PondelWilkinson’s CEO Roger Pondel was interviewed by Reporter Mark Madler of the San Fernando Business Journal for a special report titled, “Public Companies Prosper in Pandemic.” Read the full story below.
This article was originally published by national news wire service BusinessWire, a Berkshire Hathaway company, on its global blog July 9.
If you’re familiar with the British sci-fi fantasy series, Doctor Who, you know that a common plot device is the use of “perception filters,” in which aliens attempt to alter reality to reflect what they want you to see. A favorite episode is with actor/comedian James Corden, who lives on the first floor of what appears to be a normal two-story building – only the building does not have a second floor, just a scary alien machine parked on top of it with a perception filter designed to hide its existence.
Wouldn’t it be nice if we could use perception filters to influence how investors and financial analysts think about public companies? I am sure many management teams would love to use something like a perception filter to ensure that only positive things are said about their companies.
Alas, we all know this isn’t possible. And yet, one of the more interesting things I have observed over the years is how many management teams believe they already know what investors think of their companies – as if they have a perception filter firmly in place.
While many C-suite executives and corporate IR professionals dialogue often with the investment community and glean valuable insights from their conversations, it is a mistake to assume that investors will share everything that is on their minds. As Peter Drucker, the celebrated author, educator and management consultant, once noted, “The most important thing in communication is hearing what isn’t said.”
How, then, can management truly gain insight into what investors think? Enter the perception study, a tool designed to gather unique and candid feedback. It is only through the use of an independent third party that companies can truly get to the heart of what investors think. Third parties are able to create an environment that protects anonymity and are better positioned to share tough feedback with management.
Designing a Perception Study
There are many ways to design a perception study, which at its core, seeks to determine how investors view the company, its strategy, management team and IR program. Perception studies often are particularly useful before and after major events, such as an investor day, or when a company is in the midst of transition.
In most cases, many investor responses are surprising. Also in most cases, a good perception study pays off handsomely by revealing tangible and actionable items, along with nuances, of course, that facilitate communication and potentially valuation improvement.
Perception studies create opportunities to:
- Streamline business models that have become too complex.
- Simplify messaging to better resonate with the investment community.
- Improve an IR program in ways a company might not have seen.
- Provide benchmarks for future comparison.
- Let the investment community know that the issuer cares.
Dichotomy of Opinion
In a recent perception study we conducted for one of our clients, we found a fascinating difference of opinion about the company, with views that converged around common themes, but were almost polar opposites of each other. Interestingly, this dichotomy of opinion often was expressed by the same participant in the study.
For example, investors praised the management team’s ability to articulate the company’s investment attributes, but at times felt they could be too “promotional” in doing so. Investors also liked how the company positioned itself to capture emerging trends in its industry; at the same time, however, they believed the actions management took to take advantage of these trends made the business too complicated to grasp.
Perhaps most importantly, investors felt the company altered its strategy too frequently. While many praised management’s ability to pivot when the facts on the ground changed, the rate of transformation left investors and analysts wondering if management had a clear roadmap for the future, which, in turn, made it difficult, if not unnerving, for many of them to invest.
The perception study created an opportunity for our client to:
- Clearly articulate its business strategy, highlighting its vision for the future.
- Help investors understand exactly how management perceives the path to value creation.
- Simplify its story and improve consistency in metrics presented.
- Provide a candid discussion of business performance, both positive and negative aspects.
Understanding what investors and analysts truly think is a fundamental responsibility of the management team and board of any public company. Such knowledge provides tangible results and can serve as catalysts for positive change.
Jeff Misakian, email@example.com
Back in July, the SEC proposed new 13-F rules, including amending the reporting threshold for investment managers to “reflect today’s equities markets.” At first blush, the headline seems okay. When one digs deeper (actually, you don’t need to dig deep at all), the proposed rules represent a huge step backwards to a time when issuers and the investing public had very little information about stock ownership.
A little bit more about the SEC’s rationale before diving into the heart of the matter. According to its July 10 press release, the proposal would increase the 13-F reporting threshold from $100 million to $3.5 billion, “reflecting proportionally the same market value of U.S. equities that $100 million represented in 1975, the time of the statutory directive.” From everything I’ve read on the subject, this rationale is misguided and imprudent.
