Remember in the 1980s and 1990s when the size of your shoulder pads was a clear measure of your wealth and status? When investor roadshows conjured up images of big production numbers where it was OK for investors to be distracted by the glitz and glamour of the visuals?
How times have changed. This decade is all about sobriety, and investors now want a company’s story told simply, straight and face-to-face. As a result, roadshows remain one of the best opportunities to boost a company’s profile, sell its management, and ensure investors truly understand its story.
But staging a successful roadshow is a gargantuan task, so much so that the IR Magazine Awards annually recognize those companies voted by fund managers and analysts as putting on the best investment community meetings and/or roadshows across the globe. And given how much a roadshow can cost, the pressure is on the IR team to make sure that whatever a company spends going out on the road eventually comes back to its coffers many times over in the form of institutional dollars. London-based Atlantic Equities, an independent research firm that organizes roadshows for US companies, estimates that the average cost for a three-day, four-city event is $11,000, and double that for a five-day, seven-city trip.
However, companies can mitigate the risk of having an unsuccessful roadshow by using the expertise of investment banks or independent research companies to organize the event in its entirety, usually without charge. And, for a fee, IR agencies are very useful in planning and organizing investor meetings.
Hit the basics
Robert Cirabisi, Computer Associates’ IRO, understands the importance of planning and of being on the road. A year and a half ago, CA’s share price was at a ten-year low. Cirabisi recounts that at the time there was heavy interest from value firms and CA accordingly spent a lot of time with them. ‘Since then the stock is up over 200 percent and we’re presently targeting growth, value and momentum firms,’ he says. He also believes ‘if you’re not getting out on the road and meeting with investors then you’re missing an integral part of any IR strategy.’
But the key is in the planning. Derek Cole, director of investor relations at Colorado-based biopharmaceutical firm Myogen, prepares his non-deal travel calendar a year in advance to get an idea of when he will be on the road. For some IROs, this level of planning means gathering together the CEO, CFO and other senior management to strategize their goals and targets.
CA’s CEO Sanjay Kumar is actively involved in planning and makes a point of attending and presenting at each meeting. Cirabisi says Kumar ‘views these roadshows as extremely important to our overall strategy of increasing shareholder value.’
John Barker, senior vice president of investor relations and financial communications for Wendy’s International, agrees the key is to get organized early. ‘Line up key meetings involving your CEO and/or CFO first, then fill in as needed with other senior management and IR,’ he recommends. Wendy’s schedules five one-day IR meetings at headquarters, a beginning of the year IR kick-off meeting with the investment community, and an annual meeting with Wall Street in September.
Where to go
Once you’ve ironed out your strategy, it’s time to choose a location. Cities are generally picked on the basis of a combination of concentration of buy-side institutions, dollars managed, industry focus and interest level, with major cities like New York, Boston, San Francisco, London and Zurich high on the list. But firms will go to any city where there is demonstrated interest.
CA and Wendy’s, for example, head to top-tier cities like New York, Boston, Chicago and San Francisco, but Denver, Houston and Minneapolis are also on the radar. When companies go to Europe the focus is generally on the UK, Frankfurt, Milan, Geneva and Stockholm.
Choosing venues can be difficult, particularly if you’ve never been to the city where your company is presenting. You need to know how central a venue is, whether it can accommodate the number of attendees comfortably, and whether staff members can provide the technological back-up you need. If you can’t answer these questions, using local knowledge is certainly the best route.
Who to meet?
Marty Cohen, vice president of US investor relations for German technology firm SAP, is used to multi-continent roadshow planning. SAP uses sell-side firms to arrange its global roadshow, with two events each in Europe and the US and one in Asia-Pacific.
SAP has taken the headache out of finding out who to meet in each city by making use of the good relationships it has built up with analysts. ‘Part of that relationship is that they like to get out on the road with SAP management and bring us to investors,’ explains Cohen. ‘When sell-side people take us around, we put the planning into their hands but indicate some of the institutions that we’d like to see. Sometimes, they will only take us to see their best clients, and sometimes those best clients aren’t the best holders – the clients that we want to see. So we say we would like to see their best clients, but we also want to see some others.’
Investment banks, local investor relations firms and independent research companies have databases of institutional investors from which they can cull a list of target investors. Otherwise, if it’s a company-sponsored show, some sophisticated database mining and analysis will need to take place in-house. The objectives will be to identify a company’s major institutional holders, quantify the number of shares held by each of these investors, identify who within these institutions is responsible for buying and selling the stock and research that portfolio manager’s investment criteria.
Most IROs agree the best way to find new investors is to match the company’s financial profile to the potential investors’ investment style. Sometimes this information can be found on the firms’ web site. If not, you might want to call the portfolio managers to ask them to describe their investment criteria. With all types of roadshow the key is to ensure management has an accurate profile of the investor audience it is meeting with – personalities, stock ownership (in your stock and other equities), investment style and level of interest in your sector.
Presentation details
Central to the roadshow is the presentation. How long should it last? Most IROs recommend a maximum of 20 minutes. Group lunches generally run an hour to an hour and a half. The basic rule is to get to the point quickly, so keep the formal presentation to 20 minutes and use a Q&A session to fill the rest of your time.
Since Reg FD came into effect, requiring companies to disclose all material non-public information to all audiences simultaneously, investors don’t expect to get any inside information at these meetings. Their reason for attending is often to check out senior management face-to-face and hear the company’s story.
Cirabisi normally divides his presentation into two parts: product and financial. ‘As we were the first enterprise software company to switch to a ratable revenue recognition model, a large amount of time has been spent getting investors comfortable with the company’s financial statements,’ he explains. ‘When we first made the switch, almost every presentation was focused on financials.’ He feels greater emphasis on financials has resulted in investors’ better understanding of CA’s business and products.
‘It’s always best to plan in advance to ensure you lock-in management’s time and secure the venue that works best for you,’ continues Cirabisi. ‘Think about the story that you want to tell for the year, then plan presentations that flow logically and offer an expanded view of the company. If you’re using the same slides every time, interest will likely wane. But you need to keep a consistent message, so a good balance between the two is important.’
Get the feedback
Feedback is the key to future success. Did the audience understand your story? How did management come across? Did anyone buy stock? Feedback surveys are best handled by third-party consultants who provide anonymity, which helps to loosen tongues. In the case of a sell-side-sponsored roadshow, you will most likely have to rely on the investment bank to provide whatever feedback it can obtain.
Cole recommends IROs get help with the logistics. ‘The last thing you want is confusion or hassle getting to meetings, or having to reschedule meetings,’ he says. ‘That can throw your management team off its best presentation. Provide briefing sheets to management team members for every meeting so they know which investors they are meeting, individuals’ backgrounds, and the institution’s focus, investment style and hot buttons.’
He also recommends keeping some refreshments handy. ‘Carry some energy bars for everyone so when someone inevitably misses out on food because they are talking/presenting the whole time, they do not crash going into the next meeting,’ he advises.
Updating investors is a strategic right-of-passage. At its best, it is a golden opportunity to convince investors of the attractiveness of their existing investment, sway them to increase their holdings and effectively target new investors. Plan your time wisely on the road and you won’t be sorry.
