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Amid IPO fever, columnist Maynard Webb gives advice on pricing an offering

21st Jul 2021 | 02:30pm

Editor’s Note: Each week Maynard Webb, former CEO of LiveOps and the former COO of eBay, will offer candid, practical, and sometimes surprising advice to entrepreneurs and founders. To submit a question, write to Webb at dearfounder@fastcompany.com.

Q. Our company is planning an IPO. Do you have advice on how we should do our pricing? We think we can get a good price but at the same time, there is a lot of uncertainty in the world, and we’re still a young, fast-growing company.

-Founder of a breakout soon-to-be public company

Dear Founder,

Your Initial Public Offering is a great day. But I also like to say it should be your company’s worst day—you want everything to be up and to the right from there. Of course, it’s usually not straight up; it’s up and down, and when it’s down, it’s a tough thing to manage. But overall, your company should continue to get bigger, make more of an impact, and grow more valuable every day from here on!

This question about pricing is an intriguing topic, and one that’s received a lot of attention with some of the recent IPOs that opened much higher than they were priced. As a founder, you have been working for years to get the value you are going to get. But if the market is bullish and overheated, the price may go above what you are asking, and those who have been investors in your company for a day get a lot of upside—versus the employees and investors who have been building the company for years. 

It’s a delicate situation to navigate because you want to capture as much value for the company as you can, but you want to do so in a sustainable manner so that you don’t have disappointment in the market. On the flip side, you don’t want to be so conservative that you give the most upside to new investors who bought into the range and get the pop. 

The good news: Experienced bankers can guide you through the process. Right now, a lot of companies go public with dual classes of stock, which gives more protection to the people who built the company. Not all investors like that, but it will be very much to your benefit.

Remember, investors want to have much transparency and insight into every piece of your business, as they want to make informed decisions. But your business may not be mature enough to report with that level of granularity. Be careful with what you share because whatever information you give them will then always be expected to be given. You will have a chance to go through the road show and answer all questions. Stick to that same roadmap for the first year or two. Less is more in the beginning. 

The biggest thing you can do to build momentum is deliver. Do what you say and say what you do. That is what will help your stock perform the best both out of the gate and for the long term.