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Do’s and Don’ts from the Buy Side and Sell Side

Posted on December 5th, 2013. Posted by

Not long ago, I had the enjoyable task of serving as moderator for the recent evening program of the San Diego National Investor Relations Institute (NIRI) Chapter titled “Do’s and Don’ts from the Buy Side and Sell Side.” The panel of two buy-side investors and two sell-side analysts, who cover the technology and life sciences sectors, provided a lively discussion and an abundance of practical advice on the art of practicing effective investor relations (IR). We touched on just about every aspect of IR, from non-deal road shows to the corporate website, and even the perfect length of time for the safe harbor statement on a conference call. Here are some of what the panel considered the top do’s and don’ts for investor relations.

Do know your audience, including their investment criteria and philosophy, so that your IR program targets the right buy-siders. If your company is in the development stage, don’t spend time trying to arrange meetings with funds that can only invest in companies with sales and/or earnings.

Do know your company’s product line. Be able to explain it to investors and differentiate it from your competition. Don’t hide behind the veil of nondisclosure, selective disclosure, and potential Reg FD problems to avoid responding to simple or general questions about your company. If you are not providing information that is typical for your peers, investors will think you are trying to hide something.

Don’t bury information about what your company does and why investors should care about it deep within your presentation. One of our panelists recently met with a company that waited until the 15th slide to provide this information. By then the investor was checking email. Include key information about your company within the first several presentation slides.

Do use the sell side effectively to get your story out and shape it the way you want it told. Sell-siders can be terrific allies and can be used to gather feedback on what the buy side thinks about your company and how you can explain your story more effectively. The IRO needs to manage the sell side and keep them on track with how you want to position your company.

Do prepare easy-to-read, organized news releases, particularly when it comes to earnings. Make sure the GAAP to adjusted earnings information and your guidance are obvious and simple to understand.

Do plenty of non-deal road shows. They provide quality time with management for the buy side and are far superior to the 25-minute speed-meeting sessions at investor conferences. Sell side analyst participation in the meetings helps refresh their knowledge of the story and provides firsthand information about the buy siders’ reactions.

Do talk to the shorts because you may learn how to better explain your story. Most shorts will cover the position eventually, and having that happen sooner rather than later could be beneficial for your share price.

Do provide the opportunity for informal interaction with management at your analyst day. It should not be just scripted remarks from talking heads at the podium. According to the panel, for most companies, even mega caps, a 2-3 hour investor day is all investors want. And don’t be overly focused on the five-year outlook at your investor day. Investors care mostly about the next 12 to 18 months.

Do provide replays and copies of all of your investor presentations — electronic docs on the website are a good way to handle this. For biotechs, do make available the scientific publications and posters relevant to your clinical development programs, and if there is a fee that needs to be paid to the publication, go ahead and do it. This will maximize access for anyone who wants to review the data.

Don’t project the attitude that nothing ever goes wrong, that everything in a quarter was “as expected,” or that your clinical program is always progressing “better than expected.”  Admitting to a delay and explaining the circumstances can be refreshing.

Don’t spend too much time on your safe harbor statement at the beginning of a conference call. According to our panel, it needs to be a short paragraph that can be read in one minute. Any company that can’t cover it in this amount of time should “find new lawyers.”

In short, panelists said that management should be open, honest and accessible, and communicate content effectively. And one final piece of advice from the panel: Don’t issue news releases on Friday afternoon. They are always bad news.

Need insight on how to shape your IR strategy? Westwicke can help. Made up of former senior-level Wall Street executives, Westwicke specializes in the healthcare industry and provides management teams the attention and support they need to develop and execute capital markets and investor relations strategies. Get in touch to learn more.

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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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