Case: Burger King Holdings Initial Public Offering

November 30, 2011

Preparing and delivering an Initial Public Offering (IPO) can be a challenging process for
a variety of reasons, but one that can be very rewarding in ultimately preparing a company for
future success. An IPO offers a great opportunity to generate revenue, but also requires
following many formal rules and regulations that have been specifically crafted by the Securities
and Exchange Commission to prevent unfair corporate practices. These are elements for all
public relations practitioners to be knowledgeable of, as they work to protect the interests of the
company and corporate America, while also creating a successful campaign. After examining
these aspects of an IPO, the focus will turn the communication methods for Burger Kings
Holdings story.
An IPO is the first opportunity that a private company chooses to sell shares on the
open stock market, whereby changing it into a publicly-held company and creating a large
amount of revenue in the process (1). The term going public is a succinct description of the
event and commonly used in publicly traded stock markets. It is an important decision that will
change the makeup of the organization, but also work in an effort to solidify it for future growth.
The major purposes for pursuing an IPO, as defined by MB Ragupathy, are the
necessity of cashing outproviding an opportunity to exit for financial investors(and)
provid(ing) a credible signal to prospective investors. (2) Cashing out is the process of
selling a vested interest in the organization to private investors. This liquidity process generates
a large amount of instant capitol that can be used for a number of purposes. Those include
reinvestment in the company staff, purchase of production materials, an expansion of company
locations, the ability to leverage additional credit or investment and the ability to pay off initial
debt. (3) Providing the opportunity to pay off initial investors, venture capitalists and credit
lenders is a good step toward fulfilling the agreements made and as a way to show proof of a

stable organization. This allows them the opportunity to recoup their investment with profit or
choose to reinvest, while providing additional potential investors the ability to view the growth
progress of the company and to make a decision to invest.
This process also affects the corporate structure of the organization. When changing
from a private to public organization, the control of the company now includes shareholders,
which can be private investors or corporations, in addition to the current Board of Directors.
Now, when decisions about the company need to be made, all voices should be heard, so
shareholder meetings are held and ongoing financial information and corporate decisions are
continually provided so they can remain well-informed and educated when voicing their opinions
regarding the direction of the organization.
With the benefits of the IPO process also come the regulatory aspects that are
monitored by the Securities and Exchange Commission (SEC). In an effort to prevent unethical
or unfair corporate practices, there are a number of regulations and rules to follow when
completing an IPO. Those include a review process by the SEC and other markets, mandatory
waiting periods for purchasing stocks, avoidance of early information posting and restrictions on
quick resale of new stock.
The SEC requires a full review of any potential IPO to ensure that a solid plan is in
place that will neither break laws in the United States nor undermine ethical corporate conduct.
This review includes compensation of senior management, transactions with parties related to
the company, conflicts of interest, competitive positions, how the company intends to develop
future products, material contracts, and lawsuits. (4) This thorough process requires any private
company to begin the ongoing process of transparency so that all interested regulators and
investors are able to clearly understand a corporations purpose and overall transactions. The

National Association of Securities Dealers (NASD) and Blue Sky regulators will also review the
plan and may comment back on certain changes to the disclosure in the registration statement,
company's by-laws, and may designate to whom the securities may be sold. (4) This is critical
feedback that helps to guide a company through the preparation stage of this important change.
Additionally, the New York Stock Exchange, or any other publicly traded exchange site, will
perform a cursory check to ensure that its requirements are met and the NASD and SEC have
given approval. For public relations staff, completing these review processes is an important
step in gaining trust and showing a measure of corporate responsibility through financial
relations.
Just before and after the stock has become public, there are additional restrictions
about who can sell stock or be aware of the forthcoming event. Avoiding Gun Jumping is a
critical aspect of confidentiality that needs to remain in tact. Prior to any stock being available
on the open market, every company must avoid disclosing information only evaluated by the
company that has not been approved by the SEC. This is to encourage all potential investors to
make decisions based on the full disclosure of the prospectus (5) and not on insider
information. Of course, jumping the gun also forbids soliciting any orders for stock before it is
on the open market. During a Lock-Up time period, typically 90-180 days, company insiders
or those holding majority stakes in the company are forbidden to sell any of their shares. (6)
This is in an effort to prevent large stockholders from flooding the market by unloading a
significant percentage of stock, typically undermining the IPO process by driving stock prices
down. As an ethical member of the public relations team, it is important to communicate these
elements to executive staff who currently own stock and filter it through the organization so there

