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.
  4.  

  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
 
 

Will Hedge Fund Advertising Affect Brand Cache?

Just recently, the SEC lifted its ban on alternative investment vehicles advertising to the general public as amendments to Rule 506 of Regulation D, and Rule 144A went into effect on July 10.
jobs.

 

Mandated by the Jumpstart Our Business Startups (JOBS) Act, these new rules will make it easier for companies and private investment funds to raise capital by engaging in broader communications and marketing efforts. The only hitch is that these issuers take reasonable steps to verify that purchasers of the securities are accredited investors.

 

Without getting into the legal ramifications of what constitutes “reasonable steps to verify,” although securities law firm Paul Hastings does a pretty good job of highlighting some of its key elements, the new rules seem to be a positive step for hedge funds and alternative investment vehicles looking to capture freed-up investor cash as a result of the economy’s turnaround.

 

Changes to these rules have been in the works since April 2012, when the JOBS Act was signed into law. While some alternative investment funds already have been exploring advertising options, very few have rolled out larger marketing or branding campaigns. (Pictured right: Agriculture Secretary Tom Vilsack of the United States Department of Agriculture explaining the American Jobs Act.)

 

Not everyone may look at the new rule as a positive change. The exclusivity of these types of investments has created a certain cache among would-be investors, sort of like a country club-atmosphere, allowing only those with the “right” pedigree to gain access.

 

Maybe this is an extreme analogy, but there is some truth in jest. It’s probably a safe bet to say that an established $10 billon hedge fund may not be putting up a Facebook page. However, newer or lesser-known funds will be using the new rules to generate brand awareness among qualified investors. The result will force many of the firms not wanting to advertise to do something, especially since they will be overshadowed by funds that are marketing their investments more broadly.

 

Therein lies the quandary. Too much marketing will create brand dilution that will negatively affect perceptions among existing and prospective investors. Too little advertising just won’t generate attention. Finding the right mix of traditional and social media will be the correct strategy, although this will be extremely difficult in today’s Internet-based media landscape.

 

Positioning fund managers as experts across financial media and investor platforms sounds like an effective strategy and a good place to start, so does an ad in Forbes or the Wall Street Journal. The key here is to create or maintain cache. Otherwise, we’ll see more funds commoditized, possibly even banner ads on Google touting the latest alternative investment vehicle. Ok, maybe a stretch, but let’s see what happens anyway.

 

— George Medici, gmedici@pondel.com

 

 

Industrial Might to Fiscal Blight

The financial collapse of Detroit is certainly sad, Detroit as the home of Motown now has the dubious honor of being the largest American city ever to seek bankruptcy protection in court. What’s even sadder is that the fiscal realities of this once proud city were ignored for so long, its demise was death by a thousand cuts.

 

Detroit’s woes didn’t happen overnight. It started in the early 1970s when the foundation and builder of the city, the car industry, took a one-two punch from the oil crisis and a deep recession. This opened the flood gates for a mass exodus from the city and the population began falling sharply. As Detroit residents began to flee the city, the tax revenue, of course, went with them. A city of 1.8 million in 1950 is now home to 700,000 people, as well as to tens of thousands of abandoned buildings, vacant lots and unlit streets.

 

By all accounts, the head-in-the-sand mismanagement of politicians and union officials is well documented. For decades, it seems, the fiscal numbers set off alarms bells, but in a political philosophy that has become all too commonplace, Detroit’s leaders lived in a state of denial, kicking the can down the road, hoping that some magical solution would suddenly appear, instead of admit that the city was dying.

 

It’s a harsh truth, but Detroit got what it deserved. It has been taking on water for decades and was feckless in plugging the holes. Bankruptcy is a painful chapter in Detroit’s story, but it is, as the governor of Michigan said, also an opportunity to stop 60 years of decline.

 

Let’s hope that Detroit, and other municipalities flirting with the same issues, remember the past so they’re not condemned to repeat it.

 

— Ron Neal, rneal@pondel.com

Waking Up Out of Context

 

My wife, Rose, recently appeared on a Good Morning America segment about fertility and women waiting later in life to have children. Rose is a fertility lawyer, specializing in surrogacy, sperm and egg donation, adoption and a burgeoning array of other legal intricacies involved with fertility treatments.
 
The producers said she was an ideal fit to respond to an article in The Atlantic that essentially rationalizes why it’s OK to have children later life. Another aspect of Rose’s appeal: She is 33 years old and more than eight months pregnant.
 
Before saying yes to the producers, we considered the implications of Rose going on national TV to serve as a counterpoint to The Atlantic article. Rose meets myriad women on a daily basis who have waited until their late 30s and 40s to have children and subsequently endure months, if not years, of unsuccessful fertility treatments. In addition to the tremendous emotional toll of such treatments, there is also a significant financial burden.
 
