Lights, Camera, Earnings!

Traditionally, earnings calls have been a cut and (very) dry quarterly procedure. But with the emergence of social media and the SEC’s move to embrace them, following is a summer round up of how companies are finding new and creative ways to put a little pizazz into their calls.Yahoo Earnings Call
 
During Yahoo!’s most recent call, CEO Marissa Mayer and CFO Ken Goldman appeared on a high-quality streaming video webcast, answering questions from analysts who called in. The company also live-tweeted key messages from their corporate Twitter account.
 
Zillow made a splash with their call in early August as the first company to answer questions submitted live through Twitter and Facebook. Spencer Rascoff, Zillow’s CEO, answered questions from individual investors, as well as sell-side analysts.  Zillow also leveraged both Twitter and Facebook to tell their story visually, posting infographics with metrics that illustrated recent growth.
 
Like Yahoo!, Netflix participated in live streaming video, but they tweaked their approach to the Q&A session by moderating a panel discussion that included a member of the financial press and a covering sell-side analyst.   Questions were screened in advance for CEO Reed Hastings and CFO David Wells.  The questions were also unattributed.
 
The jury is still out whether more companies will embrace video earnings calls in the near future.  But shareholders seem to like it. Approximately 70% said that compared with audio-only earnings webcasts, video webcasts of a company’s CEO inspire more trust, according to a Shareholder Confidence 365 Study that received responses from nearly 11,000 professional and individual investors.
 
The challenge is training management to feel comfortable in front of a camera.  After all, answering questions with a furrowed brow could have unintended consequences when it comes to instilling confidence in your shareholder base.  Same goes for too much powder!
 
Joanne Sibug, jsibug@pondel.com

The Implications of Market Volatility: Beware the VIX

While market volatility irks investors, those with the most at stake may ironically be the many pre-public companies that have long awaited their turn to tap the equity capital markets.
 
There’s no question that 2013 has seen a general improvement in the deal market, but some investment bankers are now privately expressing concerns. “Deals were getting done more easily earlier this year, with the VIX below 15 for most of this year,” one recently told us, referencing the trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility.
 
Often referred to as “the fear index,” the VIX measures the market’s expectation of stock market volatility over the next 30 day period. “If the VIX stays at the current higher level, the window for equity capital closes for all but the best offerings,” he solemnly added.
 
The VIX measure has been steadily building since the end of May, and is now in the range that some investment bankers and syndicate managers say suggests a shift in investor psychology, resulting in reticence to take on additional risk, as is inherent in initial and follow-on public offerings.
 
While the VIX has previously spiked and subsequently retreated to happy levels a couple of times already this year, should the build-up be a harbinger of sustained volatility and a tougher deal market, public companies would be wise to consider these related investor relations implications:
 

  1. Investors seek comfort in a storm.  And nothing creates that comfort like familiarity with management.   It’s a great time to grow investor relationships in person.
  2.  

  3. It’s easier to get attention.   With buy-side researchers less distracted by disappearing deals, old fashioned stock picking is back in style.  Success shifts to sell-side analysts and firms delivering differentiated ideas, while adding value through corporate access to select managements.
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  5. The predatory order is largely determined by currency strength. “Currency” in this case being the company’s common stock.  Along with balance sheet strength and other company-specific factors, companies exhibiting the strongest stock valuations often become the consolidators of their industries.  They can come to dominate by acquiring attractive pre-public companies from VCs that can’t await an IPO, as well as through accretive stock mergers that offer potentially tax-advantaged exit strategies for key owners of acquired public companies.

 
Market volatility that signifies a shift in psychology may well make it tougher to go public. But it could soon be the best of times for public companies, and particularly those that have struggled to command investor attention in a deal-driven market. Astute managements will recognize the opportunity, hone their messages, and step up their investor relations efforts accordingly.
 
 
Mark Lamb, mlamb@pondel.com