Post IPO: Pros and Cons of the Quarterly Conference Call
You are an executive at a development-stage life sciences company. You have just been through the intense and grueling process of completing your initial public offering. Congratulations. You must now look towards executing a strategic investor relations plan. Quickly, you are faced with a significant decision: Should our company host quarterly conference calls?
Ultimately, there are pros and cons associated with both options.
Pros: The most obvious pro is that many in the financial community (including potentially board members) see holding these calls as standard operating procedure and consider it best practice for investor relations. When our clients ask stakeholders about holding these calls, the common refrain is “of course you should do them!” For this reason, the vast majority of companies do host quarterly calls starting with the first quarter post IPO.
There are other reasons to consider holding a call. It’s a great opportunity to build upon the visibility and momentum created by the IPO. Calls also enable a potential new investor to listen to the replay on the IR website and quickly grasp the company’s story.
Finally, sometimes companies want to provide information to investors, without including the information in a visible manner in a press release, or burying in an SEC filing (a terrible option for management credibility). A conference call allows management to disclose information in a Regulation FD compliant manner. However, it’s important to note: The information will still be documented, as calls are typically transcribed and stored for a significant period of time.
Before moving to cons, we should highlight one critical part of this decision. Once you have held a call, you have set a precedent. There is no turning back. Plan to host every quarter going forward. There are times when strategically it might be in the company’s interest not to be in front of investors, such as around trial completion or regulatory interactions. But if you don’t hold a call, the financial community is likely to view this as a negative, with the normal assumption being that something is wrong in the business and management does not want to be in front of investors. Management credibility (and share price) can be negatively impacted. Even if you might try to simply host your call later than your “normal” release date, it could lead to unwanted questions.
Cons: The biggest is that, as a development-stage company in an industry with long timelines, there simply might not be much to say. Management teams often struggle to find “new” items to discuss, leading to calls with little impact. While not disastrous, given the second biggest con, the level of management time and effort that is required, it can be a significant drain on resources with little value added. We often hear that management teams are looking for more time to actually run their business, and not having a call four times a year could really free up the calendar.
Finally, the quarterly call does provide a small amount of messaging risk. All calls should include a question-and-answer session at the end. Typically, the questioners are limited to covering sell-side analysts who don’t ask damaging questions, but there is no guarantee that an unwanted question or topic will be raised. This makes Q&A rehearsal a crucial component of the earnings call preparation process.
Before moving on, we should highlight that in case your company chooses not to host a quarterly call, it would still be expected to host calls for significant corporate events, such important clinical data, business development transactions, regulatory decisions, etc. We have examples of companies that have executed successful IR strategies, while never hosting quarterly calls, but making valuable use of these corporate-event type calls.
Again, while hosting quarterly calls is a crucial component of the IR toolbox, there is no law that states you must host them immediately following an IPO. Want more information about navigating investor relations post IPO? Download our “Insider’s Guide to Investor Relations” or get in touch.
John Woolford is a Managing Director on Westwicke's life sciences team. He has extensive experience in investor relations, as well as IPOs, capital raises, M&A, and other business development activities. He has a BS in microbiology from the University of Maryland at College Park and an MBA from the R.H. Smith School of Business.
Leave a Reply