Ah, the west coast. Sunshine, movie stars, vineyards, Disneyland, Highway 1 – and about $2.58 tn of equity capital to be tapped. And if that isn’t incentive enough for an IRO to head for California, how about this: California buy-siders are long-term investors. According to Cary Krosinsky at CapitalBridge, 96 percent of Californian investment turnover is characterized as either low, very low or moderate. As a bonus, 41 percent of that money is invested in value stocks: growth and Garp funds account for about 20 percent of the pie.
In northern California, Silicon Valley ensures a veritable Mecca of institutions focused on hardcore tech sectors. In the south, consumer products, biotech and healthcare companies abound in Orange County. A new tech corridor is springing up between Calabasas and Santa Barbara along the Ventura Freeway. Entertainment, broadcast media and communications companies congregate around Hollywood and Burbank, as do investors following these sectors. For companies in these industries – and their corollary sectors, like telecoms – a trip out west is essential.
The hometown team
‘Beyond the California-based firms, many of the buy-side institutions have specialists in the entertainment or tech fields that rival or exceed their east coast colleagues,’ says Roger Pondel, co-founder of Pondel/Wilkinson, one of southern California’s oldest and largest IR consultancies.
‘As a brand-name, large-cap company recognized around the world, we are fortunate to have an almost continual demand for meetings here from east coast and overseas analysts and investors,’ says Wendy Webb, senior vice president of IR at the Walt Disney Company. She notes that several top entertainment analysts and investors also call the Los Angeles area home, including Jeff Logsdon of Harris Nesbit Gerard, Dave Miller of Sanders Morris Harris, and Laura Martin of Soleil/Media Metrics on the sell side, and
Capital Research and Management, TCW Asset Management and Primecap Management on the buy side.
‘There are so many entertainment and related internet and tech companies based on the west coast that we are often shown off as part of a sell-side-sponsored tour for institutional investors,’ notes Webb. ‘They might spend two or three days visiting Disney, Fox, DreamWorks, Google, Yahoo!, Paramount Studios, Warner Studios, Lions Gate, and so on.’
Trans-Pacific roadshows
For investor relations pros from other countries seeking capital in the US, California is an important stopping point. While the UK, Canada and Japan still top the list of foreign investments by Californian institutions, there is a healthy, growing investment trend toward China, Taiwan, Korea and Australia. And, as almost 75 percent of all flights to North America from Asia stop in either Los Angeles or San Francisco, the west coast is a natural location for Asian executives to tell their story to investors.
The top industries invested in by Californian institutions are financial: banks, insurance companies and real estate and mortgage capital firms. Not far behind are healthcare and oil and gas companies. ‘We have a very good record of providing full agendas for large-cap and growing mid-cap companies in these industries, especially in San Francisco,’ says Pondel.
Where to go, what to expect
While Los Angeles and San Francisco more or less evenly divide $2 tn of equity capital within their metropolitan borders, San Francisco is a far more efficient market for IR meetings, says Crocker Coulson, president of CCG Investor Relations, a Los Angeles-based IR consultancy. ‘With over 50 percent of San Francisco capital concentrated in the
downtown area, you can do a luncheon meeting and then build a day of one-on-ones that will really bear fruit,’ he notes.
To be thorough in your pursuit of capital, Coulson suggests spending an extra day to include San Mateo, San Jose, Menlo Park or Oakland, visiting some of the boutique firms that might have a particular interest in your industry, growth prospects or market cap. One investment manager in San Mateo sees about half the firms he’s interested in without leaving his office. ‘Because of our size and our proximity to the airport, it’s relatively easy for them to visit us,’ he says.
San Francisco has a lot of choice when it comes to meeting venues. Webb favors the Mandarin Oriental, while another IRO says the Westin St Francis and Hyatt hotels are also adequate and convenient locations for meetings.
‘Be prepared for tough questions,’ suggests Pondel. ‘San Franciscans are savvy, proud people who don’t see the Wall Street Journal as a fashion accessory. They will have done their homework.’ He recommends a relatively brief introduction and a more give-and-take conversation over lunch.
