How to Build Sustainable Trust and Sustainable Valuations for Your Company Post-IPO

Going public is supposed to be the moment a company arrives. For too many, it’s also the moment they begin to fall apart. According to a 2023 OTC Markets Group analysis of all 91 small-cap IPOs that went to NASDAQ and NYSE American the year prior, more than 92% were trading below their offer price within roughly a year, with an average return of negative 64.8%. More than one-third were already non-compliant with exchange continued listing requirements.

As CEO of Prowess, I provide consulting services to publicly-listed companies and CEOs preparing for liquidity events. Recently, I spoke at the NASDAQ IPO Summit to discuss life after listing. In my discussion with four of the most prominent operators in the field (related to SEC filing, Transfer Agent, Investor Relations and Capital Market Advisory), we explored the fundamental framework and structures of communication strategy and how CEOs and companies can build what I call a “Trust Stack.” I have seen firsthand how rapidly a bright, shiny, newly minted public company can lose value. Conversely, when companies develop a solid pre-IPO and post-IPO Trust Stack, they can maintain long-term relationships with their investors and long-term valuation.

I often think of a CEO I once consulted whose IPO opened near $45 a share. Within months, the stock had fallen to roughly $1. The CEO chose to “close a few more investors first” before investing in narrative strategy. The problem: those investors were not hesitating because they hadn’t heard the pitch enough times. They were hesitating because the strategic work hadn’t been done in advance to build trust post-IPO. As we will examine, it was all solvable.

If you are preparing for an exit or a post-IPO, trying to understand which levers may improve your stock price, here are four key areas to evaluate and improve.

Pillar 1: Compliance is the invisible foundation

When it comes to the Trust Stack, the financials are the foundation. Filing them on time and meeting your deadlines is critical. You may think precision isn’t exciting. However, without precision, all other pillars fall. The late-filed 10-Qs, the re-statement of financials and the missed SEC filing deadlines by 5:30 PM are loud signals to the marketplace and undermine trust. When institutional investors see these signs, they may interpret them as evidence that your company’s foundational numbers are struggling, operational execution is sloppy, or worse.

Companies that have gotten it right do not look at preparing to file with an eye toward the due date. They do not use their competitors as a reason to file on time. Rather, they develop muscle memory from going through thoughtful preparation and mock filing cycles. They backward engineer their reporting cycle and they make sure that everyone involved in the process is aware of and has agreed upon the timeline prior to facing a 5:30 PM deadline.

Pillar 2: Ownership means hiring like a public company

Every single service provider you hire as a publicly traded company sends signals about you. Your auditor, your transfer agent, your PR and IR firm and your attorney all provide a link on your “profile,” which institutional investors will quickly review and then decide if they want to even look at your financial statements.

A potential acquirer may pull up a company on his smartphone, evaluate the team supporting it within seconds, and instantly decide not to invest. More often than not, it isn’t the actual numbers that keep them from opening a 10-K, earnings report or investor meeting. The team you assemble around you sends a signal to the market and boosts or hurts your Trust Stack. One colleague shared a story with me about how an investor didn’t even want to look at a company to invest in, because, in his words “they don’t take themselves seriously.” He made that split-second decision based on who the company hired to support them.

Often, companies try to cut corners by hiring the cheapest labor; none of this pays off in the long run. Don’t think about how much it is going to cost to get the right service providers. Instead, hire the absolute best provider in every position. Until you start sending the right signals to institutional buyers, they won’t take you seriously.

Pillar 3: Investor relations is the long game of trust

If the internal financials are the foundation, the narrative story is the external lever that moves markets. Sustainable trust and sustainable valuation patterns are built by what happens consistently over time. Consistent market updates distributed via press releases serve the role of creating a sort of insurance policy for your company. They provide a cadence, cohesion and reference points to educate your audience, or weather any negative media or market downturn. You have owned your narrative and can point to a body of work and output, should any negative press or crisis emerge. Long periods of silence or irregularity can dampen trust, cause confusion with investors, or leave you vulnerable to outside factors influencing your company’s market perception more than you do.

While important, investor relations is not solely a press release function. Invest time in creating a strategic narrative and a strong company perspective. While so many pieces move behind the scenes, synthesize and simplify the market-facing narrative so your target investors can digest and deliver it to others. It should be as easy to share as someone telling a friend over dinner. Investors invest in companies and products that they understand.

After each investor meeting, record any pertinent questions asked, how you responded and what their feedback was. Your marketing and press materials should reinforce your desk-side meetings with resonant language. Follow-up correspondence should occur to clarify any misconceptions and further build the relationships.

Pillar 4: CEO transparency is the leading trend

Companies that only send press releases leave money on the table. In terms of strategic communication post-IPO, I advise CEOs to step forward as the face of the company as much as possible. Transparency has become one of the most important signals to the marketplace regarding future performance. Studies indicate executives attribute 44% of their company’s market value to the reputation of the CEO. A well-trained, media-savvy CEO directly impacts core valuation metrics that seasoned investors look at, such as the company’s mission and purpose, fundraising ability, growth trajectory and more

Investors expect the CEO to have a strong point of view, remain accessible or transparent across social media, and be willing to provide an answer for any glitches or downturns. When a company does not answer carefully constructed questions from its stakeholders (i.e., investors), this inherently leads to erosion of trust with those same stakeholders.

CEOs need to tell a larger story about the business than just what they do. Your story needs to provide a reason for investors to want to make that connection, believe you and remain invested. That story also needs to be easy for investors to understand (clear), brief and to-the-point (concise), consistent, and something that makes them want to follow along. Retail investors now represent approximately 20% of the daily trading activity, and ESG-driven capital is spreading rapidly into all aspects of our investment horizons. Ignore both groups at your peril.

Craft your core pillar stories, elevator pitch, talking points and buy-signal phrases inherent to your brand and sector. Pre-create the market-facing story arc that builds over time. CEOs of winning organizations create a six to 12-month communications calendar that is based upon the timing of their earnings announcements, expiration dates of lock-up agreements, capital raising activities and other key milestones. They also include regular appearances by the CEO in the financial press, through interviews on various podcasts, through thought leadership articles published via LinkedIn, and through regular communication with shareholders directly, using the channels where their investors spend time. The CEO owns the successes of the organization, as well as its failures. This provides the confidence that they will continue to lead their organization forward and goes a long way toward creating sustainable trust.

The CEO I mentioned, whose stock price went from $45 down to $1, did not have an inferior product nor an inferior team. He simply failed to establish the necessary levels of trust with his investors. He allocated hundreds of millions into a new facility, yet failed to present himself as a trustworthy leader to the market with even one thought leadership article, one podcast, or one media feature. After many desk-side meetings with investors who all expressed enthusiasm and interest in the product, he was hesitant to invest because no one knew who he was. That company now trades at less than fifty cents.

Listing on NASDAQ is a milestone, but it is only the beginning. The companies that thrive long after the bell are the ones that build compliance, ownership, investor relations and CEO transparency working in lockstep. Sustainable trust is what drives sustainable valuations.