In investor relations, credibility is everything. When your authority is damaged, everything you tell the Street will be filtered through the jaded minds of professional skeptics who remember your past failure to deliver, or a time they felt misdirected. That’s why it’s vital to maintain a constant focus on sustaining and growing your level of trust with investors.
The Westwicke Blog is designed to deliver information and insights into the ever-changing world of investor relations and the capital markets, with a specific focus on the healthcare industry.
The J.P. Morgan Healthcare Conference is a few weeks away, and just about every management team and major investor in the industry understands the crucial role this conference plays in bringing all sides together. Simply put, there is no more important single event of the year within the world of healthcare investing.
But things will be a bit different in San Francisco next month from what attendees have been used to. Over the past few years, with strong equity markets, picking winning investments was relatively easy. As a sea captain once said, a rising tide lifts all boats. But the pullback in the equity markets and uncertainty surrounding the IPO market has changed the climate in which the 2016 conference will take place.
I worked on the sell side for seven years and I saw it all the time: Companies issuing material news — sometimes very good news — while failing to appreciate how the announcement would be received by a skeptical investor community.
As an executive, you want to minimize any negative reaction to your company’s latest update. That’s natural. And while there’s certainly nothing wrong with accentuating the positive, it’s important to remember that sell-side analysts are trained to poke holes in your story. That’s their job, and most of them are very good at it.
Over the last five years the healthcare market has performed well, and we’ve seen a large number of IPOs. Recently, however, times have been a little tougher and many of these newly minted IPOs are beginning to experience what life as a public company is like in a more volatile market environment.
In times like these it is more important than ever to keep your head down, run your business, hit your targets, and deliver on the promises you have made to your investors. All of this should be complemented with a comprehensive investor relations strategy that enables you to understand how to take full advantage of the resources you have at your disposal now that you are a public company. One such resource is the sell-side analyst.
Often in meetings, investors will ask a CEO or CFO about a competitive product. Doesn’t the other drug work faster? Aren’t there fewer side effects? Isn’t it cheaper? I hear those questions all the time during road show presentations and meetings. Usually management’s first response is to take a defensive position. While they may not totally “bash” another product, they seem to quickly start listing all of the negative attributes.
That’s not the right approach. Instead, when asked to compare your drug, product, or service to the competition, you should do two things: First, know why the question is being asked. Then turn a negative question into a positive response. Let me walk you through my thinking and how the positioning can actually be shifted in your favor.
It’s hard to believe I have already been working at Westwicke Partners for 90 days. After a long career as a sell-side equity analyst, the last three months have truly given me a new perspective on how I view company management teams vs. how the Street views them.
For 25 years, I was paid to poke holes in stories — and believe me, in many cases it was easy to do and I would ask myself, Why can’t this management team just get it right? Now, looking from the inside out, I can more clearly see some of the reasons.
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.
There’s a saying in investor relations: “You date your investment bankers, but you marry your research analysts.” Essentially, this means that most sell-side analysts who cover your company will remain your partner for the long run. Investment bankers, on the other hand, work with a long list of companies and deal with jam-packed, demanding schedules. They don’t disappear after the initial public offering (IPO), but the time they can devote to your company diminishes.
The opposite happens for sell-side analysts: after the IPO, the time they spend interacting with your management team and learning about (and talking about) your company increases. Sell-side analysts are at every quarterly earnings release, at many investor conferences, and if they sponsor a non-deal road show, they should be by your side at those events, too. The most effective relationships with sell-side analysts are, in theory, like those of married couples: full of back-and-forth interaction and long-term.
An investor day is a perfect opportunity to get the public up to speed on your corporate story, but compiling the appropriate guest list can be tricky. Having coordinated nearly 100 investor days as a firm, we know exactly who you should be targeting to attract the perfect audience for your event.
Current shareholders and covering analysts
First, and perhaps most obvious, you should invite your current shareholders and your covering analysts. These two groups have a vested interest in understanding every aspect of your business and will be most engaged and active in the discussions during the event. Additionally, given their relationships with your company, this group will show the highest attendance rate.
While most of Wall Street is focusing on second quarter earnings and squeezing in vacations before Labor Day, it’s never too early to begin preparing for the J.P. Morgan 33rd Annual Healthcare Conference in San Francisco this January, the premier healthcare investment conference of the year. If you are planning to attend but haven’t started thinking about logistics, you are already a little behind. Much of the meeting space and hotel rooms are already spoken for, so the time to start making arrangements is now.