Sell-Side Insights and Wisdom

Recently, our firm sat down with the director of research of a boutique investment bank that provides high-quality research primarily on small-cap stocks. Throughout the course of our conversation, Mr. X (name redacted to protect the innocent!) provided several words of wisdom for investor relations professionals and public companies, so I thought I’d share them here. My thoughts are noted in italics.

  • Don’t add an analyst/portfolio manager/investment professional to your email distribution list unless said analyst/portfolio manager/investment professional has asked to be added. Nobody likes spam.
  • Respond to inbound inquiries in a timely manner. This may seem like “no duh” advice, but you’d be surprised at how many people don’t follow it. The rule of thumb seems to be 24 hours, but I try to respond before the end of the same business day.
  • Keep analysts updated with information that management has shared during investor conferences and non-deal roadshows, even if your team travels with an analyst from another firm. It goes without saying (although I’m going to say it anyway) that you should never keep analysts, or anyone else for that matter, updated on previously undisclosed material information.
  • Guidance is helpful in that it provides a framework for reported results. Anything is fine, including expected ranges in dollars, anticipated growth rates and ongoing trends. We didn’t discuss annual versus quarterly guidance, but a bit of research will show that there is little consensus (pun intended) on guidance practices.
  • Many investment professionals have compliance restrictions on how they interact with social media. While this may be true at the office, investment professionals are people too, and can access social media to their heart’s content at home. So don’t stop using social media as a vehicle for dissemination, but understand that you likely need to keep using more traditional channels as well.
  • Don’t respond via press release to Seeking Alpha articles. We all know that content on Seeking Alpha has the power to move a stock in either direction, but Mr. X believes responding publicly via press release looks defensive. Each situation is different, but in general, I tend to agree.

– Laurie Berman, lberman@pondel.com

Tales from Wall Street: The NDR Warrior’s Toolkit

handbag

The mystery behind what’s in an IR practitioner’s workbag is revealed.

Anyone who has ever been on a non-deal road show or done an investor conference will tell you…it’s not for the faint of heart. I describe it as a planned marathon made up of many, many sprints. Meetings with existing investors, new investors, sell-side analysts, investment bankers – a typical day can start as early as 7 a.m. and run as late as 9 or 10 p.m. (depending upon when you wrap up that last dinner).

My job on these trips is to make sure that my management is on top of their game throughout the day: from making sure they have the right background information on the people they’re meeting with to making introductions and helping facilitate the discussion, and finally, helping them stay on schedule and as energetic about their story at 4 p.m. as they were at 8 a.m.

Just as a builder wouldn’t go to a construction site without his toolbox, my handbag is my silent partner in making sure the day is a success. It’s more than just a place to hold my wallet, ID, business cards, lipstick and cell phone – it’s my NDR toolkit.

So what’s in it?

  • My Surface Pro 3 – it can be a prop-up tablet for when we do a 1×1 (or 1×2 or 1×3) meeting or a fully functioning laptop that management and I can use to do work in between meetings
  • Hard copy of our schedule with background info on our meetings
  • Hard copy of last conference call transcript/earnings release
  • A bound hard copy of the investor presentation
  • Notebook, pen and mechanical pencil
  • Must have apps on my phone:
    o   Google Maps
    o   Waze (much better for managing through traffic)
    o   Starbucks (so I can make sure that my management team is ready to go for that 8 a.m. meeting or re-energized at midafternoon)
    o   Yelp! (to find good eats on the fly)
  • Electronics mini bag contents:
    o   Two UBS flash drives with copies of the investor presentation (just in case that AV guy at the conference walks away with one)
    o   Chargers for my Surface Pro 3 and cell phone
    o   Back up battery charger (just in case an outlet is nowhere to be found)
    o   Screen cleaner and microfiber cloth
  • Small Ziplock bag with:
    o   Altoid mints, Orbit peppermint gum – for eliminating coffee or post-lunch breath
    o   Lozenges – to make sure my CEO or CFO’s throat stays strong throughout the day
    o   A few energy bars (just in case we miss lunch and need to eat on the run)
  • Metro card (when traffic’s tied up, there’s no better way to travel in NYC). In San Francisco, it’s a BART card.
  • Antibacterial soap, hand lotion
  • Colgate Wisps
  • Hairbands (perfect for keeping my long hair tamed but also for organizing all the business cards I’ve collected)
  • My iPod – so when I’m winding down the day, I can kick back with a chill tune

– E.E. Wang, Wang@pondel.com

Time to Get Your NIRI On

NIRIThe film industry has Sundance, technology has the Consumer Electronics Show, and the world of investor relations has the NIRI Annual Conference.  More than 1,000 IR practitioners attend what is considered the preeminent IR event of the year, and 2015 will be no exception with a dynamic lineup of panelists, myriad stimulating topics, and the rare opportunity to sing “Kumbaya” with fellow IR folks.

