Posted on October 16th, 2013. Posted by Bob East
Over time, all management teams want to build relationships, or at least a healthy rapport, with shareholders. Consistent execution of your business plan and proper communication with current and potential shareholders can help you build credibility, which in turn can bolster your company’s valuation and even allow your management team to earn “the benefit of the doubt” when things are not easy.
Last month, we looked at the top 10 ways companies can build credibility with shareholders. This month, we consider the opposite, and explore common ways companies get into hot water. Here are the top 10 credibility busters you want to work hard to avoid.
Continue Reading
Posted on October 10th, 2013. Posted by ICR Westwicke
“Why is there so much short interest in my stock?” Many executives find themselves asking this question, especially when it seems things are going well. Stocks have been “shorted” for many years now, but there is no doubt that the practice has seen much wider use – and brought about more management frustration – in recent years. Doesn’t short selling expose funds to unlimited losses? Why do investors take the risk?
Much like with negative analysts, the most tempting answer – and biggest misconception – is to believe it is personal. It might be true that your short investors don’t like you. But that is not the reason they put in that short order.
Continue Reading
Posted on October 3rd, 2013. Posted by John Woolford, MBA
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
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.
- Provide the appropriate level of financial transparency. Continue Reading
Posted on August 29th, 2013. Posted by John Woolford, MBA
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
Posted on July 24th, 2013. Posted by ICR Westwicke
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?
Continue Reading
Posted on July 10th, 2013. Posted by ICR Westwicke
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.
Continue Reading
Posted on June 27th, 2013. Posted by John Woolford, MBA
When designing and maintaining an investor relations strategy, how important is your company website? Pretty important, it turns out. A Thomson Reuter’s 2012 survey showed that 84% of institutional investors use a company’s IR website as part of their research process. Importantly, 74% of respondents also indicated that the IR website has an impact on their perception of the company and its IR program.
First impressions are extremely important, and your website is often your company’s first chance to make an impression. Here are some key places investors go on your website, and some tips on how you can make their experience a valuable one (for them and for you):
- Make the site easy to navigate. If a website is not laid out logically and clearly, visitors will become frustrated and give up looking. Key information – such as presentations, press releases, SEC filings and other news – needs to be displayed prominently, allowing potential investors to get to it quickly. This doesn’t just apply to the investor relations section but the entire website. Don’t make it hard for investors to learn about your company and products.
- Make sure all info is up to date and accurate. Too many times, sites continue to display information that is wrong, or outdated. This can lead investors to assume that IR is not important to the company. Continue Reading
Posted on June 11th, 2013. Posted by Mike Piccinino, CFA
An investor perception audit – a formal survey of buy-side investors and sell-side analysts, typically conducted by an independent third-party – has become part of the standard investor relations activities for many public companies. Done properly, a perception audit should highlight the good, the bad, and the ugly about a company’s IR efforts and its reputation on the Street. While many companies shy away from asking the tough questions, we would encourage companies to seek both positive and negative feedback, and to actively address any concerns that are raised.
In a 2007 survey of over 3,000 companies titled, Perception Studies: What are They Thinking?, the National Investor Relations Institute (NIRI) found that the majority of respondents surveyed had conducted perception audits. Of this subgroup, 92% said that they use perception audits to determine the extent to which their company’s strategy was understood and 78% noted that perception audits were useful when refining corporate messaging. Here are some other reasons why you should consider a perception audit:
- Measuring Effectiveness: Perception audits are great for measuring the effectiveness of IR practices. Your corporate strategy may be on target, but aspects of it could be getting lost in translation when you communicate with the Street. An audit can highlight ways to improve your corporate messaging and to market your business more successfully.
- Assessing Disclosure Levels: Understanding what investors appreciate in your disclosure and where you have the opportunity to be more transparent can be key. Importantly, determining how relevant your metrics are to the Street can be helpful as you craft your financial message.
- Management Perception: Audits can be a valuable resource for the board of directors to use as an objective analysis of management as well as a vehicle to collect feedback on the management team’s credibility and reputation on the Street.
- Audience Segmentation: A well-structured perception audit will allow you to identify differences in perspective, sentiment, or expectations between the buy- and sell-sides, between current shareholders and non-shareholders, and between the largest buyers and largest sellers in recent quarters.
- Investor Day Preparation: Perception audits can be used to help plan an investor day, providing you with an objective roadmap of what subjects to focus on, what information to present, and how to make the day as productive as possible.
- Building Credibility: The investment community values being asked for its opinion and views conducting a perception audit as an indication of the management team’s interest in improving.
Continue Reading
Posted on June 5th, 2013. Posted by ICR Westwicke
As my hairs have gotten grayer in the last decade, I can’t help but to have noticed the major transformation that has altered how humans interact with one another. The digital revolution has permeated every facet of my life (as I’m sure it has yours): from how I get my news, to how I stay in touch with my family, to how I do business each day.
The “greatest generation” (i.e., those who grew up during the Great Depression) saw the widespread adoption of telephones and television sets. This generation spent the majority of its working years communicating through pen and paper, typewriters, and “snail mail.” The children of this generation—i.e., the “baby boomers”—grew up with much more access to information than their parents, but the information was not immediate, not “in your face,” and not coming at you from half a dozen devices at once. The way these two generations worked was very different, but the two groups’ outlooks were not necessarily in opposition. Like me, many of you reading this are probably part of Generation X or Generation Y. While we also have distinct world views and experiences compared to the generations who preceded us, we still are markedly different from the youngest members of today’s work force.
Continue Reading
