When you get a question from an investor or analyst that seems to be from out of left field, it makes you wonder what the underlying intention is. It may be that the questioner is just new to your story.
However, the questioner could also be heavily shorting your company or long your biggest competitor. The question could be awkwardly phrased or come across as a bit sneaky because the investor is trying to get you to elaborate on an answer or provide more detail on a topic than you have in the past.
That’s why it’s crucial to stick to your script whenever you are communicating with the investment community, whether it’s during an earnings call, a non-deal road show, or any other interaction. This goes for your extemporaneous interactions with investors as well as for your prepared presentations.
With that in mind, here are some do’s and don’ts for handling these types of queries:
Do stay on message. Be sure to listen to the investor’s entire question and try to answer it in a way that supports your investment thesis. Feel free to steer your inquisitor back to that thesis, much in the same way that skilled politicians do in their arena.
Don’t provide more detail than necessary. This is in part because you need to comply with Reg FD, which governs the disclosure of information by public companies. You should be only as specific as you have been in previous public forums. Investors will ask the same question in a couple different roundabout ways if they feel they haven’t gotten the information they wanted, but don’t take the bait. What’s more, refrain from delivering information that wasn’t actually requested.
Do know it’s OK to not answer every question. “That is not information we provide to the public,” is an acceptable answer to unfair questions. Investors will always want more information than you are willing to provide, so it is fair (and often necessary) to draw a line in the sand.
Don’t feel pressure to make up information. Providing supporting details that you’re not 100 percent confident about not only impacts your credibility, but it also could set unrealistic expectations. The best approach would be to tell the investor that you will look deeper into additional information and circle back soon.
Do tie the answer back into your investment highlights. It is critical when meeting with investors that you touch on the three or four key topics about your company that you want them to take away from the meeting.
These points may sound simple in concept. But their successful execution will require forethought and discipline. Just as we recommend that executives practice presentations before delivering them publicly, consider a practice Q&A session during which colleagues can challenge you with awkward questions that may arise with investors. The investment of time and effort will be worth it, as these tips should lead to productive meetings for both parties and help you avoid wasting time and running afoul of the rules.
For guidance on the entire IR process — from communicating effectively with Wall Street and developing a strategic IR plan to conducting earnings calls and maximizing the benefits of non-deal road shows — download our free eBook, Westwicke Partners Insider’s Guide to Investor Relations.
And as always, please feel free to get in touch for a conversation.