3 Risks Investment Banks Face on IPO Day

An Initial Public Offering (IPO) can be a great way for private companies to raise some capital and fund growth, as well as providing an exit opportunity for existing shareholders. However, the process is a huge undertaking, often involving one to two years of preparation before arriving at the ringing of the bell ceremony. That time will see IPO-supporting processes and infrastructure built, external IPO experts recruited and a wealth of other work completed across legal, finance, marketing, regulation, strategy, structure and systems.

An underwriting bank has a number of activities in the lead up to the IPO. On the day of the IPO, there is a huge amount of orchestration that takes place between a number of different areas within the Investment Bank. These range from bankers, market data teams, technology app teams and, of course, a host of stakeholders who want to understand the progress as the IPO prepares to go public.

With so much activity happening on IPO day, it’s vital that any risk of misstep is minimized, as any mistakes could lead to the listing being pulled at the last minute. This would be hugely embarrassing to the investment bank, as well as potentially damaging to the IPO company.

 

Rehearsal

It’s key to rehearse the IPO day in advance, to ensure that both the computer systems and employees can manage the huge amount of work that will be required on the day. Of course, the most realistic rehearsals are the ones that allow companies to prepare most effectively - if every detail is checked beforehand, there is much less chance of surprise issues springing up on IPO day.

 

Collaboration and Status

Multiple teams need to constantly collaborate on IPO day to ensure that all their interdependent processes are completed both on time and at the right time. Variables need to be factored in, too - while a starting price will have been set the day before the IPO, market analysis will be done continuously throughout the day, evaluating and reporting the estimated demand and price for the stock. Seamless collaboration and real-time reporting are essential to making sure everybody involved is always on the same page.

 

Audit

IPO day can be a frenzy of activity. When you need to analyze what happened later, manually piecing together the sequence of events can be a laborious task. Reduce the risk of gaps and inaccuracies by automating the creation of the record during the day. That way, the data you need for audit and improvement is much more usable in its accuracy, as well as readily available as soon as the IPO day is completed.

 

Want to learn more about how Cutover can be used in an IPO? Read our IPO Use Case.

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