Prepping for Investor Conferences

With the 2014 investor conference season about to go bananas (J.P. Morgan’s behemoth healthcare conference hits Jan. 14), it is probably a good idea to do a little prep work before spending all that time and money on the road.  Think of it like going to sleepaway camp; you got your sunblock, check, bathing suit, check, toothbrush, check, compelling investor presentation, um …
 
OK, so unless you were the ultimate dork at summer camp, you probably didn’t bring an investor deck with you.  The point is it is absolutely critical that you have the right mindset and materials before you embark on the conference circuit.  Following are a handful of tips to consider:
 

  • Make sure your investor presentation reflects the kind of company you are right now.  Many of us get attached to clever graphics, analogies and even metrics that are no longer relevant to a story.  A few substantial tweaks could make all the difference when it comes to keeping investors engaged.

 

  • Manage your one-on-one schedule.  It is easy to feel pressured by your hosts to sit with everyone on your schedule, but not all of the folks who want to sit with you are interested in investing in your company.  Some are looking for industry trends or even making a bet that your company’s stock is headed south.  Bottom line: Keep a close watch of your schedule and feel free to say no and request a new meeting.

 

  • Piggyback NDRs.  Traveling is expensive, not to mention time consuming.  So, if you’re headed across country, let’s say to NYC, perhaps it makes sense to also do a day of meetings in Boston or Philly.  Or better yet, maybe an analyst from a different bank would like to set up a dinner in NYC after your conference.

 

  • Sleep well and eat right.  OK, I’m an IR guy, not a nutritionist.  But I’ve seen it before, the executive who has been up all night working, eating crappy food, and throwing back one too many glasses of scotch.  And then comes the investor presentation, at which point you can hear all of the air being sucked out of the room because the speaker has no energy.  I’m not saying stop drinking scotch, but I am saying it’s important to take care of yourself.

 

  • And finally, take notes and ask questions.  We usually assume that investors are the ones asking all of the questions, but maybe there is some insight to be gained if management teams ask investors questions.  Investors sit with hundreds of management teams and likely can impart a few nuggets of their own.

 
— Evan Pondel, epondel@pondel.com

What Public Company Directors Should Know in 2014

Being a public company director today is exponentially different than it was just a decade ago.  Rules and regulation changes and increasing investor activism make navigating corporate governance duties more challenging and time consuming.
 
As the New Year approaches, law firm Akin Gump provides a list of 10 topics that will be important for directors in 2014.  For current directors, or those seeking board positions, and for corporate officers who directly interact with the board, it’s a good summary of what to be prepared for.  Below are a few of the more noteworthy topics:
 

  • Address Cyber Security.  Akin Gump cites a recent study by the Ponemon Institute, which found that “in the past year the number of successful cyber attacks on companies surveyed jumped 42 percent compared to the prior year.”  According to CFO Magazine, companies need to better understand the risks posed by cyber attacks including potential lawsuits, reputation damage and customer losses, as well as growing regulatory scrutiny over the adequacy of data-security measures.  Actions have been brought against more than 40 companies by the FTC for data breaches (saying that “failures to prevent unauthorized access to consumers’ information constitute unfair or deceptive acts.”)
  •  

  •  Set Appropriate Executive Compensation.  While some think say-on-pay will remain a hot button issue, others, like CNBC senior editor, John Carney, believe that say-on-pay failed with 97 percent of U.S. companies receiving shareholder votes supporting their executive pay packages through the first half of 2013, according to Equilar.  Even so, it’s apparent that shareholders and proxy advisory firms are continuing to focus on pay-for-performance, while investor activists are targeting disparity between pay for executives and other employees.  In fact, the SEC recently proposed a new rule that would require publicly traded companies to disclose the ratio of its CEO’s pay to the median compensation of its employees.
  •  

  • Determine Whether the CEO and Board Chair Positions Should be Separated.  CFO Magazine reports that during the 2013 proxy season, requests for an independent board chair were the second-most-frequent shareholder proposals submitted to companies.  According to the 2013 Spencer Stuart Board Index, 45 percent of S&P 500 companies split the CEO and chairman roles, up from 23 percent 10 years ago.
  •  

  • Cultivate Shareholder Relations.  Activist investors are here to stay.  Akin Gump says that proxy fight announcements are now at their highest level in four years. Even large pension funds are getting in the act. By knowing and actively engaging shareholders, directors can develop stronger relationships and management credibility, both of which come in handy when facing a potential proxy battle.  Equally important, and the main tenet of any good investor relations program, is keeping your message consistent.  Whether speaking with an activist, a friendly long-term investor or a mom and pop shareholder, the message should be the same.  It’s also important to determine how involved directors should be in the shareholder communications process. This is a company-by-company decision with current viewpoints varying widely.

