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building an IR program

Audacia’s IPO Roadmap to a Successful Initial Public Offering (Part Two): How to Build an IR Program

A successful initial public offering requires syncing up several moving parts. If doing a product launch feels like playing “Twinkle Twinkle Little Star,” an IPO feels like playing “Beethoven’s 9th.” Of course, to play a symphony, you need an orchestra. For your successful IPO, that means building an IR program.

If you missed Part One, we discussed how to develop your IPO story. Once you have your story, it’s time to get operational. So, this week we’ll look at answers to the following questions:

How do you structure your IR program?

Who are the key partners and players?

What are the key tools and policies that will set you up for success?

Without further ado, let’s talk building an IR program.

First, Know Your Goals.

We’ve discussed what IR is and isn’t before. The main purpose of IR is to ensure a company’s publicly traded stock is fairly valued by disseminating key information that investors use to make smart buying and selling decisions. IR departments communicate with investors (obviously), research analysts, regulatory and oversight organizations, customers, suppliers, media, and the broader financial community.

A solid investor relations plan will help guide your IPO discussions and ease your transition to a public company. The most important job? Establishing and building corporate credibility with your stakeholders through transparent and consistent communication.

Second, Gather Your Tribe.

Once your goals are clear, you can start to build your dream team of IR professionals. Hopefully, you have established and maintained strong business relationships over the years. Don’t be shy about calling on these contacts now.

Consult the following key partners and players:

Internal relationships: financial planning and analysis (make this a priority!) and finance team, general counsel’s office, external legal counsel, communications team, treasurer, business unit leads, product/service SMEs, and the C-suite.

External Relationships: service providers (Bloomberg, Nasdaq, IPREO, etc.), brokerages (JPMorgan, Jeffries, Goldman Sachs, etc.), stock surveillance (if using), public relations (if using and partnered with your internal communications team), your audit team (e.g., Deloitte, PWC, E&Y, etc.), and investment bankers.

Tools for Building an IR Program

We cover the basics below. Although we could get into using CRM systems, integrated blast email services, etc., for today, let’s keep it simple. Shall we?

Website: Your IR website is perhaps the most important tool for building an IR program and a non-negotiable requirement. Not only is your IR website often investors’ first introduction to your company and a perfect vehicle for disseminating your investment story, it’s also absolutely critical for conforming with compliance and disclosure requirements. I could go on about websites and their importance—a topic for another day!

Here are key recommendations to keep in mind for your IR website:

    • Make investor content easy to access—consider the user experience when designing your site.
    • Provide content that accurately describes your compelling investment thesis.
    • Keep the most requested information easy to find and download, i.e., earnings materials, investor presentations, etc.
    • Make contact information readily available. If you plan to be active on social media, include those links as well.
    • Make it mobile responsive—always good website etiquette!
    • Include governance information—officer and director information, committee charters and ethics documents, committee memberships, etc.
    • Keep a running list of company news/press releases.
    • Ensure that data feeds from the SEC and streaming stock quotes are accurate and timely.

IR platform: This type of tool will help to track consensus estimates on your firm and others, trading patterns, analyze your shareholder base, research and target new investors, review ownership trends, etc. These services also generally offer access to event transcripts, earnings materials, and industry, market and company analyses.

Many providers offer this type of service at varying price points. So, shop around. To operate efficiently and quickly it’s important to have situational awareness of your firm’s position among peers and within the market. These tools help you to track just that.

  • Examples include: Nasdaq, IPREO, Bloomberg, and others.

Stock Surveillance: While not a requirement—it can be pricey—this type of information can be incredibly helpful to understand the ebbs and flows within your shareholder base. It can also be a lifesaver when your CEO sticks her head in your office and says, “what the heck is going on with our stock today?!”

Stock surveillance is a service that focuses on tracking and analyzing movement in your company’s institutional shareholder base. Service providers will use a combination of publicly available data as well as proprietary and research-based methodologies and technologies.

There is a mix of art and science in this tool. It can be controversial, but I’ve found it to be very helpful in providing situational awareness. It is particularly important during times of crisis (market or company).