PondelWilkinson will be at the conference not only as an attendee, but as an active participant.  Evan Pondel will serve as a panelist for the workshop session entitled “Social media: Friend or Foe for Reaching Target Audiences?”  Joining him is Beth Blankespoor, professor of accounting at Stanford University, Nils Paellmann, head of investor relations at T-Mobile, and Serena Ehrlich, director of social and evolving media at BusinessWire.

Evan will also be moderating a panel entitled “Engaging Financial Media, Trade Publications, and Bloggers to Enhance an Investor Relations Program.”  Joining Evan is Peter Frost, business reporter from Crain’s, Paul Hart, editor of Midstream Business magazine, and Guy Cohen, director at Seeking Alpha.

The conference runs June 14 to June 17 at the Hyatt Regency in Chicago.  For more information, please visit www.niri.org.

Observations of a Knock-out Investor Conference

Three people got punched in the face and knocked out at the 16th Annual B. Riley & Co. Investor Conference, held last week at a Hollywood hotel, directly next door to where the final episode of American Idol was being recorded at the same time.

It was not the kind of night-time brawl to which investors are accustomed. And fortunately, it was not investors who felt the sting of those punches.

Rather, in partnership with the Sugar Ray Leonard Foundation, B. Riley hosted the 6th Annual “Big Fighters, Big Cause” charity boxing night in conjunction with the conference. The event supports the Foundation’s mission to raise funds for research and awareness to cure Type 1 diabetes and to help children live healthier lives.

For an organization that is part of a fraternity generally known more for greed and making money for itself and its clients, it was refreshingly cool to be part of this invitation-only charity event, that featured food by Wolfgang Puck, an open bar, a world class auction of iconic memorabilia, and a rich environment for business networking.

As for the day-time part of the conference…it was pretty cool as well. More than 200 emerging and middle market companies from a wide range of industries presented to packed rooms of institutional investors, who journeyed to Hollywood from all parts of the United States.

Attendees were treated to chair massages with short lines, fun tchotchkes from sponsors— including a wide array of pens, flashlights, chocolate, ginger candy, key chains, cute little footballs and many glass bowls in which to deposit business cards, with chances to win even bigger items. As well, there was the option of skipping a presentation or two and sashaying down Hollywood Boulevard to gaze at the stars.

There were more men wearing ties than one would expect. There were more people showing off their new Apple watches than one would expect. And just as one would expect, there were many great presentations, and, of course, some boring ones.

It was a classy conference…one could say a knock-out conference in all respects, in which the presenting companies, the investors, the sponsors, and best of all, kids with Type 1 diabetes, all benefitted.

- Roger Pondel, rpondel@pondel.com

Party in Omaha

Berky BoxToday, I’m taking a look at the CenturyLink Center in Omaha. Home to basketball and hockey games, rock concerts, a convention center, and yes, Berkshire Hathaway’s annual meeting.  The Arena holds more than 18,000 screaming fans, or, in this case, shareholders. Estimates put visitors to the 2015 annual meeting at about 40,000.

Most annual shareholder meetings amount to nothing more than required legal statements, perhaps a company presentation, and if you’re lucky, refreshments. Berkshire Hathaway takes annual meetings to a whole new level. The opportunity to buy Berkshire-themed trinkets from subsidiaries Heinz, Fruit of the Loom and Oriental Trading (including a set of Warren Buffet and Charlie Munger rubber duckies for $5 and Berky Boxers, which CNN proclaim a long-time best seller)…check. The opportunity to eat a piece of a gigantic ice cream cake created by Dairy Queen in celebration of Warren Buffet’s 50th anniversary of taking control of Berkshire Hathaway…check. The chance to run a 5k among other Berkshire investors…check. There is even a detailed Visitor’s Guide outlining the many activities in and around the shareholder meeting. The guide provides information on “seat saving,” “microphone manners,” and the annual “Newspaper Tossing Challenge” in which Buffet challenges anyone to a 35-foot World-Herald paper tossing contest. If any participant lands a paper closer to the doorstep of the Clayton Home, that participant will receive a Dilly Bar. What’s a Dilly Bar anyway? Sounds more like a party, and why not with thousands of shareholders and a Chairman who calls the annual meeting a “Woodstock for Capitalists.”

