If you’ve ever been through an Initial Public Offering (IPO) with your client or employer, you’ll be very aware that the run-up to the offering is subject to strict regulations.
These regulations are aimed at preventing any company from hyping their stock prior to the flotation. It is called the “Quiet Period” and most public companies have a similar quiet period between the end of their financial quarter and the announcement of their quarterly earnings.
This is public company PR 101. It’s not a big secret.
The rule for PR people in this period is that the company shouldn’t release any “material” information or indulge in marketing activities that could be miscontrued as hyping the company. In effect, normal business practice is fine, but no big splashes.
These requirements (along with other legal regulations) sometimes can feel highly restrictive, but they are well established and they are there for a reason.
So to make sure you’ve all been paying attention here’s a little test.
Question:
In your professional opinion, when a company is in its “quiet period” prior to its IPO, would a prominent, favorable profile in the New York Times (free subscription required) constitute:
- A fantastic piece of PR?
- An ill-judged activity that breaks the quiet period?
If you chose answer “1” go to the back of the class and start reading this post over again. If you answered “2” come to the top of the class.
Salesforce.com is a phenomenal success story.
In a difficult economic environment they have created a profitable business, a large number of customers (including Cape Clear Software), successfully pioneered a new way of providing applications as an online service and created a prominent corporate profile.
Before the company announced their IPO they did a fantastic job of extending their company into the business pages and with the exception of Google became the darling of the technology upstarts.
A lot of their success is built around CEO Marc Benioff, who is likeable, quotable and irreverant. The media love him.
But what were they thinking lining up a New York Times piece in the quiet period? How could a company so au fait with effective PR make such a faux pas?
I don’t know.
The episode has forced the Securities and Exchange Commission (SEC) to request that Salesforce postpone their IPO (that would have valued the company in excess of $868 million ) for contravention of the quiet period.
Reading the New York Times profile you get the feeling that Benioff is difficult to manage from a PR perspective, but that isn’t an excuse. The SEC don’t provide these guidelines for the fun of it and they aren’t some well kept secret.
I’m sure Salesforce will have a successful future IPO, but this is one of the PR stunts they may wish to forget.
“Most companies are extra cautious during the quiet period,” said David Menlow, the president of the IPO Financial Network.
Mr. Benioff, by contrast, recently permitted a reporter to spend a day following him around, a visit that included hours of one-on-one time, much to the chagrin of the high-priced lawyers the company has hired to help him negotiate the tricky byways of going public.
“There’s quiet, and then there’s Marc’s version of quiet,” said John Dillon, Salesforce’s chief executive from mid-1999 through late 2001. “He loves the media attention and courts it like no one else in Silicon Valley.”
In part, Mr. Benioff said, he has no choice. He sells the kind of product that only a sales executive could love: a simple, efficient way of tracking a company’s customers and prospective clients.
Footnote:
Jeremy Pepper also covers the Salesforce.com saga
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