 
The public company director position can be very rewarding by helping shape a business’s future, but it’s definitely not an easy task.  Regulatory bodies, proxy advisory firms and the investment community are keeping a sharp eye on what’s happening in the boardroom, so these directors must stay on top of the issues that matter most to shareholders. 
 
— Laurie Berman, lberman@pondel.com
 
 

Conversation: Potential Perils of Crowdfunding

Mary Jo WhiteThe Securities and Exchange Commission, through December 23, 2013, is seeking public comments on a proposal under Title III of the JOBS Act that would permit crowdfunding in connection with the purchase of securities. Nothing is perfect, and if adopted, investors and issuers alike will need to exercise caution.
 
Following is a tongue-in-cheek dialog between SEC Chair Mary Jo White, with comments taken verbatim from a press release issued by the SEC October 23, and a completely fictitious investor, expressing concerns:
 
Mary Jo:  I’m pleased that we’re in a position to seek public comment on a proposal to permit crowdfunding.
 
Investor:  What is crowdfunding?
 
Mary Jo:  Crowdfunding describes an evolving method of raising capital that has been used outside the securities arena to raise funds through the Internet for a variety of projects ranging from innovative product ideas to artistic endeavors.
 
Investor: Umm…I’m not sure I understand.  What does that have to do with securities?
 
Mary Jo:  Title III of the JOBS Act created an exemption under securities laws so that this type of funding method can be easily used to offer and sell securities as well. Securities purchased in a crowdfunding transaction could not be resold for a period of one year.
 
Investor:  Oh, I get it now.   You mean I soon will be able to take my hard-earned money and buy stocks in small, risky companies I never heard of?  Companies that may be run by rip-off artists.  Companies that have not been vetted by an investment bank. Stocks that will not necessarily trade in the public markets—not even on the OTC Bulletin Board?  And stocks that I may not even be able to easily sell?
 
Mary Jo: The Securities and Exchange Commission voted unanimously to propose rules under the JOBS Act to permit companies to offer and sell securities through crowdfunding.
 
Investor: Huh?  Maybe I don’t get it after all. What are the commissioners thinking?
 
Mary Jo:  The intent of the JOBS Act is to make it easier for startups and small businesses to raise capital from a wide range of potential investors and provide additional investment opportunities for investors.
 
Investor: Opportunities you say?  Aren’t there enough investment opportunities out there already? Do we really need more?  I’m scared. I want my mommy.
 
Mary Jo: We want this market to thrive in a safe manner for investors.
 
Investor:  O.K. I understand that’s what you want.  But President Obama wanted the Affordable Care Act website to work.  Besides, wasn’t the SEC supposed to be watching folks like that Madoff fellow?  He should have been easy to monitor, compared with the thousands of small entrepreneurs who will want to sell securities to unsuspecting investors?
 
Mary Jo:  There is a great deal of excitement in the marketplace about the crowdfunding exemption.
 
Investor:  Did I say I am scared?
 
Roger Pondel, rpondel@pondel.com
 
 

Soft Intelligence and Social Media

Cyber security and cyber threats abound, information security policies are now owned at the highest levels of a company from the C-suite to the board, according to EY’s 2013 Global Information Security Survey “Under Cyber Attack.” While companies seek to protect intellectual property and disruption caused by hackers, one area, as it relates to intelligence gathering by investors, deserves further attention: the oversharing of personal information on social networks.Linked-In
 
Today, social media use by institutional investors stands at approximately 52%, according to a NIRI survey earlier this summer. What I am noticing more and more in my daily conversations with investors is that social media seems to be emerging as a tool to get an edge on impending news, particularly as it relates to the broadcasting of new LinkedIn connections.
 
While tracking Facebook “likes” on emerging brands as a proxy for potential revenue growth or monitoring hiring trends or personnel departures from company LinkedIn pages to gauge near term expenses might seem an obvious use of social media to impact investment decisions, what might not seem so important is the innocuous LinkedIn request.
 
