Our Blog: The Podium

Hosting an investor day can be a powerful way to raise management visibility and credibility, highlight the depth of your management team, and clarify your company’s value proposition and growth strategy.  But planning a successful investor day is no small task. Here are five tips to help you along the way.

The new reality is that no public company, no matter how highly regarded or well managed, is immune from activist attention. The number of activist campaigns waged against public companies increased in 2015 to 375 according to the research firm FactSet.

Once an activist surfaces, every move a company makes can have a profound and cascading effect on its long-term viability.  Therefore, it is essential to craft response plans before any sign of danger emerges.

By Dennis Walsh, Vice President

“Buy-side analysts truly value a company with a responsive investor relations program led by an informed IRO,” shares John Barr, Co-Manager of the Needham Growth Fund (NEEGX) and Manager of the Needham Aggressive Growth Fund (NEAGX).

Most strategic investor relations programs aim to increase institutional ownership with new long-term shareholders. But anyone who has ever worked in IR knows this is often easier said than done. Targeting quality potential investors and conducting outreach can be a major undertaking. Understanding the buy-side’s investment process for identifying long-term holdings is essential to your success. So what are the key elements of a typical buy-side’s stock picking process? At Needham, Barr’s research team sources ideas from a number of methods, including quantitative screens based on various financial metrics, reading trade publications, and talking to people such as buy-side colleagues. Barr says, “If your stock happens to be on our idea list and you call looking for a meeting then we’ll do it. If it’s not on our list, it’s unlikely that we will take a meeting.”

How can IR contribute? Needham analysts like to conduct their own research – it gives them an opportunity to develop their own point of view – so being undercovered by the sell-side is not always a negative. If your company is being considered as a new investment idea for a firm like Needham, a best-in-class IR program can support the due diligence process from start to finish. Consider these insider tips from Barr to help IROs better support the buy-side’s investment process.

By Dennis Walsh, Vice President

I recently was interviewed for an article for IR Magazine titled, “Sell-Side Analysts: The Many and the Few.” The article discussed how some companies manage a full roster of covering sell-siders, while others struggle to maintain or attract just a few. In today’s market, it seems more common that IROs are in the latter situation and are frustrated by the limited return on their efforts to attract coverage.

There are many factors that contribute to the lack of adequate sell-side coverage, and all of these factors relate to the sell-side’s inability to make money by working with a particular company. Low trading volume plagues companies vying for attention from both the buy- and sell-side. The buy-side avoids low-volume stocks because they cannot easily get out of the stock, and the sell-side won’t cover a stock because the lack of buy-side interest limits their ability to generate trading commissions. It’s a vicious cycle. In addition, the lack of investment banking business may create a barrier to coverage. The bottom line is that the bank needs to make money in some way from the research coverage since they are not being compensated from the buy-side in hard dollars.

By Andrew Blazier, Senior Associate

A good friend and colleague of mine used to describe the universe of real estate investment trusts – REITs – as an “us girls” industry. It was difficult to break in, but once you did, the REIT community was so small, and so interconnected, that working within the industry could be done rather smoothly.

The publicly traded REIT community is indeed tightly knit. And the number of institutions investing in REITs isn’t much larger. When management teams go on roadshows or attend conferences, it’s not uncommon for them to meet the same individuals from the same funds four, five or six times in a year. I compare it to one of those small towns you see in Western films, with the two main characters squaring off to see who will ultimately control the town: “This investor pool isn’t big enough for the two of us.”

By Dennis Walsh, Senior Consultant & Director of Social Media

Last week, I attended the NIRI Annual Conference. It was very educational and an incredible opportunity to meet and exchange ideas with many of the approximately 1,300 investor relations professionals from more than 20 countries that attended the event in Seattle.

NIRI organized more than 45 informative panel sessions and workshops that were led by some of IR’s top influencers. While I wanted to attend each one, unfortunately I am not omnipresent. For those that I did attend, I left with several key takeaways that can benefit any IR program and wanted to share those with you here at The Podium.

By Dennis Walsh, Senior Consultant & Director of Social Media

It’s that time of the year again. Four times a year, institutional investors that hold more than $100 million in assets under management are required to file a Form 13F with the SEC that lists the securities held in their portfolio and the number of shares owned…45 days prior. Every quarter when I’m going through these filings for my clients, I have a similar reaction as Adam Sandler in “The Wedding Singer”:

Things that could have been brought to my attention YESTERDAY

The 13F filings provide a snapshot into the makeup of a company’s shareholder base at the end of each quarter. While they offer some insight into how a company’s ownership has been trending, they fail to provide who the shareholders are in real time. It is extremely frustrating when the markets are under pressure and volatility is high – as it has been in recent weeks – to not know who owns your company’s stock. During the recent rollercoaster swings in the market at the beginning of August, the publicly available shareholder data was current only as of March 31 (ownership data as of June 30 wasn’t due to the SEC until August 15)! With all the buying and selling that has taken place, a company’s shareholder base could potentially be wildly different since the end of the previous quarter.

Sell-side research has undergone profound structural changes during the past decade with far-reaching implications affecting the quality of the research and how research is generated, sold and compensated. Decimalization, Regulation FD, unbundling of trading from research and the hedge fund “brain drain” have all negatively impacted sell-side profitability, product quality and small cap coverage in today’s age of diminished sell-side research.

Decimalization. When the SEC required exchanges to narrow their bid-ask spreads from one-sixteenth, or $0.0625, to $0.01 per share effective in 2001, the profitability of trading floors collapsed amidst tremendous spread compression. While working on the sell-side, I recall hearing many times over, “when we get a trade we can all hear the cash register ring.” After decimalization, I never heard this again. Sell-side boutiques, historically adequately compensated for their research with large bid-ask spreads, now struggled to stay afloat. They reduced staff levels and often swapped higher-priced, seasoned analysts for less-experienced and less-costly researchers.

For months leading up to your S-1 filing, you probably have been singularly focused on creating that massive tome. You have spent significantly more time with your lawyers and auditors than with your own family -- and you cannot even begin to imagine a time when you won’t be spending every waking moment with your bankers. So now that you’ve left the long nights (and great food spreads) at the financial printers behind, it’s time to focus on investor relations. You need to hit the ground running with IR as soon as your company prices its offering, so here are 10 “to do” items before then:

1) Develop your IR website. The IR website must be ready to go live on the day of your IPO pricing. It is most cost-effective to hire an IR website hosting provider, which will develop your site and aggregate content such as news releases, SEC filings and stock data. You also need to prepare additional content for your site such as “Frequently asked Questions,” management biographies and fact sheets. Your website is arguably the most important vehicle you will have to communicate with investors, so make sure it has everything that investors need and expect.

Did you ever wonder who is sitting across the table from you at investor meetings? Would you be surprised to know that hedge fund investors could be sitting right along-side traditional long-only investors? In today’s complex and competitive investment environment where institutional asset managers are increasingly scrutinized for seemingly unoriginal products with excessively high fees and lackluster performance, product managers are looking for unique ways to differentiate themselves, re-craft existing products, and drive additional business. One way to accomplish this is to offer a 130/30 strategy. With this type of product, $100 million worth of equities is initially purchased for a portfolio. Meanwhile, $30 million worth of equities is borrowed from a market maker and sold or “shorted” and the proceeds added to the original $100 million portfolio, thus yielding a $130 million net long and $30 million net short or 130/30 portfolio. The strategy is designed to double up on the best long investments expected to appreciate in price with proceeds from short securities expected to fall in price.