What Does it Take?

Over the past several months, I’ve given a lot of thought to what it takes to be a good investor relations practitioner. After more than two decades of helping companies through the trials and tribulations of being public, I’m not that surprised that many of the following characteristics or traits that are important cannot be learned from books, on websites or through advanced degrees.

  • Knowledge: Strong working knowledge of financial statements/rules and regulations/capital markets. This one is a no-brainer. It’s hard to do the basics of investor relations without the requisite comprehension of what it means to be a public company.
  • Analysis: Always be ready to review a situation, operating peer or balance sheet with a sharp and analytical mind. Data is readily available, but proper analysis of that data is priceless.
  • Juggling: I don’t mean apples, balls or in the case of a former client, coconuts, but instead deftly managing deadlines, priorities and multiple personalities (hopefully from multiple people, not just one). If you work at an agency, extra points for having to do the above for many clients at one time.
  • Patience: When your stock is dropping, the phones are ringing off the hook and your email is pinging every 30 seconds, it’s important to remain calm when talking to investors and working with management to solve the problem du jour. Everyone has their own ideas, solutions and timelines, so being able to take in all of the information necessary to make the best decision with poise, is key.
  • Brevity: Executives and investors are busy. Say what you need to say quickly and precisely. Get to the point, and get out. This holds true whether your communication is written or verbal.
  • Strong Shoulder: There will be many times throughout your career when a colleague, client or senior executive needs a sounding board and someone to lean on. CEOs are people, too, so when a company is facing challenging times, or a solution is hard to come by, just being available to listen is immensely helpful. I have spent many afternoons as therapist versus press release writer, but those are the times I realize that I am truly part of the team.
  • Sense of Humor: When all else fails, laugh. It’s contagious. Almost nothing is insurmountable, so a little lightheartedness helps everyone reset and refocus. Investor relations is not an easy profession, so have fun with it.We’d love to hear what other traits are important. Let us know in the comments section.

— Laurie Berman, lberman@pondel.com

Hello 2016

We’re excited to usher in 2016 and looking forward to keeping you informed on this blog about all things relevant to investor relations, strategic public relations and Julia Child’s secret recipes.  Now that your ears are perked, following are a couple of interesting tidbits from PondelWilkinson.

  • Evan Pondel recently wrote the cover story for IRupdate magazine on how to think like an activist.   He interviewed Chris Kiper, founder of activist firm Legion Partners, for a rare look at his playbook.  Check out the story on page six of the issue.
  • PondelWilkinson volunteered a couple of weeks ago at Working Dreams’ Holiday Toy Event, where PW helped foster children select presents that were donated to the organization.  Following is a picture of the team.Working Dreams
  • And last but certainly not least, Roger Pondel wrote the following New Year’s resolution on transparency.

2016 Resolution: Don’t Forget the Transparency

At the risk saying, “We told you so,” 2015 proved to be a year when companies that failed to heed our mantra, Transparency Adds Value, took it on the chin.

Whether privately owned or publicly traded, in times of crisis or when all is going well, transparency always pays off…period. And the lack thereof, almost always backfires bigtime.

Probably the year’s biggest lack-of-transparency story was Volkswagen’s emission-cheating scandal that actually began more than 10 years ago, long before the news broke. I guess it’s hard to keep those kinds of secrets forever. Want to buy a VW today? How ‘bout an Audi?

In our business, people sometimes have the misimpression that it’s all about spin. (I hate that word, except when it’s part of an exercise class and done to a Latin jazz beat.)

No, it’s not about spin. It’s about journalistic fact finding, developing a communications and messaging strategy, perhaps biting some bullets a la corporate castor oil style…then telling the truth to mitigate the damage and maintain reputation.

And it’s not all about crises. Just look at what happened in 2015 to the valuations of many once-considered-hot, pre-public tech companies that lost billions in combined valuation because of lack of transparency.

Lack of transparency hurts customers, employees and investors alike. And while no one is happy to hear less than stellar corporate news, the market rewards transparency. Companies that do not practice it would do well to heed our mantra in 2016 and beyond.

Here’s to a transparent 2016 that brings peace and prosperity to all!

Peek-a-boo, I See You

Attention public companies: The Public Company Accounting Oversight Board, affectionately known as “peek-a-boo,” is watching you ever so closely…and wants to see even more of you.

That was the underlying message delivered by PCAOB Board member Greg Jonas as he addressed the recent second annual University of California-Irvine’s Audit Committee Summit, sponsored in part by PondelWilkinson.

“Regulators’ role is to be sure that investors hear the good, the bad and the ugly,” Jonas said. “Our challenge is to be useful and not just get in the way.”

Jonas spoke about the PCAOB’s “concept” issued in July, seeking public comment on 28 potential audit quality indicators to help identify insights into how high quality audits are achieved.

