One of the most frequently asked questions we hear from executives running private life science companies is this: why are some firms in our industry generating a lot of buzz and interest among crossover investors while others are not? And a common follow-up is: What do I need to do to cultivate that kind of investor appetite for my company?
So it was no surprise that several executives raised these very questions during the Westwicke Partners’ Biotechnology Pre-IPO Crossover Investor Conference that we recently co-hosted in New York with William Blair, a leading and growth-oriented global investment banking firm.
Few will deny that analyst research still plays a key role in any investor relations strategy. And every time one of us sees a stock getting a healthy bump in the markets following an analyst upgrade or initiation, we can easily be tempted to believe that analysts wield an enormous amount of influence over a company’s valuation and success.
Should you make expanding research coverage your top IR priority? Have you found yourself pre-occupied with making the cut with analysts and adding more research coverage to your ranks?
However, before you potentially find yourself off course with a misguided plan, let’s consider a few perspectives.
If your company is publicly traded or a private company preparing for an IPO, then you likely have two separate communications tasks, one focused on reaching investors and financial analysts, the other on reaching customers and the general public — Investor Relations and Public Relations.
The two obviously perform different functions, serve different constituencies, operate under different mandates, and typically report to different executives internally. Investor communications are strictly regulated. IR professionals are responsible for communicating a company’s business model, financials and future expectations to analysts, institutional investors, investment bankers, and the like. They usually work closely with general counsel, the finance organization, and under the Chief Financial Officer. Missteps, such as divulging information that isn’t publicly available or engaging in marketing-style hype, can breach securities law and lead to a number of serious problems — shareholder lawsuits at the top of the list.
We were recently asked to participate in a panel discussion hosted by the National Investor Relations Institute (NIRI). The topic was “Creating a Strategic IR Plan,” which is something we at Westwicke, discuss frequently. Joining me on the panel were Gregg Lampf, Vice President of Investor Relations at Ciena and Mary Turnbull, Director of Corporate Access at Raymond James.
It was a great event with a lively discussion, and the points made further validate the importance of being thoughtful and strategic in planning investor relations objectives and activities.
When shopping for a major purchase, say for a new home or car, many people wisely draft lists of must-have features and optional nice-to-have features.
Compiling a list of needs and wants is also valuable to companies searching for an investment bank, especially given how frequently they fail to evaluate a key feature: the banks’ institutional sales forces. During my 18 years on Wall Street, I can’t tell you how often I saw companies make the mistake of considering the right sales force a want-to-have feature, when they should have considered it a must-have.
A CEO transition can be a time of great risk for a company’s stock as Wall Street attempts to determine all that the change signals. If a change in leadership is not communicated properly it could make your investors nervous. Effectively communicating the CEO succession can help boost confidence in investors — and prevent long term harm to your share price.
Here are a few guidelines to help effectively communicate a CEO transition:
When I started working in investor relations (IR) more than 25 years ago, little did I realize that “creative writing” would often boil down to finding clever synonyms for words like opportunity, growth, and transition — rather than drafting colorful, superlative-rich descriptions of corporate events and milestones. Is it possible to find a new way to express year-over-year financial comparisons or do the numbers in the financial tables mostly speak for themselves?
We are often faced with management teams that seek to fill their perceived “air time” and make their conference call stand out from the hundreds of other calls taking place. If this sounds familiar, and you find yourself wondering how much creative leeway to take with your own quarterly earnings calls, then keep reading as I explain where it’s possible to truly add value, and where it actually detracts from your objective.
A great company does not always make a great stock. And a great stock does not always make a great stock for a sell-side analyst to cover. What are analysts looking for when they launch on new names? What can you do to get an analyst to consider you for their coverage universe?
These three questions can help you determine the likelihood of getting an analyst to begin to write research on your company.
If one word alone could describe the J.P. Morgan 33rd Annual Healthcare Conference, that word, from my purview, would be productive. I met one-on-one with management teams from 44 companies, and nearly our entire team came together in San Francisco that week to take part in the conference and help clients fine-tune and deliver on their 2015 investor relations plans.
At Westwicke, we consider J.P. Morgan the “super bowl” of investor conferences. No, we don’t eat chicken wings and shout at the TV, but a lot of action happens at J.P. Morgan — this year even more than in the past. And just like in football, it pays to show up ready and prepared because, as we’ve discussed before on this blog, an elevator ride with the right person (and the right pitch) can make all the difference.
In the past several months, we have been asked by several of our medical device and diagnostics clients to conduct perception audits. Some were small and focused, with specific and timely topics in mind, whereas others were broad-based with long-term objectives. Often, investors and analysts provide feedback that is difficult to hear — especially when they are giving it to a third party and their comments will be confidential and/or not ascribed to them.
While no one wants to receive (or provide) negative feedback, it is important and often can be the most constructive data. If we could offer only one piece of advice to our clients, it would be to listen openly and objectively to your shareholders and analysts when you ask them for their opinion. Don’t try to talk them out of their viewpoint (for which you just asked them), and don’t discount their opinion because they are at a hedge fund or you think they don’t understand your company. Chances are, whatever their perspective, there are others with the same view. Investors are often happy and willing to offer their feedback — especially on a stock position that is meaningful to their fund performance — in an effort to help management teams communicate better. Let them. We think it’s enormously valuable, as their perceptions are your reality.