Rob Swystun, Pristine Advisers
What makes a good IR roadshow? It’s all those unexpected twists and turns that really keep you on your toes, right? Like when the driver you’ve hired doesn’t show up and you’re in a city you’re unfamiliar with. It’s those kinds of things that keep everything so interesting and keeps a roadshow invigorating. … Or maybe I’m getting invigorating mixed up with stressful.
The truth is, as Corporate Access’ Elizabeth Judd discovered in her white paper The Value Added View, that a good road show is one with exactly zero alarms or surprises, one where everything goes exactly according to plan (which you will probably recognize as being a rare occurrence).
To help these IR roadshows go as smoothly as possible, many IROs prefer to get help from a broker-dealer.
“I have had drivers not show up and, many years ago, a salesman decided to do the driving himself, but he didn’t know where he was going,” says Matthew Stroud, vice president of
investor relations at Darden Restaurants. “It reflects on me if the driver’s not there or isn’t paying as much attention to driving as he should. It was a little uncomfortable when he was navigating traffic and referring to maps, and I had the chief executive in the back seat of the car.”
Ninety-one percent of companies take to the road for roadshows, averaging about eight per year according to the IR Magazine Global Roadshow Report 2012. The report found that for broker-sponsored roadshows, the best value that brokers can add to a roadshow is help with logistics like flights and arranging drivers and, most importantly, help with scheduling meetings.
“When you’re taking one or two days out of the CEO’s schedule, you want to make sure you’re seeing the right people and making it easy,” says Mary Frances Turnbull, director of corporate access for institutional equity sales at Raymond James & Associates. “You want the IRO to focus on preparing the management team members for the meeting.”
While services like FactSet, Thomson One and Ipreo can help an IRO to identify who owns your company stock and who owns your peers’ stock, you can typically be waiting three to six months for the data you want.
“I encourage companies to use that information as a starting point, but then to use their local partners, too,” Turnbull says. “The sell-side firms are the ones with feet on the ground, talking to investors all day, every day.”
As an example of this, Turnbull says, Raymond James has been encouraging IROs to meet with hedge fund managers, something she says they’re generally reluctant to do.
“There are a lot of nuances between managers that are listed as hedge funds because some of these ‘hedge funds’ invest based on fundamentals,” says Turnbull. “That message is beginning to get across.”
Listening to the IRO’s own market intelligence also plays an important role in investor targeting. While Stroud appreciates when a broker-dealer pitches in to handle logistics, he prefers to create his own itinerary based on his knowledge of the accounts.
“I may have had a conversation with a shareholder that wants to see us, so I let the broker know,’ he says.
Stroud’s itineraries typically pass through the usual hot spots for one or two days, including New York, Boston and San Francisco in the US and London over in Europe — dubbed ‘IROs’ favorite city’ in the IR Magazine Global Roadshow Report 2012.
These large, major centers are easy to hit Turnbull says, but notes that it is equally important to get to smaller places that maybe aren’t on most people’s radar, so-called periphery or secondary cities. Cities in the US Midwest or smaller cities that are less traversed can still have investable assets.
“If you go to Kansas City, you meet with the two biggest guys [American Century and Waddell & Reed] and maybe one or two other institutions,” Turnbull explains. “The quantity of meetings may be small, but it’s well worth management’s time for the quality of the meetings.”
While holding a half-dozen or so meetings in a place like New York, Boston or London can be an all-day event, in smaller places these meetings can be clustered together for maximum efficiency, especially if the broker-dealer is adept at handling the logistics.
“In Philadelphia, for instance,” Stroud says, “there are a lot of institutions down town, but then there are others just west of the city on the Main Line and in Berwyn or Radnor. You don’t want to bounce back and forth and spend a lot of time on the road. A broker like Raymond James will arrange all the city meetings first, then take you to the suburbs. It knows how to make it efficient.”
For smaller companies that don’t have the resources to do a big roadshow, having the broker-dealer handle the logistics means they can afford to embark on roadshows that they normally wouldn’t be able to do.
Kevin Faulker, vice-president at Nuance Communications, which develops speech recognition software in Sunnyvale, California, eschews a secretary and goes on a one-man IR roadshow, although he prefers broker-dealers to bring analysts and salespeople on a roadshow
“Roadshows represent a greater time commitment than our staff can handle, so this is a great way to have the administrative burden taken from us,” he says. “One of the reasons I like to have the brokers come along is that it gives the analysts and the firm’s salespeople an opportunity to sit in on the meetings,” he notes. “I like that I’m also educating the sales force and analysts.”
When he chooses a broker-dealer to help arrange a roadshow, Faulkner considers the broker-dealer’s analyst who covers Nuance and he is always impressed when he finds that an analyst has really done his or her homework on Nuance and understands the company’s products and has identified its opportunities in the broader market. It’s these types of people who he likes to have with him on the road.
While handling roadshow logistics is the biggest value add-on that broker-dealers can contribute, coming in second, according to the IR Magazine Global Roadshow Report 2012, is contributing investor feedback once the trip is over.
For Faulkner, this post-meeting analysis allows him to give company management examples of what shareholders are saying about Nuance.
And investor feedback is equally coveted by Stroud.
“We’re one of the bellwethers in our industry, so getting meetings is not that challenging,’ Stroud says. “What we really want is feedback from the institutional sales force on what clients thought about the meetings. If we don’t get that feedback, we might think twice about going on the road with that firm again.”
Turnbull is aware of this desire for investor feedback and says her firm responds accordingly.
“After every meeting, our salespeople go back and ask for feedback from investors,” she says.
Raymond James will then assemble a post-meeting summary with comments from investors and other pertinent observations.
“This feedback is something IR professionals value tremendously, and we really focus on getting it to them,” Turnbull notes.