Jim Schnurr, Chief Accountant for the Securities and Exchange Commission, who is responsible for establishing and enforcing accounting and auditing policy and served as the event’s keynote speaker, interpreted the PCAOB’s project as a determining factor of whether additional public company disclosures should be made, particularly regarding greater oversight of management.

“The audit committee is in an excellent position to gain insight into management controls,” said Schnurr. “Avoidance of boilerplate reporting and minimizing the risk of litigation should be high on the directors’ agendas.”

Schnurr offered additional tips for audit committee members that should resonate with management:

  • Focus on effective disclosure
  • Increase the use of hyperlinks in communications
  • Periodically re-evaluate the relevance of disclosure items
  • Use solid judgment about what is not being disclosed
  • Be certain that audit committee members have the bandwidth to properly fill their roles

Two expert panel discussions followed Schnurr’s and Jonas’s addresses. Panelist Bala Iyer, audit committee chair at QLogic, offered a number of suggestions, focusing heavily on three: asking tough questions; trusting management; and taking the time to thoroughly understand the business.

The Sarbanes-Oxley Act of 2002, which created the PCAOB, requires that auditors of U.S. public companies be subject to external, independent oversight for the first time in history. The Board has no authority over public companies, but its work can have deep implications. Here’s looking atchya.

— Roger Pondel, rpondel@pondel.com

Yes, it’s Another Post about Activism

I’ve written about activism before, but a recent blog by Bloomberg Business caught my attention and spurred me to write again.

Though probably not a surprise to anyone, activism is on the rise, at least according to a survey conducted by law firm Gibson Dunn. Halfway through 2015, there were nearly as many activist campaigns afoot than for all of 2014. Further, the number of funds engaging in activist activities was higher for the first six month of 2015 than for the full year last year … 42 versus 35, respectively. According to the study, the most common reason for activist involvement so far this year has been board representation, followed by M&A, with return of capital a distant third. The New York Times recently noted that activist hedge funds now manage more than $129 billion in assets, compared with $29 billion just 10 years ago.

What does all of this activity mean? Is activism good for companies? Does it bring about positive change? A recent Wall Street Journal article asked the question: “Are Activist Investors Helping or Undermining American Companies?” After a comprehensive look at how activism has impacted large U.S. companies (greater than $5 billion in market cap), the resounding answer was maybe. According to the Journal, “Activism often improves a company’s operational results—and nearly as often doesn’t.” So, what’s the point?

As Wendell Willkie, II, visiting fellow at the American Enterprise Institute and of counsel at Steptoe, wrote for Fortune, activism has gone overboard, stating, “In their quest for quick returns, activists make the mistake of forgetting that it takes time and patience to position any company for success.”

A survey conducted by the National Association of Corporate Directors (NACD) reported in Accounting Today, showed that more than 20 percent of corporate board directors said their boards have been approached by activist investors during the past year. However, 46 percent of those polled do not have a plan in place for responding to activist challenges.

What should companies do when faced with activism? Or perhaps the better question is what should companies do before being faced with activism? Warren Buffet believes that “The best way to keep activists away is to perform reasonably well in your business and also to communicate well with your shareholders,” as noted during a speech at Fortune’s Most Powerful Women Summit in Washington.

Willkie says companies should plan for the emergence of an activist by taking proactive steps to increase shareholder value including share repurchases and cost reductions. But what if you can’t head them off at the pass? The Wall Street Journal recommends the growing popular belief that companies should not shun an activist or completely agree to all demands. The NACD survey pointed out that most frequently, boards have expanded compensation explanations in their proxy statements, revised executive compensation plans or implemented (or changed) their dividend and/or stock buyback policies in response to shareholder demands.

In my experience, when an activist comes knocking, most CEOs take it personally and dig their heels in to mount a defense. While that may be the proper response in certain cases, there is no one-size-fits-all solution. Know your shareholder base, treat each investor with respect (activist or not) and carefully evaluate any proposals that are sent to the board to ensure that whatever route you take will ultimately result in a win for the company’s shareholders.

— Laurie Berman, lberman@pondel.com

Join us in Orange County

Some big names in the world of public companies have agreed to share their insights at two fall conferences at which PondelWilkinson is among the sponsors: UCI’s Audit Committee 2015 Summit and the Orange County Public Company Forum.

UCI Audit Committee Summit 2015, October 23

James Schnurr, SEC Chief Accountant, will be flying in from Washington, D.C. to discuss the confluence of significant changes being contemplated or enacted by the SEC and other regulatory bodies that significantly impact audit committee responsibilities. Following Schnurr’s keynote address will be two interactive panel discussions.

The event will take place Friday, October 23, 8 a.m. to noon, at the Pacific Club in Newport Beach, 4110 MacArthur Boulevard. To register, visit merage.uci.edu/RegisterEvent/2015Audit.

