What is a Roadshow
A roadshow is a series of presentations made in various locations leading up to an initial public offering (IPO). The roadshow is a sales pitch to potential investors by the underwriting firm and executive management team of the company about to go public.
What's a Road Show?
Understanding a Road Show
A roadshow involves members of the investment firm who are underwriting or issuing the IPO whereby they travel around the country presenting the investment opportunity. The goal of the roadshow is to generate excitement and interest surrounding the company and its IPO. A successful road show is often critical to the success of the IPO.
The underwriters travel to introduce the IPO to institutional investors, analysts, fund managers of mutual funds and hedge funds to interest them in the security. The road show also provides an opportunity for the underwriters to introduce the company's management and for investors to hear management's vision and goals for the company. Most road shows stop include stops in Boston, Chicago, Los Angeles, and New York City.
Roadshow events may attract hundreds of prospective buyers interested in learning more about the offering. The events may include multimedia presentations and question-and-answer sessions with several of the company's officers present. Many companies take advantage of the internet and post videos of the roadshow presentations online. In addition to the larger roadshow events, companies may also hold smaller, private meetings in the months and weeks leading up to the IPO.
Information Presented in a Roadshow
Roadshows cover a variety of topics including the company’s history and any future plans. Information about the company presented at the roadshow can include:
- A video or digital media presentation
- Company's history and how it got started
- Meeting the executive management
- Plans and vision for the company
- The unique value proposition of the company
- Earnings and financial performance
- Prior sales growth with projections and forecasts
- The investment opportunity and growth potential
- IPO stock price target
Aside from providing information about the company and the offering, the roadshow allows investors to ask questions of management and the underwriters during a Q&A session. The roadshow is essential to the IPO since it provides a forum where the company can communicate directly with potential investors to address any concerns or highlight successes. The underwriters also use information gathered from investors to complete the book-building process, which involves gathering prices potential investors are willing to pay for the offering.
After the Completion of the Road Show
Once a road show is completed, the final prospectus is created and distributed to potential investors. The prospectus is also filed with the U.S. Securities and Exchange Commission (SEC). An initial price for the offering is set based on the information gathered during the book-building process, and the IPO date is solidified.
[Important: The goal of the roadshow is to generate enthusiasm surrounding the company's upcoming IPO. A successful road show is often critical to the success of the IPO.]
A non-deal roadshow (NDR) occurs when executives hold discussions with current and potential investors, but no equity or debt securities are offered. NDRs are carried out to provide public information to investors, including updates on the company's existing business and vision for the future. An NDR involves meeting with key investors to keep them updated on how the company is performing.
- A roadshow is a series of presentations made in various locations leading up to an initial public offering (IPO).
- The roadshow is a sales pitch to potential investors by the underwriting firm and executive management team of the company about to go public.
- Chinese e-commerce giant Alibaba Group (BABA) posted the largest IPO ever by raising $25 billion. Alibaba's roadshow contributed to the overwhelming enthusiasm surrounding the company's IPO.
Example of a Successful Roadshow
Chinese e-commerce giant Alibaba Group Holding Limited (BABA) posted the largest IPO ever by raising $25 billion while the underwriters involved took home $300 million. The IPO was so successful that the stock price surged 38% in its debut.
However, the enthusiasm surrounding the IPO began well before the stock began trading. The roadshow included the financial numbers but also a video history of the company narrated by co-founder and Chairman Jack Ma. The roadshow was a such a success with investors that it's likely the reason why the IPO price range was increased to $66-$68 from the earlier published $60-$66 range. Although the increase in the price range might not appear to be impressive, it's important to remember that the company sold over 300 million shares during its IPO.