Tip of the Week: Get a New Attitude About Building Market Support

After a traditional IPO, the syndicate of underwriters works hard to support the stock by encouraging their customers to buy and sell into it, hopefully bringing the price up. That is often successful in the days following the launch of the IPO, though even then not always. After that initial burst, though, the stock may continue to be supported or may not. Once the underwriters’ original IPO purchasers are in and out of the stock, sometimes in a matter of hours, the incentive to support is questionable.

After a reverse merger or self-filing, whenever trading begins it is usually very limited at first. There is no syndicate of underwriters. The company’s job at this point has two keys: (1) focus on building your business to earn support as you go and (2) engage strong investor relations and market support professionals who are legitimate but aggressive in helping sell the company’s story to Wall Street and even Main Street. I tell clients not to look at their ticker for at least 6 months, and good trading could take 9-12 or even more months. The going public event is not the liquidity moment, it is simply a key step on the path to liquidity. If you get this and don’t worry about initial trading, you have the greatest chance of going public through alternative techniques successfully.

Leave a comment