So, Zomato went public. They hopped on to the IPO bandwagon in time and their business is now doing wonders for them. It could have gone south for them but fortunately, their plan worked out well and here they are, still delivering value. What’s advertising got to do with IPO anyway? Well, wherever there are brands, there’s advertising, or at least, marketing involved to a great extent.
The IPO Fever
Before jumping the gun, let’s first understand what IPO actually means. To explain IPO in the simplest way – it is a process under which a private company offers its shares to the public with the basic purpose to raise money from investors. This process is how a private company gradually transforms into a publicly listed firm. Going further technical, there’s also an Offer For Sale (OFS) that allows some of the existing promoters to cut down their shareholding in listed companies. However, money that’s raised from OFS goes into the private investors’ pockets who offer their equity for sale.
The Unicorn Status: Firms that surpass their company valuation of $1 billion, are usually entitled to opt for IPOs, but the rules are not fixed. Only some of the big names in the industry with a proven track record usually get to apply for an IPO to get listed publicly.
It’s not just about Zomato. Many companies ranging from tech start-ups in the food & beverage industry, cosmetics, manufacturing, BFSI and so many more have gone public or are expecting to go public in 2021. Marketing, in the IPO scenario, has a very significant role to play and it all boils down to one of the quintessential P’s of marketing – Price!
If underpricing impacts the IPO, it potentially affects the product market performance. How? Underpricing possibly attracts eyeballs because of the media presence and creates considerably valuable publicity. But, is it going to make the public rich or drain them of their life savings? That’s where the Draft Red Herring Prospectus (DRHP) comes into the story.
The Red Herring of the IPO Fairytale
Every story has a clue or a piece of information that is intended to be misleading or distracting. IPO is no different. There are conmen who steal from the public and there are genuine businesspeople. How do we know who’s who?
The Draft Red Herring Prospectus (DRHP) is the looking glass. DRHP is an offer document filed by a company addressed to the Security & Exchange Board of India (SEBI) in order to raise money from the public by selling the shares of the company to its investors. Once SEBI reviews the DRHP, it either clears it for final proceedings or seeks changes from the merchant bankers who are handling the IPO on behalf of the company.
The DRHP includes crucial details about the IPO including the company’s business, operations, promoters, financials, industry position and shareholding pattern. The document also outlines the purpose of the company to raise funds from the public and how it plans to use the money raised.
The scenes from “The Wolf of the Wall Street” or “Guru” might be playing in your head while you think of IPOs, but the marketing of an IPO is a different story altogether. Marketing of the IPO, as mentioned earlier, revolves around ‘price’ followed by ‘promotion’, of course (that’s where advertising joins the party).
Marketing – The Party-starter
IPOs look at parties differently than normal people and advertising is nothing close to normal. Its job is to think out-of-the-box and that’s what makes this party more interesting. When an IPO follows the steps to first present the proposal, get the underwriting agreement done, assemble the team and process the documentation, marketing materials are then required for the team to promote the new stock issuance.
The team of underwriters and executives promotes the issuance to ascertain the demand and arrive at a final offering price. Throughout the marketing process, the team is allowed to revise the price based on their financial analysis and the market trend.
A revolution or a fad? How long will this last?
Just like the disclaimers of any IPOs or stock-related advertisements are loud & clear, the journey of an IPO is subject to market risks. We can see the IPO rushing onto the market bandwagon in a hurry because several companies that went public last year saw significant growth. According to a recent study, IPOs raised in 2020, raised close to $4.6 billion. It is predicted that 2021 will surpass this figure as the companies applying for IPO have increased drastically. All this, to recover the business losses caused by COVID-19.
Revolution or fad, nevertheless, IPOs are set to stir the market up. With LIC expected to raise almost INR 70,000 crore, Paytm is set to raise nearly INR 17,000 crore, the current players are all readying up to leave Zomato (which raised INR 9,375 crore) way behind. Joining the IPO bandwagon this year are Flipkart, Mobikwik, OYO, Ola, Wellness Forever, Puranik Builders, Bajaj Energy, Glenmark Life Sciences, to name a few.
At 3 Dots Design Pvt. Ltd, we believe that IPOs drive the market inside out and every marketer has a potential opportunity to benefit from it. Being one of the top digital advertising agencies in Pune, we take pride in keeping up with the trend (don’t expect an IPO from us anytime soon though). Our team that’s keen to absorb any information that’s making rounds on the internet, will always bring the top ones for you so that you don’t miss out on the important stuff.