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Jun 18, 2020

Virtual IPOs: Temporary or definitive solution?

The market quickly adapted to Covid-19, as innovative solutions began to emerge

The IPO is notorious for being a complex and exhaustive process. Think months of 24/7 planning, immaculate attention to detail and a final seven-day world trip to engage investor interest. Only when the distinct ringing of a bell at the stock exchange is heard can the company breathe a sigh of relief. This iconic sound marks the beginning of a new publicly held corporation.

Even with all proper processes in place, the unexpected global pandemic turned the world upside down. Border lines were suddenly closed as travel became increasingly restricted. The stock market began to crumble as a direct result of imposed lockdowns. At first, going public in this kind of scenario would appear near to impossible. Nevertheless, the market quickly adapted as innovative solutions began to emerge.

Following the 2020 Chinese New Year celebrations in February, 13 IPOs were held at the Shanghai Stock Exchange (SSE) during the peak of the pandemic. As in-person listing ceremonies were forbidden, the SSE announced several innovative measures to combat the challenges of having a remote workforce. A team dedicated entirely to remote contracts was put in place along with a reduction in listing fees. A virtual listing ceremony also came about with an added video simulating ringing of the stock exchange bell.

The first virtual ceremony took place for a company headquartered in Hubei province, where the pandemic first started. Bestore, China’s largest healthy snack company, had its IPO while more than half of its stores remained closed. Despite the pandemic, Bestore raised $68 mn and its shares surged to 44 percent on the first day of trading – the maximum amount allowed by the local stock exchange – taking the company’s valuation to $1 bn.

Bestore’s video, with the team remotely ringing the bell at the virtual listing ceremony

On March 23, InnoCare Pharma also held a virtual listing ceremony at the Stock Exchange of Hong Kong. The company raised $290 mn, with the share price at the top of its range.

The first virtual IPO in the US took place on April 2. Biotech company Zentalis Pharmaceuticals listed on Nasdaq and had a completely virtual roadshow. The virtual offering garnered so much interest that the IPO increased by 20 percent to $165 mn. Keros Therapeutics also went public a few days later on April 7.

According to Ivana Ferreira, managing director of listings & capital markets at Nasdaq, a traditional IPO roadshow spans an average of 10 days; a virtual roadshow can be done in a mere four. Talk about an efficiency jump.

Nasdaq focused on operating an efficient electronic market with remote transaction capabilities without any disruption. According to Ferreira, listings are moving on smoothly, even with various teams working from home. Tech and biotech are the current outperforming sectors for solving problems in the present and future. The Nasdaq-100 performance surpassed both the Dow Jones Industrial Average and the S&P 500. Nasdaq’s biotech sector also reached a five-year high.

The virtual roadshow quickly became a fixture. On May 14, Pexip, a Norwegian videoconference software provider, listed shares on Oslo Børs and raised $100 mn. This sector saw exponential growth during the quarantine and quickly became a part of everyday life for those working from home and those in telemedicine.

In Pexip’s case, all IPO meetings, project management, drafting sessions and meetings with investors were held through its proprietary videoconferencing tool, spanning 15 countries. According to CEO Odd Sverre Østlie, the virtual IPO significantly bolstered productivity internally. Østlie also highlights relevant social and environmental aspects: there were 1,700 fewer hours of travel, saving more than 80 tons of CO2 emissions, an energy amount equivalent to that of 10 Norwegian citizens’ annual use. The company sent bells to each of its 240 employees, so they could all ring them together with the CEO over video.

Pexip’s CEO and employees ringing the opening bell at the stock exchange

Brazilian company Estapar conducted an IPO in May, raising R$345 mn ($66 mn), at the low end of the price range. According to Estapar’s CFO Emílio Sanches and IR manager Daniel Soraggi, the logistics worked out perfectly. Sanches points out that the virtual roadshow enabled access to certain investors and regions they could not have reached otherwise. A virtual workspace also allowed executives to participate more in company meetings. ‘We brought executives to the meetings who regularly would not participate in face-to-face roadshows, and it was a very valuable experience for them,’ Sanches says.

He acknowledges that the virtual roadshow is here to stay: ‘We do not believe in going 50-50 post-pandemic; it will be 100 percent in-person or 100 percent online. IPOs, perhaps, will continue to be held face to face, as investor relationships are crucial, but for follow-ups and non-deal roadshows, this can be a new reality.’

Estapar CEO André Iasi and B3 CEO Gilson Finkelsztain at Estapar’s virtual listing ceremony

As human beings adapt to new landscapes and unanticipated circumstances, we must remember the essence of human connection: the basic desire for close relations. Only time will tell whether the work-from-home trend will be a transitory phase or we continue following a hybrid model of in-person and virtual work.


Fabiane Goldstein is a founding partner of InspIR Group