Underwriting & Investor Engagement:
How to Market and Price Your IPO

PublicFinancial.com IPO Knowledge Hub Series


Founders often wonder: “Do we really need underwriters? What do they actually do?” This guide walks through what underwriters offer, what they cost, and how they compare to the marketing strategy behind a direct listing.

Key Founder Questions: Underwriting & Investor Engagement

1️⃣ What will underwriters do for us in an IPO?

Underwriters play a central role in a traditional IPO:

  • Price the offering based on investor feedback.
  • Buy and resell shares to institutional investors.
  • Market the IPO through a roadshow.
  • Stabilize the stock price after the IPO through limited trading activity.
  • Provide post-IPO analyst coverage and ongoing investor support.

2️⃣ How much will underwriters charge?

  • Typically 6% to 8% of gross proceeds from the IPO.
  • Larger deals may negotiate slightly lower fees; smaller deals may pay more.

This fee includes:

  • The underwriter’s services.
  • Access to their investor network.
  • Partial risk absorption (since they may commit to buying the shares).

3️⃣ What are we getting in return for those fees?

  • Access to high-quality institutional investors.
  • Help with pricing to avoid over- or under-valuation.
  • Support during and after the IPO to stabilize your stock.
  • Enhanced credibility and visibility with the market.

Think of underwriters as both distributors and brand builders for your IPO.

4️⃣ How do we pick which banks to be our underwriters?

Evaluate based on:

  • Track record in your industry or size category.
  • Investor relationships and distribution reach.
  • Willingness to allocate resources and analyst coverage to your company.
  • Chemistry and communication with your leadership team.

You’ll likely have a lead underwriter and several co-managers.

5️⃣ What is the roadshow going to look like?

  • Typically lasts a few days
  • Founders and the CFO meet with dozens of institutional investors.
  • Present your financials, growth story, risks, and strategy.
  • Gather investor feedback that helps finalize the IPO price.

In a virtual format, this can be done through back-to-back video calls.

6️⃣ Can we test the waters with investors beforehand?

Yes — under JOBS Act provisions, eligible companies can:

  • Meet with select institutional investors pre-filing.
  • Gather feedback on valuation, appetite, and deal structure.

This can help shape your IPO or direct listing strategy.

7️⃣ How will a direct listing affect investor marketing?

  • No roadshow or book-building.
  • You may host an Investor Day or publish a comprehensive investor deck.
  • Financial advisors may help with outreach but without buying the shares.

Direct listings rely more on your brand strength and investor education.

8️⃣ Who will support us during a direct listing?

You may retain:

  • Financial advisors (often investment banks without underwriting roles).
  • IR firms to shape and distribute your message.
  • Legal and accounting teams for compliance and S-1 preparation.

9️⃣ Will direct listings attract analyst coverage?

  • Possibly, but less reliably than IPOs.
  • Underwriters’ analysts often cover companies post-IPO as part of their role.
  • In a direct listing, coverage must be earned over time or facilitated by proactive investor relations.

🔟 What about lock-up agreements?

  • IPO: Founders, executives, and major shareholders typically agree to a 180-day lock-up.
  • This prevents selling immediately after listing and supports price stability.
  • Direct listing: No formal lock-up. Insiders can sell immediately — but large-scale sales may still be discouraged to protect pricing and perception.

Final Thought

Underwriters offer structure, support, and market access — but at a cost.

If raising capital, maximizing reach, and building institutional trust are top priorities, underwriting makes sense. For mature companies seeking liquidity without dilution, direct listings can work — but require a strong investor communications strategy.

Next Step: Build Your Investor Marketing Plan

Whether you pursue an IPO or direct listing, your success will depend on how well you engage investors. Contact PublicFinancial.com for an underwriting strategy review or direct listing advisory support.