Was any actual business conducted at the Berkshire Hathaway annual meeting? Absolutely. Although most investors unequivocally love him, the questions were not the softballs you might expect. Among the things he and Munger were asked, according to MarketWatch, during a nearly six hour Q&A session, included refuting accusations that Berkshire subsidiary Clayton Homes engages in predatory lending practices, whether IBM is a “cigar-butt” stock, referring to a company that is “a good value investment, but with only a couple of puffs left,” and whether Coke’s competitive advantage is narrowing. When talking about changing consumer preferences for food and drink, the 84-year-old Buffet commented, “If I lived my whole life eating broccoli and Brussels sprouts, I probably wouldn’t live as long.”

While I certainly don’t think many, if any, companies should follow Berkshire’s lead when planning their annual meeting, there are a few lessons to be learned. Be shareholder friendly. Communicate in a style that everyone will understand, and make it easy for investors to access your information, attend your meeting and own your stock. Make your annual meeting worthwhile. While tchotchkes are nice and provide shareholders with a fun reminder of their stock ownership, most would likely prefer an open and honest Q&A with management to help them understand a company’s future plan and how they are going to get there. You don’t need to give them six hours, but you should provide a forum for their questions and commentary.

With annual meeting season upon us, let us know if you’ve been to a great meeting, and also if you’ve seen anything that made you cringe (company names are not required). To Warren Buffet, Charlie Munger and Berkshire Hathaway, I say…party on!

– Laurie Berman, lberman@pondel.com

‘Wexting’ Etiquette

Text imageHard to believe that within the last two decades we’ve gone from a virtually email-less society to one that requires us to check an inbox every minute.  The weekend arrives and the flow of email that used to subside now beckons us relentlessly.

And just when you thought email was the end all be all for 24/7 engagement, texting in the workplace or “wexting” is becoming more commonplace.  In fact, a recent survey said that approximately one in seven millennials prefer text messaging compared with other forms of work-related communication.  And so, following is PondelWilkinson’s unofficial guide to wexting etiquette:

  • It may be difficult to resist, but avoid using emoticons at all costs.
  • Acronyms are extremely common in textville, and at the same time very confusing. Assume the recipients of your texts are acronym-illiterate and spell everything out.
  • Sign your texts with your first name. You may believe your officemate or client has your cell phone number programmed in their phone. Not so much. Sign your name, so you don’t have to send or receive the always embarrassing “who is this?” text.
  • Consider beginning your text with “Hi <insert name>”. Yes, this makes texting sound more formal, but it is much more pleasant in work-text situations than simply going full bore with “I need that press release today.”
  • Keep texts to five lines or less. If you need more space, send an email or pick up the phone.
  • Let the boss initiate the texting.   It is still somewhat of a more personal communication tool and better left for the boss to decide if it’s time to go there.
  • Spell check your texts and use proper punctuation.
  • Consider putting a bounceback on texts when you’re away from your phone more than a couple of hours. Texting requires even more immediacy than email, so better to have your guard up.
  • Make sure web addresses and phone numbers are hyperlinked.
  • Do not use all caps.
  • Turn off  notifications that you have “read” a text. If a wexter knows you have “read” his or her text and haven’t responded for hours, that wexter is gonna be annoyed.   Most iOS devices allow users to turn off receipts for iMessage.

– Evan Pondel, epondel@pondel.com

Access, Tenure, Pay

The 2015 proxy season is underway, and following our exhaustive annual Google search for trends, it is clear that three major issues are leading the way on this year’s ballots: corporate access; board tenure/composition; and once again, executive pay.

Regarding corporate access, everyone seems to be talking about New York City Controller Scott Stringer’s filing of proxy access proposals at 75 companies, all at once, whose shares are owned by the New York City Pension Funds. Stringer’s proposals, as with most on this subject, request that companies adopt bylaws giving shareholders who own at least 3 percent of a company for three or more years the right to list their director candidates, representing up to 25 percent of the board. Some call for 5 percent ownership. There are some interesting pros and cons of letting shareholders have their way so easily, explained well in a Harvard Law School Forum on Corporate Governance, http://blogs.law.harvard.edu/corpgov/.

On the board composition/tenure issue, just how long can a board member serve and still be an independent advocate of the shareholders? Investors are concerned that long-serving directors may not be really independent and engaged. They may have made too many friends on the board and among the management teams. Institutional Investor Services (ISS), www.issgovernance.com, the leading proxy advisory firm, says nine years should be about it. Other aspects of this subject that are gaining steam include board diversity, with the term “board refreshment” becoming quite in vogue.