Rose felt she could provide some context to the story by encouraging women to seek advice from their doctors earlier in life before age-related infertility becomes an issue. As her doting public relations specialist/husband, a spot on GMA also seemed like a good way to drum up some awareness about her practice.
 
So, she agreed to participate, and a day later GMA was staging our house for the interview. The camera folks took the requisite pregnant-lady-in-nursery b-roll, and the reporter asked copious questions about Rose’s practice, scenarios she encounters and why women shouldn’t wait until later in life to think about pregnancy. All in all, Rose was satisfied with the whole experience, and we stayed home to watch the segment the next morning.
 
After three teasers of Rose staring goo-goo eyed at onesies, GMA finally aired the segment. They opened with an interview with The Atlantic writer discussing why the decline in fertility over the course of a woman’s 30s has been overblown.
 
And then came Rose’s 15 seconds of inglorious fame.
 
Basically, GMA identified Rose as a pregnant woman who didn’t wait until her 40s to get pregnant, and that was it. There was no mention of her law practice. No mention of her experience working with women who struggle with infertility. No mention of our own infertility scare. Instead, Rose was reduced to some random pregnant woman waiting for a baby.
 
It is difficult for me to opine on this subject without my protective daddy-to-be instincts kicking in. But as a former reporter and communications executive, several pieces of advice come to mind for all future GMA subjects:
 

  • Make sure producers fully understand how to identify you on camera;
     

  • Ask questions about how you will be portrayed in the context of the story;
     

  • If you are misrepresented or quotes are taken out of context, follow up with the reporter and producer to ensure clarification is made on-air and online;
     

  • Write a blog post articulating why you were misrepresented and share the post across social media channels, including the media outlet’s Twitter handle;
     

  • And perhaps most of all, try to ensure your PR executive husband, wife, partner or professional is not out of town (as I was) on the day of your interview!

 

Evan Pondel, epondel@pondel.com
 
 

Strategic Planning, Social Media, and PW. Oh My!

PublicationsA few of my colleagues joined NIRI for the organization’s annual meeting in Florida earlier this month. Amidst the many insightful sessions and sizeable vendor showcase, PondelWilkinson was well represented.

 

Roger Pondel’s interview by IR Magazine was widely distributed at the meeting. The interview focused on developing a goal-based investor relations plan. As Roger said during the interview, “The essentials for writing an initial strategic plan should be proper definition of the end point – the future – followed by an understanding of the possible ways to get there.” We recommend the following, as well:
 

  • Define an attainable and realistic goal.
     

  • Always know what the Street is thinking about your company.
     

  • Understand what your peers are saying and doing.
     

  • Put that intelligence to work by keeping your messages fresh and easy-to-understand.
     

  • Leverage video and social media to distribute those messages.
     

  • Integrate all communications from IR to PR to marketing to social media.
     

  • Create an IR infrastructure built for success.
     

  • Track your success.
     

  • Be prepared to make changes along the way if necessary. As with many things in life, things don’t always go as planned.

 

We also distributed a white paper authored by Evan Pondel, in association with SNL IR Solutions, about how to make sense of Reg FD and new disclosure channels. With the SEC’s recent endorsement of social media as a viable disclosure channel, it is critically important that publicly traded companies understand the pros and cons of such disclosure and use the same common sense and follow the same rules and regulations that govern all investor interactions. Importantly, as social media gains steam as a way to speak with investors, companies should make sure to add social media policies to their existing investor communications policies.

 

There’s a lot of great stuff and strategic thinking going on here at PW. Stay tuned for our new and improved blog and webcast we’ll be producing on the subject of social media in the coming months. In the meantime, though, if you have any questions or thoughts, give us a holler.

 

Laurie Berman, lberman@pondel.com
 
 

The Internship (at PW, not the movie)

Neelam

Neelam Phalke, Senior at the University of Southern California

The internship season is underway at companies throughout the nation. The eponymous movie has just been released.
 
And we are happy to introduce our very own 2013 summer intern–Neelam Phalke, a senior at the University of Southern California, majoring in biochemistry with a minor in business administration.
 
Neelam (pictured right) has been a lab technician, research assistant, tutor, student ambassador, president and public relations chair of the Trojan Chemistry Club. She currently is editor of the Undergraduate Science Journal.
 
For Neelam, a classic achiever who plans to earn an MBA as well as enter medical school, the internship represents yet another new learning experience, allowing her to explore the business world, concentrate on the firm’s healthcare sector clients, and extend her affinity for communications. For us, it was Neelam’s diverse background, combined with her communications skills, which placed her as our top choice.
 
Welcome, Neelam, and have a great summer.

 

Roger Pondel, rpondel@pondel.com
 
 

The Empire Strikes Back

As the IPO market heats up with the usual technology, healthcare and consumer company players, an unusual pending deal will impact the New York skyline as well–the Empire State Building.
 