Following a roadshow or investor conference, management might receive a request to “connect” from an institutional investor. If the request is accepted, consider what that might mean going forward if new connections are then broadcast to that investor; it may very well tip your hand on impending news.
 
A quick fix would be to turn off LinkedIn activity broadcasts by visiting the privacy settings of your account. Longer term, it’s wise to consider a companywide policy.
 
Matt Sheldon, msheldon@pondel.com

Crisis Case Study: Baiting the Media in the Court of Public Opinion

Last Sunday’s overtime win against the San Diego Chargers gave the Washington Redskins a reason to celebrate, at least temporarily, as the storied franchise continues to make headlines both on and off the field.
 
The team’s losing season is only part of the problem.  A new report by the Pew Research Center revealed that 76 news outlets have publicly announced their opposition to the name “Redskins” or have banned or restricted its use in editorial coverage. 2013-09-11-WashingtonRedskinsLogo
 
Washington, D.C. Mayor Vincent Gray and anti-defamation groups reignited the decades-old issue earlier this year calling for the removal of the name, saying it is a racial slur and offensive toward Native Americans.
 
Owner Dan Snyder for years has been adamant about not changing the team’s name.  He made headlines last month after sending a letter to fans defending his reasons against a name change.  He’s not alone either.  A Washington Post poll found that a majority of D.C. residents (66 percent) are against a name change.  Other published polls also show support for the name, even among Native Americans.
 
While the 76 news outlets that came out in opposition to the name are only a small portion of the media landscape, they certainly pack a punch.  Several high profile journalists have created national news themselves by opining their reasons for the Redskins name to go.
 
Whether a reporter “becoming” the story is bad for an outlet’s credibility will continue to be debated.  Most journalists try not to get involved in their own stories, although that is becoming increasingly difficult in today’s highly fragmented, 24-hour media landscape.  Either way, it makes for good television and sells newspapers.
 
The fact is the Washington Redskins are in crisis, a battle with the courts of both legal and public opinions.  And there aren’t any signs of it tapering off, although published reports indicate that the NFL has been meeting with Snyder and the Oneida Indian Nation to address the controversy.
 
Even though the owner, team and fans like the name the way it is, the current reality is creating too much controversy around the brand, which equates to lost dollars and can impact future revenues.  That’s a recipe that can’t work in today’s NFL as pro football teams look to sell products, licenses, and TV and radio rights outside their respective locales.
 
All this makes for an interesting public relations case study for today’s business organizations.  First off, executives always must be mindful of sending correspondence, whether it’s targeting consumers, customers or even shareholders.  Most times these communications will be leaked to media or appear across social media platforms, as in the case of Dan Snyder’s recent letter to fans.
 
This case is unusual because many of the fans and ethnic groups that may be affected don’t mind the Redskins name.  However, the issue has created a broader movement among media and anti-defamation groups, which appear to have their own agenda under the guise of eradicating racism.
 
The reality is Snyder is in a difficult situation: succumb to public pressure or stick to his proverbial guns.  This instance may be reminiscent of a business executive passionate about a company function or an unrelated personal issue.  There is no easy solution in these circumstances, especially if the executive has a legitimate position.  It’s also extremely difficult to win in the court of public opinion, let alone going toe-to-toe with national media.
 
CEOs and business executives can learn from the Redskins’ current communications crunch.  For Snyder, the strategy now is to manage the PR crisis, probably taking a reactive approach, rather than a proactive one, which may only continue to fan the flames — a strategy worth remembering when dealing with the next corporate communications crisis.
 
— George Medici, gmedici@pondel.com

Board Member, Meet Shareholder

Nederlands: Vergaderruimte Boardroom Kromhout ...

(Photo credit: Wikipedia)

The Conference Board recently published a blog post on the rapid increase in shareholder requests for special meetings with board members.  Several factors are influencing this trend, including “say-on-pay” and more and more investors calling for the appointment of an independent board chairman.  Indeed, shareholder activism seems to parallel this new wave of requests for special meetings.  The question is, should board member-shareholder engagement be shunned or embraced?  Let’s first review some results from a recent survey conducted by the National Investor Relations Institute.

