Decorative pattern

Investor communications on the fundraising journey: Pre-IPO to pathfinder

March 2023


When you’re building a business and preparing for an Initial Public Offering (IPO), there are many stages to the fundraising journey. Last week, we talked about hybrid and virtual roadshows, and how the pandemic altered investor communications forever. 

This week, we’re looking at pre-IPO research and IPO pathfinder documents, including why they’re both so crucial when it comes to investor communications. 

For the majority of IPOs in the UK, pre-IPO research is carried out by underwriting analysts, the results of which are then discussed with the company’s investors. At that stage, a price range would be set. 

But what else is there to know about this stage of investor communications? In today’s blog, we’ll be covering the basics of IPO, pre-IPO research, the importance of ESG, and IPO pathfinders. 


How does an Initial Public Offering (IPO) work? 

Prior to an IPO, a company will be privately owned, primarily by its founders and those who invested in the earlier fundraising stages. When a business decides to go public, an investment bank will carry out extensive financial analysis in order to settle on a valuation, a share price, and the date on which the company could go public. When this process is complete, the business is then listed on a stock exchange, at which point their shares can be bought and sold. 


Pre-IPO research 

While much of the pre-IPO research will be carried out by underwriting analysts, there’s still a lot for the company themselves to manage. In the lead-up to going public, investor communications must be seamless. All relevant financial information must be readily available.


The growing importance of ESG in pre-IPO investor communications 

In recent years, there is one factor of the pre-IPO stage that’s become more and more important: Environmental, Social & Governance (ESG). With increasing importance to investors, it’s now imperative that businesses are incorporating ESG into their business model, even before going public. It’s no longer enough to focus exclusively on profitability, growth, revenues, and the company’s market share. As well as generating value for their shareholders, businesses also need to be providing disclosures on ESG. It’s been proven time and time again that regardless of where a company is in the IPO process, they’ll have an edge on their competitors if their ESG scores are solid. 


IPO pathfinder in investor communications

Before your final prospectus is published, you’ll be drafting a ‘pathfinder’ prospectus, otherwise known as a ‘path range’ prospectus (and in the US as a ‘red herring’ prospectus). This is another vital aspect of investor communications, and will usually include some indication of a price range. This range will then determine the final offer price. 

The purpose of the IPO pathfinder is to judge the level of demand currently in the market. The prospectus is distributed to all prospective investors during investor roadshows. As for the contents of the pathfinder prospectus, these will be largely similar to the contents of the final prospectus.  


Eager to learn more about the fundraising journey and investor communications? Keep an eye out for our next blog. And if you’re looking for an affordable virtual data room, head to our Engage page to find out more. 

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Decorative pattern