Despite technology and regulation changes, face to face meetings remain the lynchpin of all IR activity, but they do require time and effort. Whilst the disclosure is regulated and obviously no non-public information will be provided, people also look for non-verbal cues and there is a lot to be said for “the whites of their eyes” test. The meeting is here to stay, so how do you maximise the returns?
Who should organise it?
There are three options: in-house, brokers or service providers. Each has pros and cons in terms of time, cost and reach (and the implications of Mifid II have been discussed at length elsewhere, so are not the focus of this article). In practice, a combination is likely to be most efficient and effective. If you go external, a good IRO will be able to question and challenge the organiser regarding new cities or regions and investors.
How do we target investors?
There are two basic approaches: quantitative and qualitative, both trying to identify those who are interested in your stock.
Qualitative approaches rely on the providers experience and knowledge as they are familiar with the sector, with your peers and your region. Roadshows around the full year/ half year results are usually organised by the “house brokers” but using other brokers can extend the pool of contacts. I always suggest doing some “beauty parades” getting brokers/ service providers to pitch for roadshows, and separately by region.
Quantitative tools exist which allow you to drill into theoretical investor appetite. These outputs are useful to overlay with the qualitative targeting work providing ideas, data and challenges which can be then be considered to generate a rigorous targeting.
Should we meet hedge funds?
I can’t believe how often this still comes up. I have always advocated not to exclude hedge funds. It should also be noted that some hedge funds actually limit shorting activities to currencies and indexes rather than on individual stocks, plus some large traditional “long-only” investors run short books, so a blanket rule wouldn’t work anyway.
Hedge funds run a lot of money and account for a large portion of daily trading. In addition, they are often very interesting meetings. Ignoring them isn’t going to make the risk of shorting go away. It’s far better to tackle the discussion head on – a meeting with an aggressive hedge fund known to be shorting the stock could actually have a positive impact in the market chatter, and a positive meeting with that hedge fund could result in the closing a short position which is just as as valuable as increasing a long-only investor’s position.
Who should present?
Investors often default to CEO/ CFO, for obvious reasons, but divisional management meetings can allow the investor to explore particular areas in more depth and free up CEO/ CFO diaries. An additional side-benefits are that it allows the divisional management team to gain skills which are often part of their own personal development objectives, plus it provides the market with comfort regarding the strength and depth of the management team.
IR only meetings are also very effective, and not just with new/ small investors. A strong IRO will be in a position to run hundreds of meetings a year to supplement the senior management team investor programme, freeing up their time whilst still providing high quality investor engagement activity.
Roadshows vs. conferences?
A dedicated roadshow is inevitably more detailed and targeted: the investors participating in it want to hear specifically about your company and are potentially more likely to be considering buying than a mixed bag of conference attendees.
But conferences are a very efficient way to see a large number of investors in one place. A series of back-to-back group meetings over a day could easily encompass over 50 investors, but with the investors rushing from one meeting to another the typical 35-minute ‘speed date’ can only provide highlights. Whilst this sounds negative, the “speed-dating” group meeting is a great way to introduce your story to potential new investors as well as to do quick catch ups with existing investors.
There is no right or wrong answer here. In the end, the key question is: What is the most productive use of time? Probably a mix of both, depending on the details of the conference. You can also do a hybrid – for example if you are attending an overseas conference, you can easily tag a roadshow onto it.
Group meetings vs. 121s?
This has an easy answer – both! Setting aside the volume/ time impact, they are very different and appeal to different investors for various reasons. Some large investors love attending groups so they can hear what others are thinking about, some potential investors want to sit in a group to get a general “feel” for a story before investing time in doing detailed research. You have tooter both in every programme to accommodate demand and interest.
Overall, the face-to-face IR meeting is a valuable and integral part of every successful IR programme. If you’d like an independent assessment of the effectiveness of your IR programme, I offer free initial “temperature check” to assess the current position and potential.
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