Around 40 IROs gathered at the TSX Broadcast Center for the inaugural IR Magazine Canada Think Tank on September 29. With their anonymity assured, they were free to speak their minds on four key issues that had emerged from an advance poll of attendees – and did so, judging by the following extracts.
The relationship with the sell side , sponsored by Standard & Poor’s
‘People say they want the highest share price when, in fact, they should want the most accurate share price. But nobody – with the possible exception of Warren Buffett – ever tries to talk down the share price.’
‘The market’s like a mule: it’s going to get there eventually but it will go at its own pace. All of your companies at this moment are mispriced but, over time, the market will get it right. Your job is to help communicate to the market what you think your best opportunities are.’
‘Analysts are not cheap. It costs about $60,000 to $80,000 to cover a company in many cases, and that’s a lot of commission if you’re not a billion-dollar market cap.’
‘Unless IPOs start going crazy again, the sell side is not going to provide a lot of small-cap research; it’s just not economical for it to do so.’
‘Paid-for research is an ideal opportunity to get your corporate story out there, as long as you can find a good analyst who knows your industry and your company – and who has some contacts.’
‘The jury is still out on paid-for research. It’s pretty new and there are concerns about its quality and objectivity.’
‘As long as you have the resources, I think you should be accessing the buy side directly, rather than using the sell side as an intermediary.’
‘There are opportunities in Milwaukee and places like that where you wouldn’t normally go – sometimes you’ll find an analyst there who is valuable.’
‘We treat all analysts equally, it doesn’t matter whether they’ve got a buy, a perform or a sell on us.’
‘If you spoke to every investor that wanted to talk to you, you wouldn’t have any time to run the business.’
‘Look at the sell side as an opportunity to learn about what you’re doing wrong.’
Earnings guidance, sponsored by the Toronto Stock Exchange
‘There is increased volatility within your stock if you’re not providing earnings guidance information to the public and the sell side. Even the sell-side analysts who know every detail about your company still need to get that bottom line guidance from you – it just provides that much more security around investing in your company.’
‘I’m in favor of guidance because I think it partially protects our management team, which has numbers with it when it talks to the Street.’
‘If you’re a small-cap company, one of the easiest ways to attract a lot of attention is to set consistent quarterly or annual guidance because it solidifies the information out there.’
‘There are lots of investments out there so if you make it harder for analysts, they’ll just go and look at another firm.’
‘Guidance plays a useful role when you’re trying to help the Street understand where you think the company’s going. And it doesn’t have to be earnings per share (EPS): a lot of investors don’t care about EPS, they care about free cash flow or Ebitda [earnings before interest, tax, depreciation and amortization] or whatever it happens to be for your industry.’
‘Because the Street’s always trying to be ahead, we’ve had situations where we’ve exceeded guidance and our stock stays flat or goes down.’
‘Where we draw the line is on the EPS because there are so many dynamics in the industry and the Street is so sensitive to each penny that it’s just a really risky game to play.’
IR and the board, sponsored by the Canadian Investor Relations Institute
‘Shareholders want to talk to the board because they feel they’re going right to the level at which strategy is set.’
‘If one of the board’s primary responsibilities is to act in the best interests of the shareholders, it is important that the board at least knows the shareholders’ concerns and issues.’
‘The views that IROs get all the time from the investors, through day-to-day contact, formal studies and the meetings they have, are valuable information for the board to understand when it is making decisions.’
‘There are some companies where the IR person never has any access to the board, and we’d like to see that change. If we could wave a magic wand, in five years’ time every IRO would have a VP role and be part of the executive committee of the management, and thus have a seat on the board.’
‘I don’t hear our investor relations manager telling me he needs direct access to the directors because, in fact, all of the information is flowing through other channels.’
‘The annual shareholders’ meeting is a wonderful opportunity for retail investors and institutional investors to get up in a very public forum and raise these difficult issues. If they really have a concern, that’s an absolutely proper way to air it.’
‘Everybody wants to be heard by the board, and you can go into almost any other professional discipline within the company, whether it be HR or IT, and everybody wants to have a seat at the table. You only earn that by bringing value.’
‘There are many good reasons why there should be communication between shareholders and the board but the directors are not spokespeople for the company and shouldn’t have to fill such a role – there’s some real risk associated with that.’
Targeting overseas investors, sponsored by Georgeson Shareholder
‘One of the biggest challenges in investor relations is knowing who the base investors are in the business.’
‘The sell-side analysts are great at doing some of the work for you. They are usually very good at providing competitive information on what kind of appetite they have noticed for Canadian banks in any given foreign market.’
‘The European sell-side community is far more open in working with investor relations professionals than the North American sell-side community.’
‘If you have a good analyst following, you can really piggyback from that and I would say probably 70 percent of the clients they get you in front of are meaningful clients. And for us, at least, it doesn’t cost us anything.’
‘Once you go into the US market you’re there to stay. It’s a bit like Hotel California: You can check out any time you like, but you can never leave.’
‘If you are going to enter the US market you have got to go there regularly; it’s not enough to go to a conference put on by US brokers or turn up two or three times a year. I think you need to have an established IR program.’
‘It is vital to ensure you have the best agenda and calendar, are seeing the best people and know who the best institutions are in each of the cities you’re going to – and that comes down to targeting.’
‘If you’ve got a consistent IR program and you’re following up once a quarter or twice a year with institutions, you’ll get some idea about the level of interest in your company, even if it’s just from the fact that people don’t pick up the phone and respond to you.’
