If there was one financial capital of the world, many would choose Manhattan. Not only is it home to many of the world’s largest and most important investment banks, mutual funds, brokerage houses, sell-side firms, hedge funds and financial media, it also hosts three major equities markets: the New York Stock Exchange, the Nasdaq Stock Market and the American Stock Exchange.
‘It is where the major exchanges and market centers are located, it is where the sell-side research is being written, and it is the world media hub, making it truly the global financial capital,’ proclaims Andrew Reid, vice president of global strategic development with Multex.com. ‘IR professionals who are serious about gaining media and investor attention always include New York high on their roadshow priority list.’
According to JM Lafferty there are 1,715 New York-area institutions that invest in equities, including 312 with more than $1 bn in equity assets under management and 42 with more than $10 bn under management. Powerhouse Wall Street firms such as Alliance Capital, Salomon Smith Barney, Goldman Sachs and Lehman Brothers are among the list of prominent investors too numerous to name. Merrill Lynch is among those institutions responsible for the lion’s share of US investments overseas.
On the sell side, all the major analytical firms are either based here or have offices here. The financial news wires, including Dow Jones, Reuters and Bloomberg, operate out of the New York area, as do most of the other prominent financial print and television media.
Any roadshow to New York will be a major undertaking, and one rendered more arduous by the events of September 11. In addition to the human loss, that infamous day’s casualties included more than 10 mn square feet of prime office space, much of which had been occupied by financial firms and related businesses. Many investment shops once located in lower Manhattan have since shifted their offices up to midtown or out of the city altogether. For companies that have not visited New York since September, this flurry of musical chairs makes it more difficult to track down the right people. Still, this should not discourage companies from visiting. On the bright side, now the investment community is more concentrated within a cluster of blocks between 34th and 58th streets.
Investment community
Unlike some of the smaller financial centers, it is impossible to attribute any single investment style to New York’s institutions, and because the largest firms’ styles run the gamut, they can only be called diversified (see chart). The New York buy-side community spans all styles from aggressive growth to deep value, income and specialty investments. True, a sizeable percentage is devoted to core growth and Garp (growth at a reasonable price), but just because a smaller percentage goes to other investment types, in dollar value that still translates to huge amounts.
‘The easy approach is to look for firms with a large amount of total assets under management or those funds that are capable of purchasing the most shares of your stock. In a city with as diversified an investment perspective as New York, however, setting up meetings with funds using only a selection criterion based on their ability to purchase the most shares of your stock doesn’t make a lot of sense,’ Reid notes.
He suggests it is better to set up meetings with a set of funds – even if they are smaller funds – that are more likely purchasers and long-term holders of your stock. ‘The key is intelligent targeting. In other words, finding those funds that are likely purchasers of your stock based on the dynamics of their current portfolio, their recent portfolio purchases/sales and the fundamental characteristics of your stock, and then approaching them with highly targeted messages specific to those funds.’
A shotgun approach clearly would not work. Companies could set up meetings for a full week and still not get their story in front of the right investors.
Reid says comparative analysis of stock ownership information, both on your own company and other companies in your peer group, is frequently the best starting point. ‘IROs should analyze and evaluate the ownership trends of buy-side funds that are moving in and out of both their own stock and their competitors’ stocks to best target those mutual fund managers worth meeting, and to determine the mindset of the investment managers. This allows IROs to prepare a very precise message that will resonate with these decision-makers.’
An equally important research step is to look at companies that are similar, not just from an industry perspective but also from a fundamentals perspective – companies that have similar revenues, similar growth rates or similar earnings projections. Compare yourself against those companies, independent of industry segment, and determine whether or not they trade at a premium to your stock. If they do trade at a premium, Reid says, ‘then it is possible to make a strong case to the institutional owners of those companies and say, If you like these companies with a fundamental profile very similar to us – but at twice our valuation – you should be taking a look at us as well.’
The right meetings
Companies can set up meetings themselves or have a third party, such as a sell-side firm, investment bank or an IR consultancy, do it for them. Donna Stein, managing director of Brainerd Communicators, says, ‘If a company is covered by three different analysts and all have requested marketing time to get the company out in front of their institutional clients, we’ll give one analyst a day in New York or let one sponsor a luncheon meeting for them.’
If the company has significant news to report, such as a deal or major product launch, the visit might include a squawk box call at one of the brokerage houses. This lets the CEO address the firm’s institutional sales force directly and send the message out to all of the branches. Stein says this not only gives good exposure to the company, ‘It also serves the analyst’s purposes because he’s providing an update to his sales force so they can go out and sell the product.’
