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Nasdaq Times Square_1106

Nasdaq Times Square_1106 (Photo credit: gmacfadyen)

I recently returned from helping a client host a very successful investor day in New York City.  Every year for the last four years, we have introduced various members of our management team, customers and industry pundits to nearly 100 investors to help them better understand our opportunities and long-term goals.  Our 2013 event was the best yet, so I thought it might be interesting to share some pointers for a successful investor day, while it’s still fresh in my mind.

  • Hold an event only if you have  something to say.  Make your investor day worth the time and effort it takes to successfully produce a great event, and ensure your audience leaves with a favorable opinion of the company.  Holding an event just for the sake of having one is not a great decision.  Holding an event because you have new wisdom to impart about the company, is.
  • Target your audience.  The day is only as good as your attendee list.  Those with a keen interest in your company will help facilitate a more interactive session with great questions and a chance for your management team to shine.
  • Expect no-shows.  Drop off is generally in the 10-20% range, but a bad day in the market or extraordinary breaking news can drive that number up to the 50% range.
  • Be selective in who presents.  Those parts of your business that command investor attention should be included, while those that may not be core to your long-term growth strategy needn’t be.
  • Consider using guest speakers.  Allowing those outside your company to communicate with investors, provides you with third-party support and adds a little something special to your event.  Guest speakers can be solo participants, part of a panel, or included in a fireside chat.  Again, be selective.  Use outside speakers only when you are relatively certain that they will speak positively about your company and that they have a good stage presence.
  • Provide hard copies of your presentation.  There has been much debate recently on NIRI’s eGroups message boards about the benefits (or lack thereof) of slide deck hard copies.  While it’s true that digital communication is the wave of the future, and possibly even of the present, I’ve found that investors generally like to hold the decks in their hands, have them available for easy reference and use them for note taking.
  • Choose your venue carefully.  You’ll want to pick an event space that can comfortably hold all of your guests, leaving them room to spread out a bit, while ensuring the presenters and screen can be seen from anywhere in the room.  I can personally recommend the spaces at Nasdaq and Convene.
  • The message is king, but logistics matter.  While the message is key to giving investors the clarity and visibility for which they are looking, logistics are just as important.  Keep guests comfortable by providing food and drinks (an informal lunch or cocktail party gives investors a chance to mingle with management).  Offer an agenda and clear guidance on what guests should expect during the day.  Have notebooks and pens available for guest use.  Think about what would make you comfortable at an event, and provide that for your guests.
  • Webcast, webcast, webcast.  Not only will a webcast ensure compliance with Reg FD, but it will allow those who cannot travel to the event a chance to participate.
  • Invite the board.  Having the board in attendance shows their commitment to your company, while bringing them closer to your investor base.  A recent opinion piece in the Wall Street Journal highlighted the need for better communication between these constituencies.  In my book, transparency is always the best policy.

Perhaps the most important piece of wisdom I can share is to have fun with it.  It takes a lot of work, and at least six months of lead time, to produce a successful investor day.  But, if you take a step back to enjoy the day and process, you might find it to be a meaningful experience.

– Laurie Berman, lberman@pondel.com

 

New NASDAQ Market A Viable Alternative?

(Photo Credit: wikipedia.com)

One option is to conduct a reverse split if a company doesn’t receive an extension. Since 2005, 264 NASDAQ companies have completed a reverse split for one reason or another. The results of this action have been mixed. Currently about 150 companies trade below the $1 NASDAQ continued listing requirement even though some are profitable with strong cash flow.  Whether or not the economy is to blame for the low valuations, companies have very few options to maintain their NASDAQ status.
 
Perhaps there may be an alternative sooner than we think.  Next year NASDAQ will launch the NASDAQ BX Venture Market. This new exchange was recently approved by the SEC and will provide companies with a national listing above a standard OTC quotation.
 
Following are highlights from a recent conversation with NASDAQ’s director of listings about the new BX Venture Market:
 

  • Eligibility for the market requires a company to meet a number of quantitative standards including a $0.25 per share requirement for securities that were previously listed on a national exchange;
  • $1 per share requirement for companies not previously on a national exchange;
  • Companies must know if the move will impact investors ability to continue to own shares;
  • Securities will need to meet the initial listing requirement of $4 to relist on the NASDAQ Capital Market

 
While the BX Venture Market may be a viable solution, nothing beats operational performance.  However, this new market can be a good platform for companies as they reestablish their footing in today’s economy.

 

– Matt Sheldon, msheldon@pondel.com
 
 

Sleep Like a Baby

Sleep like a baby

Photo Credit: Flickr, Sabine75

A sound piece of stock market advice counsels to invest in such a way that you can sleep like a baby, which is exactly how one money manager sleeps – he wakes up every two hours and cries.
 
That anecdote was among the lighter moments from this year’s Orange County Public Company Forum, where more than 200 business leaders heard perspectives on the market from NASDAQ Chief Economist Frank Hatheway, as well as thoughts from a panel that included a vice chairman of Bank of America Merrill Lynch, two public company CEOs, a hedge fund chief investment officer and a partner in the corporate and capital markets practice of an international law firm.
 
First, the economy, according to Dr. Hatheway:  “Things are not so bad, which is very good news, particularly in light of recent fears that the economy was on the precipice of a second recession.”  Hatheway said the “outlook for the U.S. is improving, albeit slowly and unevenly.”  He noted that industrial production has been steadily rising since mid-2009, although he also expects to see interest rates rise modestly and continued weakness in the dollar.
 