According to IHS Markit, approximately 600 of the 5,200 investment managers that filed a Form 13-F last quarter manage over $3.5 billion in equities. Put another way, almost 90 percent of investment managers that are currently required to report their holdings, would no longer be required to do so. Further, more than 90 percent of the dollar value of the securities currently reported is held by these 600 firms. IHS Markit also noted that, on average, 55 percent of the investors on an issuer’s shareholder list would stop filing 13-F’s, 69 percent of the hedge funds on an issuer’s shareholder list would stop filing 13-F’s, and “IR Immune investors,” including index funds, quants and brokers would stop filing for 2 percent of their share value, while active investors would stop filing for 10 percent of their share value. Not good for an industry that requires more visibility, not less.
The National Investor Relations Institute (NIRI), has aggressively taken up the cause, rallying issuers, IR counselors and other prominent business associations. Last week, NIRI sent a letter to the SEC opposing the proposed rule. 237 issuers with a combined market cap of almost $3 trillion, five high-profile business associations and 26 IR counseling firms signed on in support. Additionally, NIRI reports widespread opposition from retail investors and small investment managers, who, in total, have submitted more than 1,000 comments to the SEC.
It’s not too late to take action, even if you’ve already signed on to NIRI’s letter. The deadline for submitting comments directly to the SEC is September 29. You can visit NIRI’s Advocacy Call to Action page for more information and suggestions on how you can help.
The SEC’s proposal would significantly hamper issuers’ ability to understand who owns their stock, who is selling their stock and who is buying their stock. Imagine a scenario in which an activist is slowly building a position, but you can’t see it happening and you are blindsided by a takeover attempt. Imagine how difficult it would be to keep current holders updated if you don’t know who they are. Imagine the inefficiency of having no way to prioritize incoming phone calls and meeting requests because you are in the dark about ownership status.
Perhaps Jim Cramer said it best. “If you believe Wall Street is important, if you believe business is important, if you believe the market is important, then the public deserves to know who owns what.” Use your voice to let the SEC know that you strongly oppose the proposed rule.
Laurie Berman, firstname.lastname@example.org
Those who live in Southern California fully understand the terms “May gray” and “June gloom.” It’s that time of year when the sun comes out late afternoon. The temperature isn’t that cold, but gloominess permeates the air and stays around for most of the daylight hours. Most people hate it.
This year, at least for those who live in Los Angeles, the pre-summer grayness is no big deal. There’s a lot more to complain about than the weather.
Regardless of who you ask, or what television news station you watch, when that sun is fully bright again, there is consistent agreement that a “new normal” will surface. I am not one for pontificating about what’s ahead, especially when so much of the future remains racked with uncertainty. But in our niche of investor relations and strategic public relations, I will throw caution to the wind and make a few prognostications about how our sector already is transforming:
- Few, if any, in-person non-deal road shows (NDRs), but plenty of virtual ones. CEOs and CFOs will love that. It will keep them in the office and save lots of time, to say nothing about eliminating many expenses, like air fare, hotels, limos, fancy restaurant meals. Virtual NDRs are in. They may be easier to schedule, but they must be visual and engaging to hold interest. Hello Zoom.
- Virtual annual meetings already are the new norm. They will be on the rise and probably never go away. CEOs and CFOs may like that, too, but investors may not. Management will control the question and answer chat button, and the democratization of public companies may take one giant step backward. So watch carefully for a rise in activism for those companies that aren’t communicative and transparent, aren’t performing and aren’t unlocking shareholder value.
- Desk-side briefings with journalists are history. There are fewer business journalists these days, anyway, and their time has become quite limited for casual background coffee klatches. A phone call or video interview will have to do, but there had better be something cogent to say.
- Quarterly conference calls will become even more important. But management teams sorely need to interject more life into their presentations and not merely recite numbers. Yes, they will likely still be scripted, but it would be better if they could be turned into quarterly Zoom fireside chats for the Q&A portion.
- Investor days are still important, but as with annual shareholder meetings, for the foreseeable future, they will be virtual. This will save money, possibly attract more attendees, and eliminate the free-lunch bunch. But to be effective, they need to be live, and engage with the audience, or attendees will be distracted while management drones on.