Stein says significant news may also merit meetings with the financial press.
‘If there’s any news that is being highlighted in the roadshow, like an announcement about a merger or a transaction, we would also schedule a press meeting with CNBC or Bloomberg Forum or some of the other investment shows.’
Companies may also want to work with their stock exchange to help get a boost in exposure. For listed companies, both the New York Stock Exchange and the Nasdaq Market Site organize ceremonies such as allowing the CEO to ring the opening and closing bell. Once again, however, the company would have to have a good reason to be chosen, such as an IPO or a listing anniversary. (Don’t tell the CEO that his visit alone isn’t reason enough.)
Chris Hodges, principal and co-founder of Ashton Partners, also reminds companies coming to New York to not overlook their current shareholders, especially those investors that have buying potential. ‘That’s low-hanging fruit – they already know your company and your story. You’ve got to support the relationships you’ve already built in addition to the ones you’re looking to build.’
Getting around
Stein believes one of the key requirements for a successful New York trip is to plan the details of the campaign with military precision. She says the concentration of firms in midtown is helpful, and companies can make best use of their time by carefully planning their meetings around the midtown locations. ‘As you go through your target list of people you want to get in front of,’ she advises, ‘you need to scope it out so you’re working from the 50s through the 40s or vice versa. You don’t want to keep going back and forth across town, because you’ll lose too much time with the traffic.’
Think about renting a limousine that will stay with you for the day, which Stein believes is better than taking cabs. After all, the last thing you want to be doing is standing with your CEO in the rain trying to hail a taxi while late for your next meeting.
Know each meeting’s details, including address, cross street, location of the building’s entrance, and what floor your meeting will be on. In New York it could easily take 15 minutes just to drive around the block and an additional 15 minutes to get to your meeting once you’re in the front door. Since September 11 everything takes a little longer. Security is tight on the streets, which contributes to denser traffic. You should also find out if you have to pass through special security at the front desk of buildings and, if so, leave extra time for scanning of your briefcase, your box of investor kits or any other packages you may be carrying.
Alternatives
Thomas Franco, president of Broadgate Consultants, offers an alternative approach. He tells his clients: ‘Get rid of the limousines. Become the still point of the turning universe. Establish yourself in a fixed location and – to the extent you’re going to have individual meetings – have people come to you rather than you go to them. It is feasible and it works.’
Franco says the idea of getting snarled up in traffic and having the CEO’s heart escalate to abnormal rates is counterproductive. ‘It’s no wonder that company management look upon a roadshow trip as the moral equivalent of a root canal.’
Franco’s philosophy is to organize the meetings so as to minimize the to-and-fro.
He says this creates an environment where management is more relaxed, more alert and more effective. ‘Also, just because you’re on a roadshow doesn’t mean you don’t have a company to manage. Having the infrastructure surrounding you permits management to conduct urgent business matters while catering to the information needs of your investor constituents.’
For the location, Franco says companies that have a satellite office in Manhattan should take advantage of it. Otherwise, he suggests companies choose a hotel or the facilities of their investment banker or advisory firm. He admits, however, that this idea may not always be practical, especially if some organizations want a number of people to sit in on the meeting. ‘I’m not saying that you ought to be slavish, but it’s a good first organizing principle.’
Coming & going
Many executives that come into New York choose to arrive the day or evening before their meetings. This allows them to get settled in and sleep off the jet lag. It also prevents any travel delays from impeding meetings. The three major airports servicing Manhattan – LaGuardia, JFK, and Newark – are all notorious for their delay times. Together they represent three of the top four airports for security wait time (see chart). To make matters worse, it is impossible to predict with accuracy the amount of time it will take to get to and from the airport; as any New Yorker will attest, you could encounter traffic jams at any time of the day or night.
There are only a few times during the calendar year that are not good times to visit. Between mid-August and Labor Day weekend the markets generally slow down as New Yorkers head out to the Hamptons for holiday. Also, the city overflows with tourists around major holidays, so avoid these times as well. On a practical note, before you schedule any roadshows look at the New York conference calendar so your trip doesn’t conflict with a major brokerage conference. Otherwise you may show up to find many of your important contacts preoccupied.
Because of the profusion of activity, the Big Apple is the place for companies to visit. Although, ironically, it is for the same reason that a trip here requires adequate planning to pull it off successfully. Simply put, if you don’t do your homework, you’ll be lost in the crowd. But a well prepared trip could turn out to be the company’s all-time best outing.
