Risk Analysis and Management for Initial Public Offering

In June 2006, an international Chinese bank issued a very successful initial public offering (IPO) on the Hong Kong stock exchange. In the months leading up to the IPO, the company and the lead investment bank for the transaction were concerned that lingering tensions over a recent proposed acquisition and ongoing issues within U.S.-China commercial relations created a risk where anti-China sentiment in the United States could dampen enthusiasm for the IPO and the road show with possible investors prior to the IPO.

Public Strategies was engaged to provide an ongoing assessment of public risks in the United States to the investment banks involved in the IPO. If a serious risk emerged (for example, congressional hearings on the growing commercial influence of Chinese financial institutions), Public Strategies was expected to lead the response effort to address the issue and ensure that key audiences (policymakers, regulators, and the media) were fully aware of the benefits of the IPO.

Immediately upon engagement, Public Strategies prepared a lengthy “risk assessment” of the key issues in the U.S.-China relationship that might have an impact on the upcoming IPO. The issues ranged from the dollar-yuan exchange rate, the belief among some in the U.S. that China engages in unfair labor practices and the opposition of American labor unions to PetroChina’s initial public offering in 2000. As part of that assessment, Public Strategies analyzed the previous media coverage of those “risks” in order to identify trends that might be applicable to news coverage of the IPO.

Public Strategies commenced around-the-clock monitoring of English and Chinese news outlets, the U.S. Congress, relevant executive branch agencies and blog sites.

The continuous information and analysis Public Strategies provided to the bank and its advisors allowed them to know that the potential risks in the United States were minimal. This allowed Bank of China to focus on the core issues of the initial public offering while not unduly focusing on potentially distracting matters in the United States.