Lastly, always a bugaboo, the subject of executive compensation again seems to be receiving heightened attention. Aligning pay with performance is nothing new and always good, and boards seem to be doing a pretty good job of it. Even though the votes are non-binding, “yes” or a “no” votes that do not pass by large margins can signal shareholder discontent. Many companies see major swings in their say-on-pay votes from one year to the next. Read more at www.corporatesecretary.com.

- Roger Pondel, rpondel@pondel.com

And the Award Goes To…

5 seconds of summerAustralian boy band Five Seconds of Summer recently won an award for “Best Fan Army” at the iHeart Music Awards. The award was not associated with any one of their songs, albums, concerts or music videos.  Instead, it was an award based on the group’s online social media engagement.

As I watched the band accept the award and thank their fans (with their Twitter moniker “@5sosFam” flashing across the screen), all I could think of was that somewhere out there was a PR pro doing a happy dance because they just helped the band win a music award.

A recent study conducted by Networked Insights found that a single tweet expressing the desire to see a film translated to the equivalent of $1,100 to $4,420 in additional box office revenue, depending upon how many weeks before the movie’s release the tweet is made.

Strategic PR employs a variety of tools to extend and expand awareness of a brand, product or person – from news releases to social media to media relations, but when was the last time you heard of a Golden Globe being awarded to an actor or director for the best original tweets or a J.D. Power award for best branded Facebook page for a car?

Social media and PR are not mutually exclusive. Engaging social media is a form of PR, and the more effective the social media engagement, the more personal and direct connection between the audience/consumer and the product idea or concept. While most older PR tools are unidirectional in promoting an idea or association with a brand, product or person, social media invites the intended audience to become an active participant in the dialogue, resulting in a multi-directional effort that can be self-perpetuating (for better or for worse). At its core, social media turns each of us into a PR powerhouse – through what we talk and post about on Twitter, Instagram, Facebook, and other social media outlets.

As the Networked Insights study demonstrates, this can translate to real, measurable dollar value, and the possibility that sometime in the future, the Oscars could include an award for “Best Movie Fan Following.”

– E.E. Wang, ewang@pondel.com

Up ‘Periscope’

Periscope_033015Twitter’s launch of Periscope, which allows anybody to live stream video from a smartphone to anyone in the world with a simple click of a button, has profound implications for the communications world, creating millions of “on-the-scene reporters” and another medium to engage for the investor relations and public relations industry.  Fittingly, in the announcement of the app, Twitter said, “A picture may be worth a thousand words, but live video can take you someplace and show you around.”

With the ability to instantly notify followers that you’re live, Periscope adds an element that’s been missing with the use of video in IR and PR worlds: immediacy.  Live streaming provides for immediate action in a crisis, while also allowing for greater transparency by going beyond the 140-word character limit of Twitter.  Everything from an earnings conference call to a product announcement can now be broadcast live.

At the same time, it opens up a whole set of risks, including as PR News discusses, a “new chapter for the hot-mic problem,” not to mention a bevy of disclosure issues. Of course, it will take several years before live streaming becomes more commonplace. In the meantime, it makes sense to ponder the possibilities of how it could make your story more compelling.

– Matt Sheldon, msheldon@pondel.com

For Public Companies, It’s Always Something

It seems like every day there is a new article or hypothesis about corporate boards and governance.  Diversity…Say on Pay…Proxy Access…Tenure.  You name it, it’s been debated.

A new Ernst and Young study takes on the topic of board member skills, or more specifically providing more disclosure to investors about the skills and experience of board members.  According to Ernst and Young, “Investors increasingly seek confirmation that boards have the skill sets and expertise needed to provide strategic counsel and oversee key risks facing the company, including environmental and social risks.”  Of the 50 institutional investors interviewed, more than three-quarters do not believe companies do enough to explain why they have the right people in the boardroom.

The Wall Street Journal reported that a thorough approach to selecting directors is more important than lower mandatory retirement ages for board members.  It only makes sense that investors be more concerned about what each director can bring to the table (pun intended) than how old that director is or how long they have been serving.  Although, these issues are also hot buttons for today’s boards.

As we tweeted earlier this week, there are more than 100 proxy access proposals thus far in 2015, up from just 17 last year, signaling that institutional investors want to be part of the process for selecting who will be guiding the companies they own.  Fourteen corporations are taking a more proactive approaching by voluntarily agreeing to give investors the ability to nominate their own directors.

It will likely be some time before corporate America turns over the board selection process, but in the meantime, we continue to believe that disclosure and transparency in governance for listed companies are the best way to build and maintain credibility and goodwill.

– Laurie Berman, lberman@pondel.com