What a treat to chat yesterday with Kai Ryssdal, host of NPR’s Marketplace! I’m a regular listener of the show, so I was honored when his team reached out to me yesterday regarding the impending Facebook IPO. Here’s an inside look into the IPO roadshow process, and what Facebook executives can expect in the coming weeks.
Kai Ryssdal: It looks like we’re only going to have to wait just a little bit longer for the most-awaited stock offering of this or many other years. There are burblings out there — neither confirmed nor denied — that Facebook’s going to hold its IPO on May 18th.
The way these things work is that before the stock actually goes on sale, the company in question goes out and tries to convince big investors to buy in. It’s called a roadshow. Facebook’s is going to start on Monday. And we wanted to get some idea of what it might be like.
So we called Phil Fernandez. At the moment, he’s the CEO of a company called Marketo up in Silicon Valley. In earlier days, at other companies, though, he’s been through his share of these things. Phil, good to have you with us.
Phil Fernandez: Great to be here with you Kai.
Ryssdal: So the phrase ‘roadshow,’ I mean, you can sort of see it in your mind — companies go out on the road and they do a little show. But what exactly does it mean?
Fernandez: A roadshow’s when a company is trying to sell typically an initial public offering in stock to the public markets, so you’re out trying to sell $100 million or $200 million worth of stock to a bunch of big investors like Fidelity and T.Rowe Price and other big mutual funds.
Ryssdal: Is it a couple of Powerpoints and then some dog and pony? What exactly happens in this presentation?
Fernandez: It’s meeting after meeting after meeting. There’s one-on-one meetings, where you’re actually doing typically a flipbook Powerpoint, not projecting, 10 or 15 minute meeting with the fund manager, and then you often lunches or other big meetings where 50 or 100 people come to a room to hear a company presentation, standing in front of a big room.
Ryssdal: Do you find yourself as a supplicant? It’s a sales pitch, right?
Fernandez: It’s absolutely a sales pitch; you’re selling and it’s a very high-stakes sales pitch that all takes place in typically 10 or 15 minutes where you win or lose the deal right in that moment.
Ryssdal: Do you know in that moment whether you’ve lost?
Fernandez: Oh, I think so. I think you either see somebody that engages and you connect, or if they’re kind of wandering off and eyes are looking in other directions five minutes later, you know, they’re not going to buy.
Ryssdal: But if it goes bad in one of these 10 to 15 minute meetings, you’re probably have like nine more set up that day, right?
Fernandez: Nine or 25 or something like that. I’ve done them from San Diego to Los Angeles to Denver to Minneapolis to New York, all in the same day.
Ryssdal: Yeah, sounds grueling. Sounds like not a whole lot of fun.
Fernandez: You know, it’s an incredible high because what you’re doing is one of the most exciting things in a career, and at the same time, it’s about as hellish as anything I’ve ever been through.
Ryssdal: This might seem like kind of a rookie question to ask, but why do we need roadshows? Why do you guys have to go do this? Isn’t there a better way?
Fernandez: You’d sure like there to be a better way. In all things, there’s this adage that says ‘people buy from people.’ And I think this is exactly what this is — it’s people looking people in the eye and choosing whether they’re going to do business with them.
Ryssdal: What happens then, after you do all these meetings and everything — you’ve either made the sale or you haven’t — but you get back home wherever it is, and then what?
Fernandez: Well the bankers will run what they called ‘the books,’ which is the orderbook of who’s going to buy and who’s not. And they’re figuring out, if it’s an IPO roadshow, exactly what the price is going to be, and of course, what everybody wants is for the price to be above how you filed with the SEC. And so what happens is in the days of and right after the roadshow, the deal comes together, it doesn’t. And you have an IPO and go ring the bell at NASDAQ or New York Stock Exchange or whatever.
Ryssdal: Phil Fernandez, president and CEO at Marketo up in Silicon Valley. Thanks very much for your time, sir.
Fernandez: You bet. Enjoyed it, Kai.