     

  • The majority of survey respondents (60%) state that their companies do not permit board members to engage directly with shareholders (defined as in-person or via telephone).
  • Within companies that do allow direct communication, 65% state that any board member may speak directly, while 35% state that only certain board members may speak directly to shareholders.
  • Within companies that do allow direct communication, 57% indicate that a member of management is not required to be present during these discussions.
  • In general, as market cap increases, so does the likelihood that only certain board members may speak with shareholders and that management’s presence is required.
  • Companies are only slightly more likely (43%) to facilitate indirect communication between boards and shareholders (defined as e-mail responses to questions via a third-party, such as the IR department or corporate secretary’s office), than direct communication (40%).

 
There are pros and cons to board member-shareholder engagement, and much of that depends on the shareholder base and propensity for activism. But as the Conference Board points out, engagement is here to stay and it behooves companies to develop a plan of engagement long before a rogue activist is banging down the door.

Following are a handful of tips to consider when board members engage with investors:

 

  • Instead of letting them come to you, proactively engage top investors with a specific agenda, whether it is to discuss the company’s executive compensation plan or other corporate governance concerns.
  • Make sure the board member is accompanied by an investor relations representative or another knowledgeable board member.
  • Try to summarize positive developments for the company at the beginning of the conversation.  It is easy to get derailed or focus on one specific topic from the outset of a conversation and never return to a broader discussion about positive developments.
  • Set time parameters.  Generally, 30 minutes to an hour should more than suffice.
  • Ask questions.  Yes, the investor is generally asking the board member questions. But engaging with an investor could provide invaluable insight that could greatly improve shareholder relations.

— Evan Pondel, epondel@pondel.com

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Post Investor Day Thoughts

Nasdaq Times Square_1106

Nasdaq Times Square_1106 (Photo credit: gmacfadyen)

I recently returned from helping a client host a very successful investor day in New York City.  Every year for the last four years, we have introduced various members of our management team, customers and industry pundits to nearly 100 investors to help them better understand our opportunities and long-term goals.  Our 2013 event was the best yet, so I thought it might be interesting to share some pointers for a successful investor day, while it’s still fresh in my mind.

  • Hold an event only if you have  something to say.  Make your investor day worth the time and effort it takes to successfully produce a great event, and ensure your audience leaves with a favorable opinion of the company.  Holding an event just for the sake of having one is not a great decision.  Holding an event because you have new wisdom to impart about the company, is.
  • Target your audience.  The day is only as good as your attendee list.  Those with a keen interest in your company will help facilitate a more interactive session with great questions and a chance for your management team to shine.
  • Expect no-shows.  Drop off is generally in the 10-20% range, but a bad day in the market or extraordinary breaking news can drive that number up to the 50% range.
  • Be selective in who presents.  Those parts of your business that command investor attention should be included, while those that may not be core to your long-term growth strategy needn’t be.
  • Consider using guest speakers.  Allowing those outside your company to communicate with investors, provides you with third-party support and adds a little something special to your event.  Guest speakers can be solo participants, part of a panel, or included in a fireside chat.  Again, be selective.  Use outside speakers only when you are relatively certain that they will speak positively about your company and that they have a good stage presence.
  • Provide hard copies of your presentation.  There has been much debate recently on NIRI’s eGroups message boards about the benefits (or lack thereof) of slide deck hard copies.  While it’s true that digital communication is the wave of the future, and possibly even of the present, I’ve found that investors generally like to hold the decks in their hands, have them available for easy reference and use them for note taking.
  • Choose your venue carefully.  You’ll want to pick an event space that can comfortably hold all of your guests, leaving them room to spread out a bit, while ensuring the presenters and screen can be seen from anywhere in the room.  I can personally recommend the spaces at Nasdaq and Convene.
  • The message is king, but logistics matter.  While the message is key to giving investors the clarity and visibility for which they are looking, logistics are just as important.  Keep guests comfortable by providing food and drinks (an informal lunch or cocktail party gives investors a chance to mingle with management).  Offer an agenda and clear guidance on what guests should expect during the day.  Have notebooks and pens available for guest use.  Think about what would make you comfortable at an event, and provide that for your guests.
  • Webcast, webcast, webcast.  Not only will a webcast ensure compliance with Reg FD, but it will allow those who cannot travel to the event a chance to participate.
  • Invite the board.  Having the board in attendance shows their commitment to your company, while bringing them closer to your investor base.  A recent opinion piece in the Wall Street Journal highlighted the need for better communication between these constituencies.  In my book, transparency is always the best policy.

Perhaps the most important piece of wisdom I can share is to have fun with it.  It takes a lot of work, and at least six months of lead time, to produce a successful investor day.  But, if you take a step back to enjoy the day and process, you might find it to be a meaningful experience.

