Code View Point: State of the IPO market

This is the first of a regular feature where I will share a few short insights from the financial markets / wider economic developments and assess the implications for philanthropy.

My aim is to keep each article to a maximum of 750 words so that you can read each one in under 5 mins!

I had hoped to start these articles a little sooner but here goes with the first one!

We will often see in the press details on an IPO, statements about the IPO market and rumours swirling around which will be the next private company to tap the public markets. However what significance does this have for prospect researchers and fundraisers? Well it could have a fair few zeros impact!

Lets start with the basics.

An Initial Public Offering (IPO) is where previously privately held shares are sold to the public. This sees the founders / owners give up some or even all of their shares in return for cash. Think of Google, Apple and Microsoft all of whom started in a garage and now are some of the biggest public companies in the world (also making their founders some of the richest people in the world at the same time).

Some owners will retain a stake in the business (there are lots of inventive ways this can be done such as through B share issuance etc - more on that another time!), some will be appointed to senior positions in the business (and get handsome reward packages) and some will leave and often setup a new venture with the wad of cash they have just received!

Ultimately though an IPO sees a private company become a public one with their shares listed on an exchange such as NYSE, LSE, ASX or the NASDQ etc.

The significance is that an IPO is often the primary wealth creation moment for individuals and far exceeds other sources of accumulated income.

When first coming into this sector with PyroTalks I was amazed how little attention was given to private company valuation. An IPO could net owners billions in one go and thus provide an influx of cash that is ripe for a donation

You will see that on Code we have a strong focus on private company valuation to support your identification of potential prospects that have been hard to previously value. Our Smart Valuation tool enables you to value private companies / shareholdings irrespective of the level of information you have. You can use this valuation to prioritise prospects and gain an insight into their potential wealth (albeit capitalised wealth).

A buoyant IPO market is great for founders, positive for financial markets (ie bigger banker bonuses and more listed companies) and provides the realisation of value for business owners (ie shifting their wealth from capitalised to liquid).

Where IPO markets falter business owners have fewer ways to realise value and are unable to exit as easily or with as much money.

Having read a recent FT article, it confirmed my initial thoughts that the IPO market this year has been severely depressed. Some of the pertinent points include:

1. Wednesday will mark 238 days without a tech IPO worth more than $50mn, surpassing the previous records set in the aftermath of the 2008 financial

2. Overall US IPO volumes are down 94 per cent year on year, with just $7bn raised so far in 2022 compared with $110bn in the same period last year, according to Dealogic data

This is not good news, but it could show how in the future we will see a flurry of IPOs when the market is firing on all cylinders.

Making an ask after the IPO is too late as the proceeds will already be either physically or notionally allocated. At a recent PyroTalks event Bod Buckley stated that following a London IPO, the founders made a significant charitable contribution - however that was to an organisation where a relationship had been established over several years. Therefore, it is important that relationships are built early and even pre-exit donations are setup (see the links below for further info). When the IPO market is quiet - it presents a good time to build those relationships!!

Practical takeaways

1. Monitor the IPO market - there more active it is the more wealth will become liquid

2. Use Code to value private companies of any size or industry - this will help identify and prioritise prospects

3. Build relationships early

In my next insight, I’ll give you a few examples of how to spot companies prepping for an IPO and how to monitor SEC filings for evidence that a company is prepping for an IPO.

Hope this article (and future ones) provide a few ideas that you can explore. Any questions or comments let me know.

Jon

Key article links

https://www.ft.com/content/90cb4e56-b460-4654-b420-9c470218fd9b

https://www.deedeemendoza.com/blog/2019/8/28/5-truths-of-pre-exit-philanthropy

https://dealroom.net/blog/the-biggest-ipos

Updates: Director Dividends

The updates keep rolling….

As many directors (mainly public companies) are awarded shares (via share options, bonus awards or the vesting of LTIPs) we have now reflected that many of these shares pay dividends once vested.

Taking average director shareholding and average dividend rates for each company size / sector we have been able to provide an insight into an additional income stream that directors may receive on top of their salary and bonuses. In some cases, this can be quite substantial.

If you have any queries let me know

Jon

Updates: Corporate Donations

Following significant work, we are pleased to announce the launch of a new calculator, Corporate Donation.

We know that many of you are undertaking corporate fundraising activities and this calculator has been created to specifically support this analysis.

Based on whatever information you have; the calculator will enable you to estimate annual corporate donation potential. Much like Smart Valuation, you will be able to use this calculator if you have:

• employee number only

• core financials (sales, net Income, net Assets)

• Full access to the balance sheet (typically only UK companies)

Our data is based on the pre-tax profit of the business (which code will estimate for you) and the net cash position (which code will also help establish). Donation rates are based on extensive research we have undertaken plus drawing upon reports from the likes of Giving USA.

We will work through this new tool at the next Code User group meeting so you have a better understanding of how it works and I can address any questions.

Thanks

Jon

Ps this is the first new tool of a big development frenzy we have going on at the moment. There are some really exciting new tools, functionality and data coming soon so watch this space, it is going to be an exciting month for Code!

Updates: Board Roles

We have made a small update to the results section in Board Roles to help make clearer the typical remuneration package executives receive.

Previously we only showed the results for those components that were applicable. For example, a Non-Executive Director would only receive a Base Salary, no Dividends, no Bonus and no LTIPs. On Code only the base salary would be shown in the results section.

However, from discussions, users would like confirmation that other forms of remuneration are not typically paid to give you the confidence that you are not missing anything.

Therefore, to signal that some roles would not typically receive remuneration components, we will publish all forms of remuneration (Base Salary, Dividends, Bonus and LTIPs) and signal with an N/A (i.e. not typically applicable) where a component is not typically paid.

Any questions let me know and hope this helps.

