Executives who've gone the IPO route warn that bringing a private company public isn't for the faint of heart.
Thinking you'd like to file for an IPO?
First you'd better develop a thicker skin.
That was one of several pieces of advice shared by two Minnesota CEOs last week as part of a insider's look at bringing private companies public. The event was organized by the Collaborative, a group that links entrepreneurs with investors.
James Dolan, CEO of the Dolan Co. told the crowd said he wasn't prepared for the amount of misinformation bloggers wrote. He said he was ready to file an IPO "intellectually, but not viscerally."
He ended up turning off his Google filter at the time.
"I had to turn that off because there is too much craziness out there," Dolan said. "It's a major distraction."
Based on his experience, Dolan cautioned other executives to watch what they say during and after the initial public offering (IPO) process.
"Don't blog. Don't tweet. Don't do things online that could be misunderstood," Dolan said.
Dolan's business publishes various media and legal publications including Finance and Commerce, a business newspaper. Dolan employees have been instructed to check first with management before talking to the press.
"A combination of fear and uncertainty has kept them on the right path," Dolan said.
The Dolan Co. went public in 2007 at $14.50 a share, raising $195 million. On Friday, the stock closed at $10.29 a share.
Dolan said filing the IPO was management's idea. He said the company went public to give better access to capital, provide some liquidity for existing shareholders and more equity for management.
For Tornier, a Netherlands-based orthopedic device company, the reasons for going public were different. CEO Doug Kohrs said the company needed to pay down debt and wanted to grow the business. Tornier's U.S. headquarters is in Edina.
"Orthopedics is extremely cash-intensive," Kohrs said. He pointed out that in addition to providing products, his company also has to provide the instrumentation used to insert them. Medical device companies also must get their products approved by regulators, a costly and time-consuming process.
Tornier went public in February at $19 a share, raising $166.3 million. On Friday, the stock closed at $27.40.
Kohrs said he has noticed that institutional investors have become more concerned about the financial results and trends affecting competitors compared to the past.
Be ready to defend yourself
"It's the negative rhetoric from your competitor that you have to avoid turning into negative rhetoric for you," Kohrs said. "There's much more focus on what's happening overall [in the industry] and you in essence have to prove why you're going to be different."
Initial public offerings from Minnesota-based companies have been relatively rare since the financial crisis spread in 2008.
The most recent Minnesota company to complete an IPO was Kips Bay Medical Inc. in February, which came out at $8 per share. The stock closed Friday at $3.01 Before that, only two companies completed IPOs in 2010 and one in 2009. No Minnesota company completed an IPO in 2008.
Nationally, IPO activity has picked up, according to Bloomberg News. So far, 94 companies have priced IPOs this year, up 42 percent from the same period a year ago.
But while activity is up, so is uncertainty. Thirty-four companies have withdrawn or postponed plans for IPOs this year -- also a 42 percent increase over the same period in 2010.