If you’re the CFO of a pre-IPO company, the months leading up to
your S-1 filing can be exhausting. You’ve read your registration statement so many times you have it memorized. And you cannot even begin to imagine a time when you won’t be spending every waking moment with your bankers.
Our Blog: The Podium
If you’re the CFO of a pre-IPO company, the months leading up to
Riddle, Mystery or Enigma? Winston Churchill was talking about the potential for Russian military involvement at the outset of World War II when he uttered that now-famous phrase. But the concept
also describes how many small-cap management teams feel about the process of obtaining sell-side analyst coverage. Some companies manage a full roster of covering analysts, while others struggle to maintain or attract just a few. The bank research business model is in considerable flux, and IROs increasingly find themselves in the latter situation, frustrated by the limited return on their efforts to attract coverage.
When it comes to corporate governance, board members and shareholder activists do not often agree. But there is at least one opportunity for common ground: better communication.
When you do work in crisis communications, you’re often asked to share war stories alongside other communications professionals on conference panels. The cases that are analyzed run the gamut of private and public companies, from small start-ups to large multinationals, in industries from consumer goods and high tech to pharmaceuticals and financial organizations. But there are consistent themes that typically rise from these discussions.
“Somebody’s Watching Me”
In the age of social media, somebody is watching every move that companies and their employees make. And more and more frequently, they are reporting their findings and opinions as fast as Twitter and Facebook will allow. Social media are not only accelerating the pace that information is being delivered but reshaping the entire communications landscape. In today’s crisis situation, anyone and everyone can now add their opinion into the conversation at a moment’s notice.
If you have ever tried telling a life sciences investment story, chances are, you’ve encountered one of three responses:
- “Wait. Slow down. I have no idea what you’re talking about.” This is sometimes communicated nonverbally as a blank stare.
- “Okay. That makes sense. So when do you expect commercialization?”
- “What’s the mechanism of action? And which disease are you treating? I haven’t heard of that study. Where is the research on that, so that I can read it myself?”
These examples illustrate a unique challenge for life science companies: How to communicate an investment thesis to three entirely different groups of institutional investors – generalists; life science investors less familiar with your specific market or science; and investors who are experts in your particular area.
Communicating That 1+1 = 3
By David Calusdian, Executive Vice President & Partner
A well-known portfolio manager once said to me that he loved diversified industrial companies “for their break-up value.” If you’re in the industrial space, this is the polar opposite of how you want investors to think about your company. For an industrial, it all comes down to ensuring that investors see your company as being more than a sum of its parts – not less. Here are four tips to ensure that investors believe your company is worth more than its breakup value.
Synergize! An industrial company’s collection of businesses can either be viewed as just that - a disparate group of autonomous operations individually contributing to the corporate P&L. Or they can be seen as interconnected, mutually supporting components of a single profit-generating machine. The first way to demonstrate that your company’s whole is indeed greater than the sum of its parts is to communicate how the portfolio management philosophy of the business fosters cross-selling throughout the organization, driving revenue growth. Also focus on how management realizes cost synergies across the enterprise, such as through lower fixed costs due to shared overhead or greater combined purchasing power.
In this two-part conversation, public accounting experts from the CPA firm Wolf & Company provide insights on current trends in public company compliance. In our second conversation, we discuss accounting standards changes and other audit committee related topics with Jim Kenney, Scott Goodwin and Dan Morrill from Wolf.
The Podium: Hello, everyone. Thank you for joining us. In today’s discussion, we wanted to address the major trends you see coming to public company accounting in the near term. Let’s start with revenue recognition. A brand-new standard has been issued for public companies. What does it entail, and when will it be coming?
Scott: That’s right. The new standard, which goes into effect in 2018, accomplishes several objectives. It removes inconsistencies and weaknesses in existing revenue recognition guidance and provides a more robust framework for addressing revenue issues. It also provides, for the first time, a single revenue recognition standard that will be applicable across entities, industries, jurisdictions and capital markets, and provides more useful information to users of financial statements through improved disclosure requirements. One good thing is the rules are now all in one place.
On May 17, 2016, the SEC issued new Compliance & Disclosure Interpretations related to Regulation G. The Podium discussed the new guidance on the reporting of non-GAAP financial measures with Sullivan & Worcester Partner Howard Berkenblit.
The Podium: What do you see as the most significant changes that came out of the new SEC guidance on Reg G?
HB: There are two main themes to the changes. First there are some additional interpretations regarding what can and can’t be presented – these have the practical effect of creating new rules without technically changing the rules. For example, one of the changes makes explicit that EBITDA “must not be presented on a per share basis,” while others give new examples of adjustments that may not be made to non-GAAP measures. While some of these were implicit from the rules or prior SEC Staff speeches and comments, having them in Compliance and Disclosure Interpretations, even if theoretically not binding, gives them greater weight.
In this two-part conversation, public accounting experts from the CPA firm Wolf & Co. provide insights on current trends in public company compliance. In this first conversation, we discuss cybersecurity regulatory trends with Jerry Gagne, who heads Wolf’s risk services practice.
The Podium: Hello, Jerry. Thank you for joining us. In today’s discussion, we wanted to focus on cybersecurity. This seems like a hot area right now and of great interest to boards of directors. What issues are you seeing right now with cybersecurity?
This is Part II of our preannouncement series based on AlphaSense research. Today we focus on the qualitative discussion of the results in earnings preannouncements and the financial metrics used.
In my previous post, we focused on the factors that contribute to a company’s decision to preannounce its financial results – that is, provide the Street with a preliminary, high-level understanding of what its quarterly performance will be. Using AlphaSense, a unique search engine that offers an advanced level of information discovery, we looked at 59 preannouncement releases that were issued in the U.S. through the first six weeks of 2016. We examined the rationale for preannouncing and some of the issues at play when providing advance insight to investors.