a healthy respect for the logistics.

My first piece of advice is to rest before it starts and stay away from alcohol during the roadshow. You will likely be changing time zones and dealing with jet lag. The less additional stress you put on your body, the better you will perform in meetings. You can have all the drinks you denied yourself once it is over.

Eat well. Stay hydrated. You will be talking a lot, and a raw throat will absolutely work against you. This is an important trip — or series of trips — and you need to stack the odds in your favor. Expect planes, cars, and possibly trains (New York to Boston). For larger IPOs, expect travel to Europe and a week or more on the road.

The second piece of advice is to be prepared to sit through many meetings where you say very little — but also be ready to carry the meeting if needed. You are the CFO, traveling with your CEO. A tremendous amount rested on your shoulders before the roadshow launched, but once it starts, the burden shifts heavily to the CEO.

This varies by individual, but most CEOs who make it this far are good at selling what makes their company special. Your role is to support them, handle the details, and do whatever you can to help them succeed. It is common for people to lose their voice or have their energy dip over the course of a roadshow, so you may need to step in more than expected — but you should not plan on it.

The meetings themselves feel very much like the wall-crossing meetings. Most are cordial, with a back-and-forth Q&A. Styles vary widely among analysts and portfolio managers. Some questioning styles can feel combative or dismissive. Do not take it personally, and warn your CEO in advance if you sense that style emerging.

Some of the largest orders I have seen came from firms that sounded the most negative in the room. Maintain an even keel, but do not become expressionless. Investors expect some passion from management. Unlike routine IR meetings, IPO roadshows tend to involve a higher proportion of portfolio managers — actual decision makers — rather than just analysts.

At the end of each day, the order book will be updated and you will get a snapshot of how many orders are coming in and from whom. The ECM team at the lead bank will be increasingly directive about allocations, assuming demand warrants it, but that becomes more important later in the process.

For now, the rhythm is meeting, limo, meeting, limo, eat something, meeting, limo. It all blurs together. I have a good memory, but if I do not take notes, I struggle the next day to recall who said what.

As the book grows, you will see which banks are delivering orders. It often looks like the lead bank is doing all the work, but that is partly an artifact of book control. Non-lead sales forces may push less aggressively because investors know which ECM team controls allocations, so they route orders accordingly. Analysts across the syndicate are usually working hard, and smaller banks often bring in smaller accounts that larger banks ignore, earning their place in the book.

Eventually, the meetings end and the banks tally the orders. If things went well, they will tell you they have enough demand to put a deal together. I do not work on an ECM desk, but I do know that accounts routinely inflate orders in expectation of being cut back.

If you assume roughly 100% order inflation, the common rule of thumb that a deal should be 3–5x oversubscribed really means you need something closer to 6–10x in raw demand. This varies based on market cap and, more importantly, the quality of the orders, not just the quantity — but as a rough guide, it is about right.

In my final post on the IPO process, I will cover allocation, the pricing committee, and what happens when trading begins — including how the banks can step in if early trading is choppy.