Enhanced Investor Relations
It is critical for publicly listed companies to have an informed and effective investor relations professional acting on their behalf, ideally as a full-time employee. This person protects the executive team’s time while ensuring that the investment community is well informed with consistent messaging.Institutional investors are busy and since small cap or newly listed companies typically have smaller floats and less-experienced management teams, the resulting volatility can make them less attractive to long-term investors with large portfolios to manage, especially in a down market when investors are more discriminating. The path to a sustainably higher share price and valuation is ongoing and consistent messaging, delivering on previously provided earnings guidance to build credibility, and supporting the sell-side analysts as they get more confident with the company’s value proposition.
We Establish Best Practices
We provide input on developing the best IR professional, either recruiting an external candidate or training and developing an existing employee to prepare for the role. Our responsibilities can include:
- Working with management to develop an earnings guidance policy that reflects the company’s objectives, is conservative and ideally leaves room for upside
- Responding to inquiries from equity analysts, in particular on building their forecasting models and creating their earnings forecasts
- Preparing for routine quarterly results including writing the press release, earnings call transcript and anticipating potential questions and answers
- Maintaining an IR calendar to include quarterly calls, conference participation, non-deal roadshows, and company visits
- Orchestrating and hosting an annual investor day
- Preparing monthly and quarterly updates for the board of directors that summarize relevant research themes and trading characteristics, along with peer and industry news
- Conducting a perception study to ensure the company’s message is being accurately received by the investment community
Sustain Company Awareness Through the Media
Increasing media coverage and visibility can also be the responsibility of the IR team and, when done well, enhances perception and awareness of the company. Additionally, the company and board should have a crisis plan developed in advance of the occurrence of any unforeseen or unfortunate events. We guide our clients to keep their website up to date, with an IR section that includes links for recent press releases, company presentations and SEC filings.
Post IPO Offerings
If an IPO has been well received and the company is performing well, the management team of a newly listed company will be very busy. The publicity from a public offering drives new business leads and incremental revenue generation. In addition, the company should be able to attract and retain more value-add employees. As earnings and cash flow continue to grow, M&A is usually more active to augment growth rates. All of this activity leads to more investor interest, with the opportunity for additional equity offerings if new capital is desired or a financial sponsor wants to reduce its position.
While our role typically diminishes as a capable IR professional gets up to speed, the relationship in some form can be ongoing. The investment positioning continues to be refined and reiterated, and the deal preparation and pricing phases are revisited for successive equity offerings. Ultimately the goal is to achieve and sustain the highest valuation possible to establish the stock as a currency and allow for further monetizations as appropriate by owners.
Getting Back on Track
In the unhappy event that a stock is not performing well, we also add value by performing a perception study among the investment community to identify investor concerns. If the company has failed to meet or exceed an earnings target which an often happen for successive quarters, it can take time to regain credibility. Being proactive and addressing the shortfall, what happened and how that will be prevented in the future, helps to regain the confidence of the investment community, eventually.
Based on dialogue with the investment community, we can provide comprehensive feedback to guide management to clarify its strategy and value proposition, with the goal of securing additional research coverage, improved liquidity and a higher valuation.