The Investment The Banker

The investment banker and roadshow

Company management plays the investment banker to develop the market and créate demand for its stock. One of the most important fuctions of the investment banker is to find institutional buyers for the new shares. To do this, the banker oftne takes company management on a “pre-oftering-roadshow”to market the company. They are called roadshows because members of management travel to major U.S. and international cities to make presentatios. During the roadshow, management presents the companys business plan, its estimated financial statements, and its managemnets operating philosophy. The performance is one part finance and one part showbiz. The investment banker must coach the management team (usually the chairman, chief executive officer, and the chief financial officer) in the presentation of the companys story. This coaching may include using a presentation coach, simulating question and answer sessions, and giving instructions on whath to say and whath not to say under security and Exchange regulations. There have been more tan a lew IPOs whithdrawn trorn the market because management lailed to impress the audience of financial investors. A good roadshow wili help créate more demand for the stock tan the available number of shares being soid. When this happensthe success lul offering usually rises above its offering Price to the day of the IPO.

In 2005, the SEC issued rules to address electronic roadshows over the internet, the rules are intented to allow wider Access to roadshows and to encourage greater media scrutiny and reporting on roadshows. Over the years, the SEC has struggled with how much companies should be allowed to comunícate prior to a stock offeringrestricting how much information companies can reléase around stock issuances may protect unsophisticated investors from buying overpriced IPOs however, restricting the information that small investors recaive may also place them at an information disadvantage relative to sophisticated institutions.

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