The flight between San Francisco and Los Angeles is about an hour; if only traveling by road in Los Angeles were as easy – this is not a city for the autophobe. And if you haven’t been here before, don’t risk making your first trip with your CEO in tow, especially if you think you’re going to be able to use a cab or perhaps rent a car and MapQuest it. This is a trip you’ll need a guide for – one who has a good knowledge of the local investment community. So hire a car and expect to do what everyone does here: stay in it much of the time.
‘You can’t just have a luncheon meeting and expect people to travel to it,’ says Coulson. ‘The time it takes to get across town in Los Angeles precludes this. In New York, Boston, Chicago or San Francisco, institutional investors will show up at your meetings. But a group luncheon in Los Angeles means a retail broker luncheon.’
Not that that’s such a bad thing. If you’re looking for high-net-worth individual shareholders, this is the place to be. Somebody’s got to run all that Hollywood money, and you can draw these folks in if you keep the venue close to Beverly Hills. But that’s something you as the IRO can do on your own without your CEO – and only if an individual shareholder outreach program is appropriate for your company.
For institutional investors, you not only have to know how to get to them, you have to know which ones to target once you’re inside the complex. ‘Cap Research in Los Angeles has a lot of active funds,’ Pondel points out. ‘But its Byzantine internal structure makes it difficult to get into if you don’t know what you’re doing.’
Filling in targets
Chances are you already have a handful of Los Angeles investors in your portfolio, so start by meeting one-on-one with them. Then fill in your targets geographically, preferably using a local pro to help you determine time between meetings. ‘We usually start clients out in Pasadena, then hit downtown, the west side and Orange County,’ says Coulson. Pasadena investment houses include Roger Engemann Associates and Provident Investment Counsel. Downtown, there’s Capital Research and Wells Fargo.
If your firm has over $500 mn in market cap, you should spend a day in San Diego. Brandes, with over $1 bn in equities under management, is worth the trip alone. San Diego is about 90 minutes’ drive from Los Angeles if you don’t hit traffic. That means leaving early in the morning (5 am) or after rush hour (10 am) to arrive for 7 am or noon meetings.
For small to mid-cap companies, California offers a plethora of research houses and smaller banks. WR Hambrecht offers Dutch auction-style IPOs, and Roth Capital Partners in Orange County is number one in private investment in public equity transactions for small-cap growth.
The ideal Californian IR itinerary? Arrive in San Francisco on a Wednesday night. Have one-on-ones in the morning, a group luncheon, then one-on-ones in the afternoon. On Friday, visit one of the outlying investment houses and then head out to San Jose. Spend the weekend in Big Sur, south of Carmel on Highway 1, then fly out to Los Angeles. Visit your top targets with one-on-ones on Monday and head down to San Diego or Orange County on Tuesday morning after rush hour. Do a luncheon and afternoon one-on-ones, then fly out of either San Diego or Orange County airport on Wednesday.
Visitor information, San Francisco
Where to present
Mandarin Oriental
222 Sansome Street
+1 415 276 9888
Westin St Francis
335 Powell Street
+1 415 397 7000
Where to stay
Four Seasons
757 Market Street
+1 415 633 3000
Ritz-Carlton
600 Stockton at California St
+1 415 296 7465
Where to take your CEO for dinner
The Dining Room
at the Ritz-Carlton
+1 415 773 6198
Visitor information, Los Angeles Where to present
Omni Hotel
251 South Olive Street
+1 213 617 3300
Where to stay
Beverly Hilton
9876 Wilshire Blvd
+1 310 274 7777
Where to take your CEO for dinner
Lucques
8474 Melrose Avenue
Top ten buy-side institutions Firm Main investment style Location Equities under mgmnt ($bn)
Barclays Global Investors (US) Index San Francisco 725.7
Capital Research and Management Value Los Angeles 682.1
Capital Guardian Trust Co Garp Los Angeles 160.0
Calpers Index Sacramento 122.9
Dodge & Cox Value San Francisco 105.6
Brandes Investment Partners Value San Diego 101.0
Franklin Templeton Investments Growth San Mateo 72.1
Dimensional Fund Advisors Quantitative Santa Monica 62.4
TCW Group Growth Los Angeles 53.5
Primecap Management Company Growth Pasadena 49.3