Orange County Public Company Forum, November 18

David E. I. Pyott, former Chairman of the Board and Chief Executive Officer of Allergan, will provide his insight into the world of M&A, gained in part, from one of the highest profile M&A deals of the year, when Actavis acquired Allergan, and then changed its corporate name to Allergan. Pyott’s keynote address will be followed by an expert panel from all walks of the M&A spectrum.

The Forum will take place Wednesday, November 18, 7:30 a.m. to 9:45 a.m. at the Westin South Coast Plaza Hotel, 686 Anton Boulevard, in Costa Mesa. To register, please follow this link.

— Roger Pondel, rpondel@pondel.com

If David Letterman was an IR Guy

Perhaps even more unlikely than injuring yourself while playing Mahjong is the sliver of possibility that David Letterman will be leaving his new retirement life to become … wait for it … an investor relations professional. I can’t even imagine what the probability of something like that might look like as a percentage: .00000000000001%?

Source: Mass Communication Specialist 1st Class Chad J. McNeeley

Source: Mass Communication Specialist 1st Class Chad J. McNeeley/Released

What is possible, however, is coming up with one of Letterman’s famed top-10 lists to define key concepts of IR, especially for management teams that are new to life at the helm of a publicly traded company. Following is our initial list, and we encourage you to add to it on Twitter at #LettermanDoesIR.

1. Under promise and over deliver

2. Treat your shareholders with dignity, even if they’re seething with disdain

3. Love (or at least do not fear) thy activist

4. Show investors, don’t tell

5. Strategize, execute, perform, communicate
or
Strategize, communicate, execute, communicate, perform, communicate

6. Transparency wins

7. The numbers will tell

8. Perform, not promote

9. Do not bury the lead

10. The story is the business, not the stock price

— Evan Pondel, epondel@pondel.com

Tales from Wall Street: Dealing with the Angry Investor

It’s been a very rough last few days on Wall Street. After nearly 20 years of doing investor relations, I’ve learned to weather the storm when it comes to crashes, corrections and the impact of what the Fed says (or doesn’t say) on any given day.

That said, investing is not just an intellectual exercise, but an emotional one, too. Whether it’s the Dow dropping 600 points, or less than stellar earnings results, chances are that if you are a public company CEO, CFO or investor relations professional, you’ve dealt with an upset investor.

Following are my dos and don’ts for dealing with an angry or upset investor:

Do actively listen. The best way to do this is to take good notes on what the investor is saying.

Do show empathy. Acknowledge what the investor is saying (and respectfully ask for clarification when needed). Treat every investor with genuine respect.

Do be calm, matter of fact and professional. Dealing with a professional or personal investor’s investments can be highly emotional. Be conscious of your body language and tone of voice. If an investor is profane or abusive, don’t respond in kind. Instead, remove yourself from the situation if you feel tempted to “fight back.”

Do correct misinformation and take the emotion out of the exchange. Avoid attacking the investor’s emotions or feelings about a stock when addressing any misinformation they’ve brought up. Your job is not to change their mind about how they feel about a stock – but to present them with factual information.

Don’t respond with sarcasm. While it may be OK in context among friends, it has the potential to be misinterpreted in a written conference call transcript or when an investor posts what you said on a message board.

Don’t get defensive or try to “solve” the issue right away. Wait for the cue or ask the investor for permission to ask questions or respond.

Don’t say “The stock is turning around or it’s going to go up soon.”

Don’t, under any circumstances, try to advise the investor on whether or not they should keep or sell a stock. If the investor asks you, “What would you do?” the appropriate response is “It would be inappropriate for me to advise you on whether you should buy or sell your stock.”

Do talk about your company’s “investor” story. Each company has its own unique investor thesis. Emphasize the fundamentals of your company’s story.

Do be proactive in your response, but don’t promise anything you can’t deliver. If you don’t know the answer, don’t make one up. There is nothing wrong with saying “When is a good time for me to get back to you on this issue?”

Do keep your answers short and to the point. It can be tempting to try to add additional assurances or information to your response, but when dealing with public company information issues – the best response is to stick with information already public.

– E.E. Wang, ewang@pondel.com

Tales from Wall Street: Surviving Earnings Season

If a non-deal road show is a planned marathon made up of many, many sprints – earnings season is like a sprint that feels like a very long marathon.

At the risk of sounding a bit like a New Age-y Californian, here are the tips for how I survive earnings season:

  1. Stay Fueled. For you, it may be a Starbucks triple espresso, but for me, it’s my morning smoothie. My personal favorite recipe has 2 cups of kale or spinach, ½ a red grapefruit, ½ an orange, 3-4 strawberries, a few slices of Persian cucumber, a handful of raspberries, 1-2 tsps of raw maca powder (for extra pep in my step) and one tablespoon of chia seeds for protein.
  2. Find your Earnings Season touchstone to maintain your mojo. The most frustrating part of any earnings season is the “middle.” It could be the script’s not done, your team’s onto the XXth revision, you just found out that Yahoo’s printed the wrong analyst estimate, or you’re simply wondering how you will get everything done by Earnings Day.