Jon

Updates: Dividends Tool

Following extensive discussions with users and additional proprietary development, our new Dividend tool (in the Income section on Code) has launched!

Dividends are an important and liquid part of owner / shareholder remuneration and can also lead to significant accumulated wealth.

Dividends are also a rich potential source of donations as recipients see them as extra income over their normal salary (that is normally pre-allocated to normal living expenses) so bigger % donations will come from dividends than salary.

Furthermore, typically dividends are taxed at a lower rate than salary!

To use the new tool, navigate to income / Dividends you now need to initially select whether you have access to financials or no financials.

• Select ‘Financials” if you don't have access to full accounts, but do have access to sales, net income or net assets.

• Select ‘No Financials’ if you don’t have any financials and then just enter the number of employees (often found on LinkedIn. Using the ⒸPredictor tool Code will estimate the likely dividends that the company will pay.

For advanced users and those with access to the full accounts, you can still select full accounts in the financials option and Code will support your research in finding those hidden dividends (as covered in the masterclass and coming to the Knowledge base soon!)

If you have any queries, need support or want to give us any feedback drop me an email at Jonathan.jeffery@pyro.solutions

We have further developments and cool things coming soon…..so watch this space!

Updates: Specialist Roles

Some further updates have been made to Specialist Roles

• Consolidated the specialist role sectors to make them more intuitive and easier to navigate

• Added additional senior Medical roles for the US

• Added the Marketing & Advertising sector and roles to the US dataset

• Added US Big 4 partner remuneration data (some big numbers here so well worth looking at and checking your prospect list!!)

• Added additional assets under management (AUM) sizes for Private equity, Hedge funds and Fund management for the UK and AUS

• Updated Big 4 partner salaries in the UK and AUS to reflect recent developments (Partners have had their best year ever!!!)

Further updates are planned for in a few weeks that will provide additional data on high-paying specialist roles (focused on the legal and finance sectors) plus some additional insights for each role.

Thanks

Jon

Updates: Smart Valuation

To enhance the ease of which the Smart Valuation tool can be used, we have enhanced its layout and functionality.

When launching the tool you will be now be asked whether you have access to key financials or not for the company you are investigating.

Key financials are Turnover, Net income or Net Assets. You only need 1 of these inputs, however the more you input the more accurate the result will be.

If you don’t have financials, you can simply enter the Number of Employees and our algorithms will predict the company valuation. The number of employees can often be found via LinkedIn or other readily available sources. If you can’t find the number of employees, this could be benchmarked against a similar company.

These changes make it easier to gain an insight into company valuation when you don’t have access to any financials, such as the case in the USA and Australia.

Don’t forget you can also use our modifiers to further customise your valuation.

We hope these changes make it even simpler to use Smart Valuation and any questions let us know.

Jon

Updates: LinkedIn Sector Map

Given the extensive use of LinkedIn we have now updated our sector map to include a greater range of sectors used by LinkedIn. This will help you navigate from LinkedIn’s sector to the Pyro Sector/Industry easier to get insights on likely remuneration and company valuation.

To use the sector map simply navigate to (https://code-fi.com/sector-map): Guides / Sector Map / Search Type, then choose LinkedIn Sector (Global) and select the LinkedIn sector. The result will show you which Pyro Sector/Industry to use in all of our tools.

For those countries where accessing financial information is difficult, LinkedIn can provide basic information such as the number of employee numbers, which can be used in our Smart Valuation or Predictor tools.

More updates (some big ones) are on the way over the next few weeks so watch this space!

Jon)

Updates: Board Role Remuneration Ranges Now Live

Following user feedback we have now added ranges to all board level roles. For each role you will be able to see the calibrated minimum, average and maximum for:

1. Base salary

2. Bonus

3. Dividends (where applicable)

4. LTIPs (where applicable)

This data is available for AUS, UK and US for all public and private companies. This also included business owners / founders.

It is important to note the minimum and maximums are calibrated and as a result of this there might be occasional outliers (ie an Elon Musk type bonus) that has been purposefully excluded from our results to ensure the range results are not excessively skewed / large.

Updates: AUS Specialist Roles

We have today added data for over 700 extra specialist roles in Australia. These roles range from Accountant & Finance to Technology and Manufacturing. Please take a look!

This shows our commitment to building Code into a truly global platform to enable you to research anyone anywhere!

Note a further update is planned in the next few days for Legal roles to reflect global increases in Legal pay, especially for partners so keep your eyes peeled!

Code User Group Reminder

A quick reminder that the Code user group will be held on Thursday 21st July at 3pm. We will work through the Career Earnings tool and will also have plenty of time for your questions and insights.

I look forward to seeing you then!

Updates: Business Owner Dividends Added

You can now see the predicted salary and dividends for private company Business Owners. To access this data go to Income / Board Roles - then select your sector, the private company size and choose Business Owner / Founder.

The new data is available for AUS, UK and US.

This will enable you to have more insight into how Business Owners are paid.

Business owners will often take advantage of the lower tax rate applied to dividends and take a larger proportion of their remuneration via dividends than normal salary.

Welcome to our new update blog

Welcome to regular Code updates blog.

This blog will keep you up to date with what we are working on and the latest data and functionality updates on the Code platform. To whet your appetite we have a significant new bit of functionality and data coming soon so watch this space!

I will also use this feed to remind you about upcoming code user groups and surgeries (individual and teams).

As well as the regular monthly code user group, I will be making weekly slots available for users or teams to book to go over any specific issues they are facing or queries. Please look out for my post on this in a week or so!

In the future I will be sharing some key insights from the business, financial and philanthropic world and hopefully stimulating some debate and ideas.

Finally if there is anything you want me to cover in future blogs please let me know!

Thanks

Jon