- Virtual investor conferences already have arrived and will likely increase in number. But be careful which ones to attend, either as a presenter or an investor. They can prove to be a waste of time. From the issuers’ perspectives, it’s important to know who’s really paying attention. Is anyone really listening? Sponsors should do whatever it takes to do it right, such as using video to make it worthwhile and come alive.
- Assure that “out-of-sight, out-of-mind” syndrome does not set it. With much of the above happening in the privacy of one’s home office – or at least not in the offices of investors and analysts – greater attention must be paid to messaging for those who are listening.
The times, and the market, are changing fast. Balance sheets are more important than ever. Investors are looking for corporate measures to assure that capital is being deployed in value-accretive activities. With fewer, if hardly any, companies providing financial guidance, investors want to see actions that can translate into trackable metrics. They want to hear from management teams more often, and perhaps in new, or old, ways, like maybe bringing back the quarterly report. And once regarded principally as feel-good commentary, stockholders today look increasingly to investing in companies that focus on environmental, social and governance measures.
Unlike a CEO of a publicly traded company providing financial guidance on a quarterly earnings call – with significant consequences if wrong – no real harm has been done if my forecast for the future of investor relations is wrong. And maybe, just maybe, if I am right, the transformation will be good for all when the viral fog lifts. Except, of course, for missing some great meals in those fancy New York restaurants while on an NDR.
Roger Pondel, email@example.com
While activist activity was down a bit in the first quarter of 2020, compared with last year’s first quarter, according to Activist Insight’s “Shareholder Activism in Q1 2020” report, there were still plenty of shareholder demands made of public companies.
By sector, industrials was the largest group impacted by activism, followed by financial services and consumer cyclicals. Large cap companies were the most affected, with U.S.-based companies making up 70 percent of those subjected to activist demands.
Lazard’s 1Q 2020 activism review shows that the number of targeted companies in the first quarter of this year was roughly the same as in last year’s first quarter. On the other hand, Reuters, reporting on the Lazard review, noted that while 2020 began on a strong note, with activist firms pushing for change at 42 companies in the first two months of the year, new activist campaign launches fell by 38 percent in March, when the global economic shut-down began in earnest. Further, Reuters reported that new activist campaigns were, “launched at the slowest pace since 2013 and corporate agitators put the smallest amount of money to work since 2016.”
Even so, there are several high-profile campaigns looming. One getting some buzz, according to Bloomberg, is Standard General’s proxy fight with Tenga, Inc., a $2 billion media company. This contest will be the first-ever all-digital board fight. With Standard General seeking four board seats, Tenga’s virtual annual meeting on April 30 will be a test for activism, both digitally and in the world of COVID-19.
While virtual annual meetings are nothing new, counting contested votes remotely is. Bloomberg noted that Broadridge Financial Solutions Inc., which prepares, ships and counts most of the proxies for U.S. companies, doesn’t currently have a specific platform to allow for remote voting in a contested situation. According to a Broadridge representative, the company, “lacks the technology” to count virtual votes when there are competing director slates.
Bob Marese, president at MacKenzie Partners Inc., a proxy solicitation firm, said that it could, “be more difficult for proxy solicitors get investors to switch their votes in the lead up to the meeting because many are not in the office, nor are the bankers or brokers they may need to change their vote.” Other potential pitfalls include the inability for shareholders to ask tough questions in a virtual meeting setting. According to the Financial Times (as reported by IR Magazine), investors have become concerned that virtual annual meetings could “shift the balance of power” away from shareholders, as companies have greater control over managing Q&A sessions virtually.
What does the future hold for activist activity? Since many companies have curtailed stock buyback activity in light of the COVID-19 crisis, Lazard believes that activists pressing for return of capital through buybacks will not be a focus.
Jim Rossman, the head of shareholder advisory at Lazard, believes that, “lower M&A activity and companies focused on conserving cash will mean that activists are likely to increase their focus on operational performance and how management teams react to the crisis as the basis for new campaigns.” He went on to say that activists will likely want to avoid looking overly aggressive during the pandemic as to not offend other investors, “whose help they might need in pushing their case later.”
