Attending Wall Street investment banking conferences is a large part of a strategic investor relations plan. Along with non-deal road shows, management’s visibility and interaction with buy-side accounts during one-on-one meetings are critical for conveying your story to potential investors, addressing unanswered questions, and expanding on an investment theme. But, finding the appropriate conference strategy can be harder than it seems, especially when it comes to lining up a successful meeting schedule with key buy-side accounts.
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.
You are an executive at a development-stage life sciences company. You have just been through the intense and grueling process of completing your initial public offering. Congratulations. You must now look towards executing a strategic investor relations plan. Quickly, you are faced with a significant decision: Should our company host quarterly conference calls?
Ultimately, there are pros and cons associated with both options.
“The analysts are projecting your revenue for next year” — a year in which you have not provided guidance — “at $50 million. Are you comfortable with this projection?”
Most CEOs and CFOs of public companies have heard a question like that — a “trick” question for which it seems any answer you give can potentially cause you problems. If you say you’re not “comfortable” with that revenue number, for example, do you risk projecting weakness to the investor community? On the other hand, do you want to effectively provide guidance before you formally release it?
If you are a healthcare company executive who is contemplating, in the process of, or has completed an IPO, chances are you have met with a number of investment banks. In these meetings, each bank shows a varying number of league tables that position the bank in a positive light relative to its peers. The data presented is useful for finding banks active in your space, but the parameters defining the table can be adjusted to portray any institution in a position of relative strength. The bottom line is that investment banks are good at what they do, and all of their bankers are bright, diligent, capable, client-focused, and extremely hard-working professionals. Without these attributes, they would not be in such a role.
Providing investors with guidance is a key component of any IR program. It is a company’s main avenue to set expectations. Management credibility, an important factor in a company’s valuation, is significantly driven by delivering on these expectations.
When providing guidance, we recommend that you keep these important themes in mind:
Thousands of public companies have just released their quarterly earnings and held those dreaded earnings calls — far more dreaded for those whose numbers missed estimates. While they’re not much fun for anyone, it can’t be overstated how important earnings calls are for your reputation as a leader and for the prospects for your stock.
The call is your chance to communicate your story to the world, to put your perspective formally into the public record. And it’s your investors’ and analysts’ chance to seek clues about your future prospects. In short, the call is something you just can’t afford to mess up.
Warren Buffet makes news each year for his letter to Berkshire Hathaway shareholders. By employing his uniquely wry and contrarian style and by covering many topics that have little direct bearing on Berkshire’s results or prospects, Buffet has taken one of the staple obligations of a public company CEO, and turned it into something much larger — a kind of State of the Union from the desk of one of our most important business leaders.
It’s impressive. And as you get ready to release your own annual letter, you may be tempted to take a page from the Buffett playbook and offer your shareholders a bit of your own wit and wisdom.
Let’s be honest: Market conditions have been hostile to most industries this year, and the healthcare sectors have been victimized along with all the rest. These are not easy days to be the chief executive or chief financial officer of a public company, and you may be feeling pressure to take action to drive your share price up despite the headwinds.
It’s been several years since Wall Street last saw a period of sustained bearishness — long enough that some of today’s public companies have actually never been through such a difficult time. A lot of companies are hitting the panic button. We recommend the opposite.
I’ve written before on collaboration between the information “silos” that exist within some organizations and why it is important to establish — and stick to — an internal control process for issuing public information. The other morning, I was reminded why this is so important … and the consequences of what can happen when it breaks down.
Shortly after market open, I received a call from a CFO saying he was surprised by a press release that his company had issued pre-market, about which he was already getting calls from analysts with questions. He had to go to his own company’s website to see what had been released. My second call was from the General Counsel of that same company asking how they could add a Forward Looking Statement paragraph on a material release that had already been issued, as well as make corrections to outdated language in the “About the Company” section.
In the past several months, several of our Medical Technology clients have participated in investment bank-sponsored conferences or traveled to meet investors in one-on-one meetings. In preparation for these meetings, we work with our clients to create a list of topical and provocative questions that investors are likely to ask, and we help to prepare scripted answers. We also create investor profiles ahead of every investor meeting so that our clients have information at their fingertips on competitive share positions, the investor’s background, and our insight as to focus areas for that particular investor.
While most questions that investors and analysts ask in these meetings pertain to the particulars of the business, revenue growth, and market dynamics, we have come to expect the unexpected. We know that thorough preparation is crucial.