Virtual roadshow

Brad Hammond is on the road so you can stay at home. Monday it’s New York with Goldman Sachs; Tuesday, Robertson Stephens in Menlo Park; Wednesday morning, it’s BT Alex Brown in Baltimore and then a late flight to Chicago. Typically, he won’t be home in Atlanta until the weekend. You may wonder why all the investment banks are demanding his time. It’s because people can’t travel any faster now than they did a few years ago, but information can. Brad Hammond is the pioneer of virtual roadshows.

Combining video, slides and prospectus, the virtual roadshow has emerged as a critical tool for public offerings. It allows companies to maximize their exposure, get in front of more investors and supplement the impact of their live show. While only a handful of investment banks were using virtual roadshows a year ago, today there are only a handful who aren’t.

Ted Hatfield, head of Credit Suisse First Boston’s equity syndicate, sees virtual roadshows as complementary: ‘Traditional roadshows will maintain their presence, but you can make a judgement on the management team based on their virtual presentation.’ While last year none of CS First Boston’s IPOs used virtual roadshows, Hatfield admits, nearly all of them do now.

Hammond’s Net Roadshow helped proliferate the trend. His young company’s acquisition by Broadcast.com, the leader in streaming media events, may give him the edge over Bloomberg and other competitors. ‘Put simply, everything that can be digital will be digital,’ Hammond announces with a southern drawl from a telephone in JFK airport. ‘It’s all going in that direction.’ Though he comes across as part staid businessman, part airy idealist, the fact remains: virtual roadshows have taken off.

The virtual roadshow is a re-creation of a company’s live show for transmission over the internet. The company’s main underwriter sets the process in motion, hiring web designers to create an interactive web site which incorporates video taped presentations and slides that flip automatically. Investors receive an access password from the underwriter and have the option to skip or repeat certain sections, download the company prospectus or get a scaled-down version over the telephone. Due to securities regulations, they cannot print or copy the presentation itself, but they can view it as often as they like. Meanwhile the underwriter monitors the site – who comes to visit, how long they stay and what they explore.

‘You cannot eliminate the importance of face-to-face meetings where investors can interact, probe in-depth and see how body language changes when they ask questions,’ adds Art Rivel, founder and president of Rivel Research group. ‘But the web is a very good way to get a quick read on the company.’

Strength in numbers

The main advantage to a virtual show is simply accessing a much larger audience. The traditional roadshow may last two weeks and meet with some 45 accounts in a few select cities. Investors elsewhere may be left out. Take a city like Charlotte, North Carolina. Although it has the headquarters of Bank of America, First Union and several key institutions, most companies cannot take the time to visit. The virtual presentation is the next best thing for investors who can’t see it live, and the best tool for institutional salesmen covering cities like Charlotte.

Furthermore, the virtual roadshow can serve as a valuable prelude to one-on-one meetings. Investors who will have 45 minutes with the company can view the presentation online, prepare their questions beforehand and maximize their meeting time. Karen Thomas, of Bloomberg’s roadshow team, tells the story of one company who worked with two separate underwriters for their equity and high-yield offerings. ‘Only the high-yield team used a virtual roadshow,’ narrates Thomas. ‘Afterwards, the company wondered why their high-yield meetings were much more productive, while their equity time was spent reiterating the presentation over and over again.’

Hammond, a former institutional salesman at Morgan Stanley, had no trouble pitching his virtual roadshow project to his prospective banking clients. On the contrary, their legal departments jumped in to help tailor it.

Resistance came from the SEC, which needed to decide how a virtual roadshow fitted into federal regulations of broadcast and published materials. Hammond summarizes: ‘All of our US securities laws are governed by the Securities act of 1933, and obviously at that time they hadn’t conceived of TV, much less the internet.’ Hammond appealed to the SEC on two counts. First, the virtual roadshow is not a broadcast per se: its audience is limited to specific accredited investors who would otherwise attend live roadshows. Second, the virtual event is an oral, not a written, presentation and therefore skirts the classification of published material.

Hammond negotiated for a year-and-a-half with the SEC who remained ‘benignly skeptical’ throughout. Finally, in September 1997 they granted a no-action letter and gave the go-ahead for his roadshows to travel the web.

Forcing the SEC’s hand

‘Brad was the one who really forced the hand of Arthur Levitt,’ says Martin Flaherty, director of business development at Elemental Interactive, a communications consulting firm in Atlanta. ‘He pushed the SEC to wake up and say this is what we’re going to do, and that event really opened the door for technology to communicate real-time offerings online.’

Around the same time CNBC Dow Jones Business Video also received approval for roadshows, and Bloomberg quickly added their own version to their ubiquitous terminals. The Bloomberg service caught on so well that the company decided to develop an internet version. In the world of technology, no pie stays unsliced for very long.

After a year in common practice, the virtual roadshow has already begun to change the way securities are offered. Public companies which want to issue more shares are realizing that it’s no longer necessary to spend two weeks on a live show. Using a virtual presentation, they can reacquaint themselves with their institutional shareholders in less time, and put a feather in their cap by marketing their quick turnaround.

Riding market waves

Meanwhile, another trend is just around the corner. As more computers get set up for streaming video and as virtual roadshows gain wider acceptance, investment banks will begin leveraging online events against choppy market conditions. If analysts see, for instance, volatility for a scheduled offering on Thursday, the bank will be able to get on the horn, plug the internet version and price on Tuesday instead. Ultimately, the virtual presentation may replace the traditional as the primary platform.

‘Managing finances is a challenging thing to do from the offline world,’ adds America Online’s senior director of IR, Michael Broder, commenting on the securities industry’s migration to the web. ‘Online, it’s just much easier to get information and integrate it with your analytical tools. Ultimately it enhances your productivity.’

Somewhere out there among the clickety-click of a million interconnected keyboards, Brad Hammond is setting up to tape his latest client. He’ll soon be offering a number of follow-ups to the roadshow, including an executive overview – a ‘high-level infomercial’ – for corporate web sites, as well as internet earnings reports. ‘Very soon it will all be going this way,’ predicts Hammond of the emerging digital trend, ‘It’s all going to be available on demand and on TV.’ Unlike three years ago, lots of people find themselves agreeing with his predictions. After all, he’s the one who lets people hit the road while staying home.

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Andy White, Freelance WordPress Developer London