Chris Young, managing director and global head of contested situations at Jefferies, also believes overly aggressive activists could face media backlash for seemingly profiting off the pandemic. Young further believes that, “having lived through the prior period of sky-high market volatility, we expect there will be a decline in activist campaigns in the near-term. Once volatility subsides and corporate valuations reset at new normal levels, however, we expect activists could have enough time to initiate new campaigns, including submitting director nominations for proxy season 2021.”
While COVID-19 may be changing the activist landscape in the near-term, the same best practices apply to help make sure your company is ready in the event of aggressive shareholder demands. Analyze your shareholder base and stay in-the-know about changes in ownership, especially during a period of extreme volatility when activists can build positions more cheaply; be open to proactively engaging with investors, even while you hunker down to focus on the impact of the current health crisis and economic downturn; and, think about adopting a “poison pill,” or at least having one at the ready.
Laurie Berman, firstname.lastname@example.org
Do you remember any of your elementary school teachers? Think back for a moment if any remain in your memory.
My kindergarten teacher at Bateman Elementary School, on the north side of Chicago, was Mrs. Hart. I only remember her because it was kindergarten, and she was my first teacher. No one went to pre-school in those days.
The next teacher I remember was Mrs. Castle, third grade, at Laurel Elementary School, in the heart of the borscht belt, near Melrose and Fairfax, in Los Angeles. I only recall her name because we just moved to LA, mid-semester, and I was the new kid in class. She was nice to me, even though I was a little behind in my knowledge of cursive.
Then we moved again when I was in the sixth grade, also mid-semester, and again I was the new kid in class at Lankershim Elementary School in North Hollywood. Not easy when you are painfully shy and eleven years old. But this teacher, Irv Sherins, was different.
Mr. Sherins paid lots of attention to me. He even assigned one of the kids, Dennis Gass, to be my buddy and show me around the school. (Dennis and I remained friends through high school. He enlisted in the Army right after graduation and died in Vietnam.)
You might be wondering what my memory of Irv Sherins has to do with investor relations and strategic public relations, which, after all, is what this blog is supposed to be about.
I so vividly remember Mr. Sherins – not because he treated me well and made me feel comfortable as the new kid in class – but because of a two-letter word he wrote on a corner of the blackboard, that was never erased. It was a word that has relevancy for our clients, our staff and corporate executives, among others, everywhere: The word is “If…”
Between today’s political stress, the coronavirus, and yes, the steep stock market decline, impacting valuations and business conditions worldwide, the meaning of that one small word written by Mr. Sherins more than 50 years ago, and never erased, can help all of us now. It was the first word and title of a famous Rudyard Kipling poem circa 1895. It’s interpretation by Mr. Sherins:
If you can keep your head while others around you are not…
Roger Pondel, email@example.com
WARNING: You have to read this entire blog post to know where to find the best donut in Los Angeles.
With third-quarter earnings season nearing its sunset, the year is practically over. OK, OK, let’s not get too far ahead of ourselves. But seriously, what does 2019 hold for capital markets? Um, uh, well, that’s hard to say. A few preliminary ideas from the IR observation deck: Investors will care even more about diversity at the board level, cash preservation or lack thereof will weigh heavily on investors’ minds, and public companies will feel more pressure to perform on a quarterly basis to justify high stock valuations.
Indeed, these variables have already surfaced in 2018, particularly in California. A California law passed in September that requires all publicly held companies based in the state to have at least one female board member by the end of 2019. The law goes further by also requiring companies with at least five directors to have two or three female directors by 2021.
At the same time, continued volatility in the market and rising interest rates are influencing companies and investors alike to carry more cash on their balance sheet. This trend will likely persist as the Fed partakes in gradual interest-rate increases in 2019. That being said, investors don’t necessarily have the patience to watch a lot of cash sit idle on a balance sheet, so use it wisely.
Speaking of patience, high U.S. stock valuations will require companies to prove their pudding is still the best pudding around, and the onus will be on IR professionals to ensure that stellar financial performance is communicated effectively.
There are a number of other IR-related topics to consider for 2019, such as the continued effects of MiFID II, how artificial intelligence will influence IR, and the best place to eat a donut in Los Angeles when you’re on an NDR. But for now, let’s just get through earnings season.