And second, the consensus on the stock market was similar to that of the economy:  The entire panel expects the markets to continue to improve during the next 12 months, with predictions that ranged from 3% to 10% growth.  Looking out even further, Cary Thompson, vice chairman of Bank of America Merrill Lynch, said he expects 3-5% annual growth for the next five to seven years.  Thompson also noted that the deals thus far in 2011 have been significantly larger than in 2010.
 
Given the choppiness of the expected growth, you may want to heed another piece of advice:  Don’t watch the stock market every minute of the day, and take it slow and steady for a good night’s sleep.
 
The annual event, now in its 14th year, was sponsored, in part, by PondelWilkinson, along with NASDAQ OMX; Paul Hastings; Bank of America Merrill Lynch; Deloitte; R R Donnelley; Woodruff Sawyer; NIRI Orange County; Mackenzie Partners; and the Forum for Corporate Directors.

 

PondelWilkinson, investor@pondel.com
 
 

NASDAQ’s News Notification Rule

It seemed a little confusing at first glance.  But the second time around, it’s clear that not much has changed with NASDAQ’s recently issued updated news reporting notification rule, and most NASDAQ-traded companies likely already comply.
 
In a nutshell, it states that NASDAQ-listed companies must submit material news announcements to the NASDAQ MarketWatch Department prior to 6:50 a.m. ET when the public release of the material news is made outside of NASDAQ market hours—7 a.m. ET to 8 p.m. ET.
 
There is no change to the notification requirements of least 10 minutes prior to public release of material news disclosures made public during NASDAQ market hours.  Such notifications must be made through the electronic disclosure submission system available at www.nasdaq.net, except in emergency situations.
 
In simpler terms, if you plan to issue a news release between 7 a.m. and 8 p.m. ET, you must provide at least 10-minutes advance notice; if you plan to issue a news release after 8 p.m. but before 7 a.m. ET, you need to provide notice no later than 6:50 a.m. ET, which is 10 minutes before the market opens. If you plan to issue a news release on a weekend or market holiday, you need to let NASDAQ know no later than 6:50 a.m. of the next market day.
 
And as a friendly reminder, if an 8K is the only form of disclosure—which we rarely recommend—the same NASDAQ notification rules apply.
 
NASDAQ said the rule change, which went effective February 19, removes a burden on listed-companies, while continuing to enable NASDAQ to conduct timely reviews of company disclosures and make materiality assessments for possible trading halts.

 

Roger Pondel, rpondel@pondel.com
 
 

The Quad Witch Commeth

In the next several weeks, a confluence of events will occur that historically have caused significant trading volumes and some volatility in the equity market.
 

  1. Quadruple Witching – June 19
  2. S&P – June 19
  3. Russell – June 26

 
A recent NASDAQ seminar provided some interesting information regarding these events. One panelist postulated that the volatility might not be as pronounced this year as in the past due to diminished risk appetite that could limit some “gaming.”  Another noted the SEC’s crackdown on naked shorting that should have a dampening effect.  All said, it’s better to be prepared and level headed as we ride out some of the heaviest trading days of the year.

 

PondelWilkinson, investor@pondel.com
 
 

To Buy or Not to Buy, That is the Question

At a time when many stocks are languishing (the Dow is down 3.7% over the last 12 months, the Nasdaq Composite is down 6.9% over the same period and the S&P 500 has lost 8.2%), many investors are asking companies to put their cash to work and initiate stock buyback programs.
 
Is a buyback a good idea?  In 2007, many companies thought so.  According to the Wall Street Journal, companies in the S&P 500 repurchased a record $589 billion of their own stock in 2007, up 36% from the prior year. 
 
Buybacks reduce a company’s number of shares outstanding, which in turn helps increase earnings per share.  Company’s stocks often advance on the news of a buy-back, but the effect is generally short-term.  According to a May 2007 article in Forbes, the increase in EPS as the result of a buyback gives only a temporary, one-time, artificial boost to earnings, while causing companies without the proper cash position to increase debt, leaving them vulnerable to a downturn in the economy.  Additionally, a study by Birinyi Associates and cited in the Forbes article showed that of 375 S&P 500 companies that bought back their shares in the six years through December 2006, the companies’ median stock return post-buyback was 56%, versus 72% at companies that did not repurchase their shares. The average return post-buyback was 102%, compared with 131% at companies that did not repurchase.
 
So what’s a company to do now that the economy has turned sour?  Buybacks fell 18% in the 2007 fourth quarter, the biggest quarter-to-quarter drop in more than five years, says the Journal, and given the current credit crunch and fall of the large financials, buybacks are unlikely to reverse this trend in the near-future.
 
If your company’s stock represents a great investment, you have idle cash in the bank and your business can self-fund its growth, a buyback can be a fantastic statement of your future confidence.  However, if you’re considering buying back stock to please a group of critical investors, think hard about whether the cash outlay will introduce unnecessary risk to the business.

 

Laurie Berman, Senior Vice President, lberman@pondel.com
 
 

(Nasdaq: QNET)

On November 27, 2007,  the Nasdaq Stock Market Inc. launched
a new stock market index (Nasdaq: QNET) that tracks Internet-only companies in a broad range of industries, including retail commerce, Web hosting, search engines, Web site design, and access providers, among others.  Companies included in the index are, according to Nasdaq, “at the forefront of Internet technology.”
 
Aha.  That must explain why bloggers are asking why the likes of News Corp. and Microsoft are missing from the list, although both companies operate highly visible web properties (myspace.com and MSN/Live).  My mission for the rest of the day is to find out what parameters Nasdaq is using to classify companies as Internet-related and what metrics an Internet-related company must possess before Nasdaq considers it for inclusion in the Index.  

 

PondelWilkinson, investor@pondel.com