How can you align your investor relations (IR) efforts with your overall corporate strategy and messaging? How do you balance IR activities with other demands on your time as a management team? Here are several tips from the Westwicke team to help ensure that the strategic investor relations plan you create at the beginning of the year delivers the desired results.
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.
Hiring an investor relations (IR) firm isn’t easy because it’s not a simple decision. A tremendous amount rides on the relationship you are able to cultivate with investors and shareholders, so you need total trust and confidence in your IR partner.
Making the choice more difficult is that IR consulting firms vary widely, and what gets promised up front doesn’t always hold true. The spectrum ranges from firms that offer IR as one of many services to those that specialize only in IR. While it might seem reasonable to just pick one and get to work, the reality is that the relationship you build with investors and Wall Street represents a core part of your business strategy with a real impact on your perception in the markets.
How can you choose wisely? Finding the right fit takes time and research. IR firms aren’t one-size-fits-all, and the right choice requires you to stop and ask some hard questions, starting with these essential eight.
Management teams often believe that marketing their company in Europe would offer a fun, worthwhile trip and could diversify their shareholder base among international investors. While it can be productive, marketing abroad can be a colossal waste of time and money, if not planned thoughtfully. Having coordinated hundreds of non-deal IR road shows in Europe, here are a few tips from the team at Westwicke Partners:
- Do leverage an existing trip to Europe to meet with investors. Our suggestion is to combine an existing trip for business purposes or a conference appearance with a few marketing meetings. The trip is long, so it makes sense to accomplish several goals while you’re already there.
- Do ask for help. Too many companies try to “set up” European meetings themselves or through their IR firms. The reality is Europe is a different animal and it’s impossible to know every key player in each market. We suggest using one of your analysts to set up the trip. Almost all investment banks have a dedicated European sales force that is much more qualified to produce a quality set of meetings. As a quick aside, don’t hire a third party to set up the trip. You will likely end up with a lackluster schedule.
- Do focus on quality vs. quantity. We believe that more isn’t necessarily better; better is better! Often, the European sales forces at these banks are so excited to get a management team in their territory that they want to extend the trip for several more days to see a number of cities. This is a bad idea for two reasons: First, the cost of travel to these secondary cities can be off the charts. Second, these meetings often have diminishing returns. Stick to the major cities and target the best accounts.
- Do insist that the salesperson attend the meetings. Salespeople play an important role in the success of these trips, as they can give valuable insight into each meeting. For example, before every meeting, make sure you get a summary about each person’s level of interest, investment style, peer ownership and any other relevant factors that can help with the discussion.
- Do maximize your time, i.e., logistics matter. As you think about the trip, recognize that many large cities are difficult to maneuver. London, for instance, is much like Manhattan. Meetings can be all over the place and, if not properly coordinated, getting to each location can leave you missing some meetings and late for others. Make sure the investment bank setting up the meetings in each city arranges a logical and efficient schedule (which is yet, another reason to ensure the salesperson attends).
Some management teams are reluctant to meet with hedge fund managers. While planning a road show or conference appearance, they try to meet with “long only” fund managers. While I can understand that management teams are reluctant to meet with hedge fund managers out of fear of a tense line of questioning or some form of brow beating during the meeting, the reality is that you can’t (and shouldn’t) avoid these meetings. The sheer number of hedge funds is staggering and almost $2 trillion dollars are under management within these funds.
Following are the top ten positive reasons management teams and IR professionals should keep hedge funds on the schedule:
- Don’t judge the book by its cover. Hedge funds come in a variety of flavors. Funds can differentiate themselves by investment style, sector focus, geography, market cap, market neutral, long/short, etc. You may even be surprised to learn that some hedge funds are long-only or exclusively long-term oriented.
- Despite their depiction by the popular press, not all hedge fund managers are “bad guys.” Many hedge fund managers are smart, considerate, thoughtful, long-term investors. Don’t let the structure of their fund dictate if you meet with them. Continue Reading
Our clients often ask, “Why did account X sell my stock? Our last meeting with them went so well.” Generally speaking, there is one reason investors buy a stock: the assumption that its price is going up. There are, however, countless reasons why stocks are sold. Sometimes when a company’s fundamentals seem to be improving it’s not always clear why a portfolio manager might sell a particular stock. We want to shed some light on the factors that can lead to the “sell” decision via this month’s Top 10 list.
- Locking in gains. No one has ever been fired for locking in gains. Even an investor who’s held your stock for years can’t be faulted for taking some money off the table.
- Macro concerns or sector rotation. Even for a company that derives zero revenue from Europe and does not sell directly to the federal government, events like foreign debt defaults and sequestration cause fund managers to lighten up on stocks. In uncertain times, cash is king! Similarly, depending on the outlook of the firms’ economist, portfolio managers shift money between sectors, increasing and decreasing their exposure based on the economists’ suggestions. If healthcare is deemed an underperforming sector at a particular time, your stock might be caught in the sector rotation. Continue Reading