are no delays with the IPO date and any potential concerns surrounding the good corporate
standing are avoided.
Lastly, in an effort to keep a level playing field with regard to the opportunity for
purchasing investment stock, while consequently avoiding those in the business of quick turnaround profit, there are restrictions an organization can place on those desiring to purchase stock
during the IPO. Some firms impose restrictions on investors who "flip" or sell their IPO shares
soon after the first day of trading to make a quick profit. (7) Many corporations are looking for
steady investors that desire to become part of the corporate environment and add to the value of
the company, rather than simply turning a quick profit. So having regulations similar to this in
place is great to help establish relationships with investors. An additional measure includes
requiring a selection criteria process performed by the brokerage coordinating the IPO. This may
include an evaluation of the stability of a clients account balance or that they have purchased
premium services offered by the organization. (7). Each of these purposes works to establish a
corporation with solid investment assets that displays the effort to show consistent performance.
In specific regard to the Burger King Holdings scenario, there are a couple
communication measures that are legally allowable and need to be followed to communicate its
unique story. With the 1934 Securities and Exchange Act came many regulations to follow when
becoming a publicly traded company. Within these rules also exists the ability to communicate
with potential investors and not divulge insider information that could sway their opinions, or
influence their decisions. Most frequently, this occurs through the distribution of a preliminary
prospectus. Also known as a red herring, it is a preliminary prospectus that is essentially
complete except for financial statements, the offering price, and final changes by the regulators.
(4) Aside from any information related to the financial stability, this is a great opportunity to

relay the history of Burger King and how it arrived at its IPO. During the road shows, where
this information is provided to institutional investors, portfolio managers, analysts, and
securities sales personnel, (4) feedback can be gained regarding the interest level for potential
purchases and decisions to change a corporate image or message can be evaluated.
Additionally, an important technique that will draw attention to Burger King is
through a press release. A press release can focus on the upcoming IPO, mention details already
provided in the preliminary prospectus and even highlight the efforts of current management
staff. The goal would be to direct interest back to the companys website, where the story of the
company can be fully told in the History section of the website. Here, details of the rise of the
company along with the mission statement and beliefs and values can be easily communicated.
This would fall completely within the regulations governed by the Securities and Exchange
Commission, and therefore not affect the process of the IPO.
Although cumbersome to a degree, following the rules set by the Securities and
Exchange Commission will show the value and ethics of the corporation and help complete a
successful IPO campaign.

ENDNOTES

(1) Definition of IPO. New York Stock Exchange. November 2011.

http://nyse.nyx.com/en/learningcenter/glossary
(2) MB Ragupathy. Initial Public Offering: A Critical Review of Literature. IUP Journal of
Behavioral Finance, March 2011, Vol. 8, Iss. 1, pg 41-50.
(3) Why Go Public. Investopedia.com. November 2011.
http://www.investopedia.com/university/ipo/ipo.asp#ixzz1f58S2vyS
(4) Louis Taubman. Considerations of an IPO. FindLaw.com. 2011.
http://library.findlaw.com/2001/Jan/1/127967.html
(5) What Does Gun Jumping Mean?. Investopedia.com. November 2011.
http://www.investopedia.com/terms/g/gunjumping.asp#ixzz1f4Tdr2yX
(6) What Does IPO Lock-Up Mean?. Investopedia.com. November 2011.
http://www.investopedia.com/terms/i/ipolockup.asp#ixzz1f4TAROnm
(7) Initial Public Offerings: Why Individuals Have Difficulty Getting Shares. U.S.
Securities and Exchange Commission. November 2011.
http://www.sec.gov/answers/ipodiff.htm