— Evan Pondel, firstname.lastname@example.org
As our firm celebrates its 50th anniversary year, we thank our clients for the trust they have placed in us, and for allowing PondelWilkinson to help enhance value, build businesses and protect reputations.
It has been our privilege to work side-by-side with stellar management teams and boards of directors of companies big and small, established and emerging, global and regional.
When our firm was founded in 1968, it was done with a business philosophy based on four simple tenets: apply sound thinking to meet unique client challenges; attract the best talent, regardless of position; deliver quality, responsive service; and always operate in a respectful and ethical manner. That philosophy has endured.
Today, we pride ourselves on long client and staff tenure, with a collaborative, professional team that is the best in our business. We are grateful to our referral sources for their confidence in recommending us. And we extend deep gratitude to a vast network of wonderful people with whom we work every day on behalf of our clients, from investors and analysts, to editors and reporters, lawyers, accountants, and so many others.
Technology has transformed much of what we do, but our core competencies and the scope of our services remain highly focused, grounded in relevant experience: investor relations; strategic public relations; and crisis communications.
Aside from our day-to-day client work, in 2018 alone, we have been privileged to arrange highly successful investor days; stage business/financial media events and NDRs; develop communications for several mergers and acquisitions; and craft delicate, reputation-defining messages regarding a number of highly sensitive matters.
Tooting our own horn is not generally our style. We fully believe it is our role to be the rock, the secret sauce, the foundation behind the scenes, and have our clients shine brightly, center stage. But hitting 50 is a pretty big deal, and we know you will understand and share our exuberance.
So, to everyone we know, thanks for being there for us. We look forward to being there for you for decades to come.
Evan Pondel wrote a story in the May/June 2018 issue of IR Update on Regulation A+ offerings and what they mean for investor relations professionals. You can download a PDF of the story here. Following are some IR tips for companies pursuing a Reg A+ offering:
- Ensure that you are telling a story that individual investors will understand
- Align with experts in public relations and digital marketing
- Millennial themes tend to generate the most interest with respect to Reg A+ offerings
- Answer investor questions via live phone conversations, email and FAQs
- Exercise patience when speaking with individual investors
- Apply Reg FD and consistent communication whenever telling the story
- Under promise and over deliver
Media relations are an integral component to what we do at PondelWilkinson, whether a public relations or investor relations engagement.
Crises aside, generating media awareness of corporate entities, their brands, products and services, among readers, listeners and viewers is critical to the success of any communications program.
Shrinking news departments, fewer beat reporters, and an increasingly tighter news hole, however, are making it harder to get reporters’ attention.
Another caveat to these challenges is that only 36 percent of journalists prefer to get their information from PR/IR sources, press releases, and newswires, compared with 42 percent last year, according to the 2017 Global Social Journalism Study.
The good news is that experts and industry contacts remain key sources of stories for U.S. journalists. For example, while a reporter may not write about a new app or the latest software version, he or she may be more inclined to interview an executive about key technology trends, such as artificial intelligence or cybersecurity.
Media relations 101, right? Maybe not. According to the same study, only 19 percent of reporters say PR professionals provide high quality content, and just 37 percent are reliable.
Learning what’s important to reporters is vital to establishing long-lasting media relationships, essentially, helping them make their jobs easier.
Follow these simple rules for building successful media contacts:
- Do your research, learn about the reporter and his or her area of coverage.
- Customize your pitch, conveying why it’s important to the outlet’s audience.
- Do not blast pitches. Just don’t do it.
- Provide value, such as proprietary content or a unique perspective or point of view.
- Call first, if possible, especially since reporters are constantly inundated with e-mails.
- Be transparent to foster credibility.
There’s no easy way to building better media relationships. It takes time, effort and a good sense of news, coupled with knowing what reporters want and need.
— George Medici, email@example.com
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31 Aug 2021
Public Companies Prosper in Pandemic
20 Jul 2021
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12 Jul 2021
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3 May 2021
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28 Jan 2021
WHO WE ARE
PondelWilkinson Inc. is a leading investor relations and strategic public relations firm that has earned a national reputation for innovative, aggressive, professional service.