— Laurie Berman, lberman@pondel.com

 

The Tango of Business, Politics and Journalism

It came to no surprise among media pundits that Time Magazine’s Managing Editor Richard Stengel will be taking a job as a spokesperson for the U.S. State Department.  His new title, under secretary of state for public diplomacy and public affairs, will have Stengel leading communications outreach for the department across many issues, ranging from cultural programs to terrorism.

Time Magazine is no stranger to the Obama Administration.  Former Washington, D.C. Bureau Chief Jay Carney joined the president’s staff as White House press secretary in January 2011 after serving as Vice President Joe Biden’s communications director.

English: Jay Carney giving a press briefing.

English: Jay Carney giving a press briefing. (Photo credit: Wikipedia)

Journalists historically have transitioned from hack to flack, probably more so in recent times as traditional news outlets struggle to survive in today’s Internet-based media landscape. It’s happening in the corporate world as well, and has for decades, with financial reporters taking jobs at public relations firms, including ours, as well as within internal corporate communications departments to focus on media and investor relations.
On one hand, it’s hard to deny these moves don’t affect the credibility of journalism or at least each reporter’s former news outlet.  Reporters accepting positions at organizations they once covered can create an allure of collusion within an industry that prides itself as being vigorously independent, unbiased and objective.

The pendulum swings both ways, however.  Scores of business executives and political officials   have transitioned to various media gigs, including talk show hosts and media contributors.

Business, politics and journalism always have had incestuous relationships. Some good, others not so good.  With New York City’s primary elections over, and Anthony Weiner and Eliot Spitzer losing their bids for mayor and comptroller, respectively, all eyes will be on which politician may be the next media pundit.  Perhaps both.

— George Medici, gmedici@pondel.com

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Q&A with L.A. Business Journal Reporter

Business reporters play an important role in helping investors identify opportunities. PondelWilkinson caught up with James Rufus Koren, staff reporter of the Los Angeles Business Journal, to shed light on factors that influence his coverage of the banking and finance world.

 

James Rufus Koren, reporter with L.A. Business Journal

James Rufus Koren, reporter with L.A. Business Journal

1. How are social media influencing your coverage of companies?

 

I don’t know that it has changed the game that terribly much because of the type of niche business publication we are. We don’t do a lot of breaking news. We are looking for the analysis story; the exclusive deep read on what’s going on.  I also don’t find social media the best way to get information about banks. The three sentences at the bottom of a 10K are usually much more insightful. That said, if we are looking for a lead, I will search through Twitter to see if anyone is tweeting about a company or I’ll read blogs to see if anyone is talking about a company.

 

2. What characteristics make for a compelling story in the Los Angeles Business Journal?

 

Growth, change and new strategies that speak to the local economy are interesting to me. Big names are also interesting. For example, if Charlie Munger is doing something, we will probably be more interested than if Evan Pondel is doing something (laughter). But often times, what interests me may not interest another reporter. I like to explore parts of the banking and finance world that are not well understood. I look for things that I don’t understand and then try to take a crack at it.

 

3. How would you define an ideal source?

 

An ideal source is someone who is deeply in the know not just about their company or their particular corner of the world but also has a broader knowledge base and a big Rolodex. It’s very helpful when someone can say, ‘hey there is something interesting going on here that you should look at,’ such as a particular sector of the economy. An ideal source is someone who will give you information without the expectation that it will result in something immediate, or something positive for them.

 

4. How do you like to be approached about prospective stories?

 

In general, email is the easiest, but the ideal approach is developing a relationship with me. If you have been helpful in arranging interviews, I am more likely to follow up on story ideas. Sending gifts does not ensure a good story. A number of interesting things come into this office. Thankfully, no one has sent me a fish wrapped in a newspaper.

 

5. Where do you foresee the future of business journalism going?

 

I actually see business journalism continuing to connect with people in more real ways than other kinds of journalism. Many people have a hard time seeing the direct impact of stories about state and local politics, but people who read business stories want information so they can make wise decisions about their money.

 

6. How do you react when a call is not returned?

 

It depends on the information I left in a message. In general, I interpret it as the person has nothing to say for themselves, or that I have things pegged well enough in a story and the person cannot benefit from getting in touch with me. Also, as a business journalist, I understand the limitations of public companies and that certain things cannot be disclosed.

 

— Evan Pondel, epondel@pondel.com