Maintaining your mojo can be hard but incorporating fun little rituals and having a touchstone activity, can help refocus and reinvigorate your Earnings Season ninja skills. For me, it can be as simple as taking a moment to call or text my hubby* with a quick hello or performing freeway karaoke to my favorite IR songs to remind me that there is life outside of earnings season.

  1. Get Some Good Sleep. It can be hard getting a full night’s sleep when your mind is filled with anticipation for that upcoming earnings call. But as anyone will tell you, a good night’s sleep can do wonders for making sure you are feeling your best and on top of your game come Earnings Day. Research shows that it’s not about the hours you get, but the quality and depth.  Here’s my favorite sweet treat recipe for getting a good night’s sleep the evening before Earnings Day:

1 cup almond milk

1/2 a frozen banana

2/3 cup frozen bing cherries (pitted)

1/4 tsp nutmeg

1/2 tbsp. of raw cacao nibs

1 tbsp honey

Toss all ingredients in blender. Mix until smooth.

  1. Put Together a Fun Earnings Day Ritual. It might be having your team wear a certain color on earnings day or going out for a quick bite at a favorite local hangout, but I always find that sharing a simple ritual or tradition before the conference call is a fun way to make sure that your team gets some fresh energy before tackling that last stretch of your Earnings “sprint.”

You’ve researched, written, edited, rehearsed and planned for this day. Now your investors get to hear about your results for the first time. Good luck!

*(My hubby has been my rock through nearly 50 earnings seasons to date and despite his own busy work schedule, still has managed to send me a quick “good luck and I love you!” text just before each earnings call. Thanks hon! This one’s for you – and all of the understanding spouses and significant others who support the CEOs, CFOs and IR professionals during and outside of earnings season.)

– E.E. Wang, ewang@pondel.com

Silicon Valley – The HBO Show (not the place)

SiliconWhile binge watching HBO’s Silicon Valley last weekend, I was thinking about whether the show actually mirrors reality, or if it’s mostly a work of fiction. Since I’ve never started up a tech company, I don’t have an opinion on how real that aspect of the show is, but since I do spend my days in the worlds of finance and communications, and I did work for a tech company that was incubated, I believe that the show’s conversations about venture capital, fund raising and public perception are pretty on the money (pun intended).

So, I thought a blog about Silicon Valley (the show) and its ties to business and celebrity of Silicon Valley (the place) might be interesting. But when I sat down to actually write something, I couldn’t quite figure out how to relate what I’ve seen on the small screen to my life in investor relations. That got me pulling up a search engine (one based in Silicon Valley, of course) on the off chance there might be something that would help stir my creative side. Much to my surprise, when I typed “HBO’s Silicon Valley and business” into the search bar, I got 421,000 results. Titles like, “3 Management Lessons from HBO’s Silicon Valley,” “Business Lessons from HBO’s Silicon Valley” and “INCUBATE THIS: Trade Secrets Lessons from HBO’s Silicon Valley” made me realize that this is a topic that has been done before.

At the risk of being somewhat of a copycat, here’s a quick summary of the lessons a lot of bloggers and journalists want to you take away from the show:

  • From Hivewyre: Have a work/life balance. “By taking the occasional break (or, gasp— even a vacation) you’re doing yourself and the company some good. Doing so means recharging your batteries, clearing your head, and coming back ready to kill it!”
  • From InsideCounsel: Protect your IP. “It is important for these companies to invest in protecting its own IP so that it can use that IP to defend itself if necessary.”
  • From WeberShandwick: Clear messaging is essential. “Especially in deep tech, it’s easy to get caught up in the specs and techs of a product. Our challenge is to elevate the messaging to something meaningful, but not generic. Instead of “making the world a better place,” can you get more specific?”
  • From Forbes: Do your homework. “Startups need to have the basics buttoned up long before raising money.”
  • From The Business Journals: Assembling a board is not an easy task. “Good board members can help young companies gain credibility and open doors. Board seats are valued rewards for key investors and personnel. But they also carry tremendous responsibility. Board members must place the company’s interests ahead of their own. And for every new board seat created, the value of every other board seat is diminished. The lesson: board positions matter and should be given out very carefully.”

If you haven’t given the show a chance, check it out. It’s politically incorrect and foul-mouthed, but an incredibly funny look at the culture of tech start-ups, and a fountain of good information…for what NOT to do!

— Laurie Berman, lberman@pondel.com

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