Investor Perceptions Are Your Reality
Many factors — inside and outside your company, even outside your industry — affect how investors perceive you. Some would argue there is no such thing as a misperception; in other words, whatever investors think about your company is your reality.
But perceptions can change. If the prevailing perception is not what your management team wants it to be, there are ways to alter the perspective to be more in line with how you want to be viewed. While the efficient market hypothesis states that share prices reflect all publicly available information, investor expectations about future earnings and profitability are imbedded in today’s stock price. Shaping perceptions about the future is an important goal of successful investor relations.
Stepping outside your company to see how others view it is an essential part of perception building. Assessing how outsiders respond to the following basic questions is a good place to start:
- What does the company do?
- Who are its customers?
- How much risk is there in bringing the company’s new products to market?
- What/who is the competition?
- Does management instill and exude confidence?
- What is management’s track record?
- What do bloggers and others involved in the social media sphere say about the company?
If you haven’t done an investor perception audit in a while (or ever), then it’s time to plan one to see if your messages are getting through. You and your board should keep tabs on the effectiveness of investor presentations and reports, hot-button issues, investors’ understanding of your business strategy and long-term goals, and whether or not you are providing appropriate access to the management team.
Here are three high level activities that will impact investor perceptions of your company and can be managed over time.
1. Meet or beat all guidance and timelines.
Publicly disclosed corporate or financial objectives must be met. If you are a biotech developing a new therapeutic, make sure you can meet your timelines regarding clinical trial completion or regulatory filing targets. If an unforeseen circumstance slows things down, you must provide honest commentary about what caused the delay and discuss a revised timeline. If you provide guidance on financial metrics such as revenues, gross margin or operating expenses, make sure you can achieve these goals as well. If you miss a target and try to cover it up or avoid a transparent explanation, the perception of management’s ability to run the company and investor willingness to believe management in the future will suffer. For example, I’ve seen honest, well-run companies try to sugarcoat feedback from the U.S. Food & Drug Administration (FDA), with deleterious results when the truth eventually comes out. I have also witnessed a company halt a development program at the end of a successful Phase 2 trial because the commercial value of the program was in doubt – a move that was applauded by investors.
2. Ensure your communications are open, honest and professional.
Public appearances at conferences, on conference calls, or at industry trade shows will be judged on several factors, including clarity and sincerity of messages; organizational skills; physical appearance; body language; the ability to have a professional, engaging and enthusiastic conversation with the audience; and your overall credibility. Effective integration of these traits will keep the investor audience engaged and interested in learning more about your company – as well as inclined to believe what you are saying. Prepare, practice, open with confidence, keep your messages tight, and ensure you repeat your key points at the conclusion of your presentation.
3. Be deeply knowledgeable about your sector and therapeutic category.
Healthcare is complicated. Staying on top of the legislation, regulations and decisions coming from Congress, the FDA, and insurance companies – and articulating how your company can adapt to changes – is imperative for instilling respect in your management team. Effectively explaining how these changes, both actual and anticipated, could affect your future financial results, customers and day-to-day operations all play important roles in shaping the perception of your company. The same goes for staying on top of scientific and medical advancements that could directly impact product development. Having a go-to and trusted source of industry knowledge is very much appreciated by both the buy- and sell-side investment communities. Being that source can work well even with negative analysts, who themselves can shape the perceptions of your company.
A history of thoughtful explanations, openness, and meeting goals on time will go far in establishing a perception among investors that syncs with how management prefers to be perceived. You may also find that when the economic cycle or industry trends become less hospitable, investors’ positive perceptions could grant you a bit higher valuation.
At Westwicke, we have a long history of helping companies manage investor perceptions, from audits to strategic planning. Contact us for more strategic information that can help with your IR planning and decision making, and sign up for our newsletter to learn more about best practices in investor relations.
ICR Westwicke is the largest healthcare focused investor relations firm in the country. We provide customized investor relations programs and independent capital markets advice to small and mid-cap healthcare companies.
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