Last week, it was reported that at least 80 percent of the investors of Malkin HoldingsLLC, Peter Malkin’s company that owns the Empire State Building, approved a plan to take the historical New York City skyline tower public.
 
Malkin’s plan involves lumping in the Empire State Building into a newly created real estate investment trust (REIT), the Empire State Realty Trust Inc. The REIT is estimated to be valued at approximately $4.15 billion, more than a billion over the $2.33 billion that the building alone is valued at after debt. Through this plan, investors will be able to cash out, and Malkin will be able to stay in control.

Empire State Building

Empire State Building Photo Credit: wikipedia.com)

 
With its complicated ownership history, the 82-year-old, 102-story Empire State Building certainly will be the centerpiece of the new REIT, which in total will have more than 18 properties.  Should the IPO go through, Malkin’s share is calculated to be worth as much as $714 million. Investors would also see flexibility and have more access to their capital, making this IPO quite attractive.
 
It is very rare that any deal of this magnitude will please all parties. While the advantages of taking the Empire State Building public appear at first glance to outweigh the disadvantages, at least for top investors and the Malkins, it remains to be seen if this deal proves to be more profitable than costly.  How the Malkins approach IR will also be interesting to watch.  Such a high-profile building is likely to attract a significant retail following, and telling the REIT’s story to investors might be the biggest challenge yet for the Malkins, especially when all of Manhattan is already watching your biggest asset.

 

Joanne Sibug, jsibug@pondel.com
 
 
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Influence Ebbs for Proxy Advisers

JP Morgan

Influence is waning from firms whose mission, in part, is to recommend how investors should vote in corporate elections, The Wall Street Journal reported last week.  In one striking example, the roles of chairman and chief executive officer remained as one at J.P. Morgan Chase after a widely publicized contest, even though the two largest proxy advisers were in favor of splitting it.
 
Institutional Shareholder Services Inc. and Glass Lewis & Co. have long been key influencers when it comes to recommending votes, but with nearly 30 percent more proxy contests in May than last year, issuers have become a lot savvier about engaging investors before entering proxy season.
 
And rightly so.
 
The WSJ citing ISS said investors were able to secure board seats 73 percent of the time this season, compared with 56 percent last year. Nevertheless, issuers that are showing their muscle are starting to win, as was the case with J.P. Morgan.
 
It’s always easy to come up with a “should-a, could-a” list following proxy season.  But one prevailing concept should stick with issuers year round:  a well-devised investor communications and engagement plan helps ensure that management’s side of the story gets heard.  And if such a plan is implemented long enough in advance, investors will take the time to listen and come to their own conclusions long before the ballots are cast.

 

— Evan Pondel, epondel@pondel.com
 
 
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Any PR is (not) Good PR

We often hear the phrase, “Any PR is good PR,” but I’m convinced that negative PR will eventually cause a business to lose customers and flounder. I’m guessing the owners of an Arizona bakery feel different. What else could explain the mind-blowingly trenchant behavior of its owners, currently waging war on the social media front with, well, pretty much the entire free world.
After bombastic Arizona bakery owners Samy and Amy Bouzaglo got the boot from Gordon Ramsay on “Kitchen Nightmares,” they decided that sparring with every human being with Internet access would be a good idea.

Gordon Ramsay in 2010.

Gordon Ramsay in 2010. (Photo credit: Wikipedia)

 
When negative comments about the bakery brats appeared on Reddit, Facebook and Yelp, calling the Bouzaglos rude and arrogant during their reality TV performance, the couple had the brilliant idea to go on the attack, railing against reviewers and going on a rampage against Yelp and Reddit posters, threatening legal action and calling them idiots, morons and every other name in the book.
 
Can you say PR 911?
 
The latest twist from Amy’s Baking Company is a claim that all of their social media was hacked, and that someone else manufactured this social media temper tantrum. Hmm, that’s really not going to pass the smell test when in 2010, the Bouzaglos responded to a bad review on Yelp, telling the poster, “Do US a favor and keep your ugly face and your ugly comments to yourself and go back to the restaurant that you really work at!!” Their credibility already has been torpedoed by their “Kitchen Nightmares” misbehavior, so the “hacked” excuse holds no water. Furthermore, when a loose cannon like Gordon Ramsay thinks you’re too insane to work with, that’s not a good sign.
 
These two gems are so over the top, it makes you wonder if it’s all an act and that the show’s producers created these Frankenstein’s in an effort to boost ratings.
 
Whatever the case, Amy’s Baking Company could hire the best crisis communication team in the country and it probably wouldn’t make much difference. What they need at this point is a time machine, not a PR firm.

 

— Ron Neal, rneal@pondel.com