Many early-stage companies need consistent access to capital to invest in growing the business, to fund long-term projects, or for R&D. Over the past few decades, alternate modes of funding have evolved to help public companies raise money more expeditiously. One mode of funding is at-the-market (ATM) financing, which emerged in the 1980s with utility companies looking to raise capital on an ongoing basis. From that time on, companies in a broader range of industries, both large cap and small cap, started using it, and when the market dropped in 2008, the number of companies seeking funding through ATMs rose significantly.
Today, many public-company CFOs and CEOs, especially in biotech/life sciences, consider an ATM financing part of their capital-raising arsenal. When deciding on whether or not to put an ATM in place, it is important to understand how an ATM functions, and the pros and cons. Continue Reading
Sell-side analysts hold big sway with the investment community, and can help your company’s potential to attract investors. To work in your favor, analysts must know the ins and outs of why your company or product represents the next best thing in the marketplace. They also need confidence in your company’s potential to make it to the next level.
While the reputation of sell-side analysts came under fire with conflict of interest stories this past decade, and new regulations helped level the playing field, analysts continue to play powerful roles in the marketplace, and companies are wise to nurture strong relationships. What’s it like in today’s market from the sell-side point of view? And how can you better your chances of making it on analysts’ coverage lists and receiving a coveted “Buy” rating? Continue Reading
Posted on September 18th, 2013. Posted by Bob East
Legendary “60 Minutes” reporter Mike Wallace once said: “If there’s anything that’s important to a reporter, it is integrity. It is credibility.” The same should be true for every management team. Credibility with The Street – both on the buy side and the sell side – is an extremely important element in a successful investor relations program. In this month’s Top 10 list, we offer simple practices that help build and maintain corporate credibility.
First and Foremost: Under-promise and over-deliver.
Make sure your message and metrics are consistent.
For publicly traded companies, there are two types of “quiet periods”: First, there’s the heavily regulated, post-IPO period when a company cannot talk about its aims and earnings. Second, there’s the quiet period at the end of each quarter when companies stop communicating with Wall Street once they begin to get a handle on the quarterly results. While this second type isn’t regulated, it is still important to have a defined policy governing this quiet period to both guide your external communications practices (especially with analysts and investors) and to remain in compliance with Reg FD.
Quiet periods have no standardized length. These quarterly periods end, of course, with the earnings conference call and/or press release; but it’s up to each particular company to determine when they begin. Constructing the optimal quiet period will vary, depending on how quickly earnings are determined, as well as how experienced executives are with analyst and investor interactions. Following are some suggestions to help guide your company’s activities as they relate to quiet periods.
Quiet period “don’ts”
Don’t make exceptions. Quarterly quiet periods received more attention after the enactment of Regulation FD, which prohibits companies from appearing to favor one analyst or investor over another. Once the policy is set, do not make exceptions for anyone. The most important strategy is to make sure you communicate with all audiences consistently and share the same information. Continue Reading
Over the last decade, various regulatory adjustments have dramatically changed the buy-side/sell-side scenario and how companies interact with both sides of The Street. In 2000, the SEC adopted Regulation FD, which aims to promote the full and fair disclosure of information by publicly traded companies. Two years later, Sarbanes-Oxley mandated reforms to enhance corporate transparency and reduce conflicts of interest among securities analysts. Crucially, today, management teams need to provide the same information to both sell- and buy-side analysts.
The following are a few tips to help you better manage your analyst relationships:
Keep the talking points consistent between the sell-side and buy-side analysts. Regulation FD mandates that you treat both sides equally. Be straightforward, transparent and candid with both. Shareholders that receive different information from the analysts will take this as a red flag.
Appreciate the nuances between buy- and sell-side analysts. It’s important to understand that buy- and sell-side analysts have different jobs and play different roles. For instance, the sell-side analyst needs to have a price target over the next year. The buy-side analyst may create a target price over the next three years. As a result, each may interpret the exact same information differently. Continue Reading
While not all investor meetings require a walk through of your company’s slide deck, meetings with potential new shareholders almost always start with the investor presentation. To ensure that your audience fully appreciates your story, it’s key that your IR deck be clear, concise, and compelling.
Here are 5 tips for refreshing your IR deck to ensure your company’s story and opportunity is properly conveyed:
Clearly explain your business. The most common mistake we see is companies launching into their story before telling the audience exactly what they do. Make sure you allocate ample time early in the discussion to explain your business. If you lose them in the first ten minutes because they don’t fully understand what you do, the rest of the meeting is a waste of time.
Make sure your industry numbers are correct. When discussing your market opportunity, make sure your numbers make sense and are correct. The fastest way to kill a meeting is to base your assumptions on figures that you can’t back up factually. Management teams lose credibility when the numbers don’t jive.
Articulate your growth strategy. Once investors figure out what you do and that you have a large market opportunity, the rest of the discussion is easy and should focus on your growth strategy. Senior management teams need to clearly articulate both near-term and long-term growth strategies for the company. Continue Reading
All public companies face the challenges of helping the investment community understand their business—how they’ll grow, how fast they’ll grow, what investments are required, and what kind of volatility there may be in their financial results. Those companies that can effectively communicate how they will grow, and then execute predictably, have the greatest potential to earn higher-than-average valuations over the long term.
The practice of providing financial guidance is a powerful tool for helping the market realistically frame its expectations for your performance, as well as for decreasing the likelihood that your actual results will miss the Street’s expectations in the near term. And indeed, according to IR Magazine, 68 percent of companies worldwide provide earnings guidance to investors at some point during the year, to create greater transparency for their shareholders and analysts.
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?
The road show you take in conjunction with your company’s initial public offering (IPO) represents an exciting and action-packed two weeks. Over that period, you will crisscross the country, meet hundreds of potential investors and spend way too much time on airport tarmacs. While your bankers will have thoroughly prepared you to deliver your “story” to the Street, I thought it would be helpful to share some other thoughts about road shows based upon the thousands of IPO road show meetings Westwicke team members have participated in during our Wall Street careers. Here is my list of the top 10 things bankers probably won’t tell you about IPO road shows:
You are always on stage. Be respectful and professional at all times – not just in the meeting but in the waiting area and car, as well. Often you will be traveling with an institutional salesperson so remember that this person has a relationship with the analyst or portfolio manager you are about to meet…don’t say anything that would allow them to give negative “color” to their clients.
Let the person on the other side of the table get the question out. I see this all the time: senior management begins to answer the question in the middle of the question. Let the analyst or portfolio manager completely ask his or her question. Then, clearly answer that question. Continue Reading
Whether notification comes from an open filing with the SEC, a private letter or an inbound call, the mere presence of an activist investor or fund in a company’s stock is enough to put even the most stalwart management team on edge. In recent years, the growth of specialty and hedge funds has led to a dramatic increase in shareholder activism, which has brought both problems and benefits to investors and managements.
One important point to keep in mind when dealing with activists is that despite their loud voices, activist shareholders’ opinions should not outweigh those of other shareholders. That said, as shareholders, activists’ opinions are important and can be very helpful if approached with an open mind, as most activists seek increases in a company’s share price just as management teams do.
However, interests often diverge with the time frames and methods each would like to see. Activists often seek to unlock existing value as rapidly as possible, often through reorganization and austerity, while management teams often take a longer-term view that focuses on investment and franchise expansion. Depending on the specific case, either approach could be the best path for shareholders as a whole.