Capital is available – but on different terms
It is tempting to describe the capital market as either open or closed. The reality is more nuanced. Transactions are completed, but capital is increasingly directed towards companies that can explain how the proceeds will be used, how long they will last and what measurable value should be created before the next funding requirement arises.
This does not mean that a company must already be profitable or free from risk. A growth company may have a substantial funding need. The board and management must, however, demonstrate that the risks are understood, the priorities are deliberate and the financing supports a realistic operating plan.
For companies preparing an IPO or share issue, funding should therefore be addressed early. It should not be treated as the final line in a presentation after the structure, timetable and documentation have already been fixed.
The equity story must withstand scrutiny
A strong equity story still explains why the market is attractive and why the company is well placed to succeed. It must also be translated into figures, decision points and responsibility. What will the proceeds finance? Which milestones should be achieved? Which costs are fixed, and what can be adjusted if sales develop more slowly than expected?
This is often the difference between an interesting presentation and an investable case. Forecasts should not suggest false precision, but their assumptions must be understandable and capable of being monitored. Investors should be able to see the relationship between the funding, the company’s activities and the value management intends to create.
The same logic should run through the company description or prospectus, financial model, announcements and investor presentation. Conflicting messages about funding needs, growth or timing create questions that are expensive to resolve late in the process.
Funding readiness is more than the size of the issue
The company should assess working capital, transaction costs, existing debt, potential delays and a scenario in which the issue raises less than originally planned. It should also understand which alternative sources of financing are genuinely available rather than merely theoretical.
A robust plan therefore includes at least a base case and a more cautious case. It identifies possible measures, investments that may be postponed and costs that cannot readily be changed. This gives the board a stronger basis for its decisions and makes investor communication more credible.
Underwriting, subscription commitments, bridge financing and credit facilities may all form part of the solution, but they require legal and commercial assessment. Terms, security, fees and possible conflicts of interest must be clear and properly disclosed.
Prepare the documentation before the market sets the timetable
Many processes lose time because basic materials have not been assembled. The share register, issue history, incentive programmes, material agreements, intellectual property, board minutes and financial records must be capable of review. Deficiencies found late may affect valuation, timing and confidence.
The practical work should therefore begin with a structured review. What is missing? What must be corrected? Which decisions are required from the board or shareholders? Which information may constitute inside information and how will it be handled during the process?
A well-organised data room is not merely for advisers. It demonstrates that the company controls its affairs and allows questions from investors, the marketplace and other parties to be answered without unnecessary rework.
The transaction is the beginning, not the end
After the transaction, the company must be able to report, disclose information, maintain insider lists, run its board processes and communicate with the market. This requires more than policies stored in a folder. Responsibilities, workflows and the reporting calendar must work in practice.
The board should know who makes the initial assessment of potential inside information, who prepares the decision record and how an announcement can be finalised under time pressure. The finance team must deliver reporting of sufficient quality and on time. Management must ensure that market communication remains consistent between reporting dates.
Companies that build this capability before the transaction generally achieve a more controlled process and a stronger start as a listed company. It is also a concrete way to show investors that the organisation is ready for its next phase.
Our practical assessment
A company is better placed when three elements support each other: a clear commercial objective, a funding plan that remains workable if assumptions change, and an organisation capable of meeting continuing obligations. If one element is missing, it should be addressed before the company fixes a marketplace, valuation or transaction date.
Start with simple questions. Can management explain the funding requirement in five minutes? Is it clear how the proceeds lead to the next milestone? Are the company’s legal and financial records ready for review? Are resources available for life after the transaction?
Clear answers usually indicate a sound basis for moving forward. Unclear answers are not a reason to abandon the plan, but they do show where the preparation should begin.