Key Policies for Staying on the Straight and Narrow

Every public company must decide whether and to what extent to give the market guidance about future operating results. The decision whether to give guidance and how much guidance to give is an intensely individual one. There is no one-size-fits-all approach in this area. The only universal truths are (1) a public company should have a policy on guidance and (2) the policy should be the subject of careful thought. As you continue building an IR program, keep the following policies in mind.

1. Reg FD

We’ve discussed Reg FD policy a few times. Specifically see:

Here are the highlights: Regulation FD is a fair disclosure rule, not an anti-fraud rule. This means that only conduct that is intentional or reckless can be considered a violation. Both companies and individual personnel can be held responsible and are subject to SEC enforcement actions.

Such enforcement actions can include injunctions, fines, and obligations to disclose the violation.

For more information about Reg FD and the SEC’s enforcement of the law, check out this list of frequently asked questions. But always remember that nothing you read online, including this article, is a substitute for qualified legal counsel.

2. Disclosure Policy

Your disclosure policy outlines the information your company will communicate on an ongoing basis and demonstrates your commitment to transparency. Avoid making the policy too narrow. It could come back to bite you during any potential litigation. Decide in advance who will be taking calls from various audiences. Spokespeople should respond to all calls as soon as possible, but most definitely within 24 hours.

This policy generally designates company spokespersons, approved channels of disclosure (website, SEC filings, social media, if your firm chooses to do so), handling of earnings and forward-looking guidance, and quiet periods.

A note on quiet periods:

The purpose of a quiet period is for a public company to avoid making comments about information that could cause investors to change their position on the company’s stock. There are no official guidelines on quiet periods. Practices vary by company requirement—for example, a Mega-cap firm that is part of the Dow may consider its quiet period to begin 2 weeks before the end of the fiscal quarter and conclude with their earnings report after quarter close.

However, a small-cap firm that is lightly covered may need to continue to take calls—even if they cannot answer some of the investor questions. In general, during a quiet period most companies either (a) allow no formal or informal communications at all (AKA all calls go to voicemail) or (b) allow limited communication and interaction with investors/analysts by:

  • Answering only fact-based inquiries
  • Sharing information only on overall long-term business and market trends
  • Announcing if it expects financial results to differ materially from earlier forecasts

Again, it’s hard to generalize here. Having a policy tailored to your IPO ensures that everyone knows the plan and has a common starting point.

3. Stock Trading Policy

The SEC has recently stepped up its efforts to detect suspicious trading. Sophisticated data analysis tools track shady patterns such as “improbably” successful trading across different securities over time. Many firms also make use of behavior analytics to uncover activities that could potentially lead to a range of trading illegalities.

Your stock trading policy should contain information for directors, officers, and employees to prevent insider trading. This article contains a list of best practices from someone charged with and convicted of insider trading. Hindsight is 20/20, right?

Concluding Thoughts

As with so many aspects of taking your company public, preparation is critical to success in building an IR program. So make sure that you have positioned your company to be successful in IR. An effective IR program will be critical to avoid stumbling out of the gate with investors and will help you to build shareholder value for the long-term.

Audacia Strategies can assist your company in building an IR program. We offer everything from investment case development to talking points for IR executives to financial guidance and forward-looking positioning. Let us know how we can help!

Next up: Congrats! You’re Public. Now What?

Photo credit: Andriy Popov

corporate communications

In Corporate Communications, Timing is Everything

You might be surprised to hear that corporate communications and standup comedy have something in common—timing is key. Whether you are announcing a corporate merger or delivering a killer punchline, if your timing is off, your message will fall flat.

When corporations have a big announcement to make, a lot of time and energy goes into figuring out precisely how to state the message. What should the press release say or what language should the CEO use when discussing changes with investors?

While it’s certainly important to get the messaging right, keep in mind too that good corporate communication has less to do with what you say, than how you say it.

Let’s consider some important questions to ask when dropping big announcements.

 1. Is your announcement subject to regulatory restrictions?

First, you must consider the federal regulatory rules of your industry. There are most likely rules regarding what you can communicate, to whom, when, and how. So make sure you brush up on the SEC disclosure requirements and corporate communications law relevant to your industry.

Example: Material Announcements

Speaking of regulatory restrictions, Regulation Fair Disclosure (Reg FD) requires all publicly traded companies to release material information to all investors at the same time.

This hasn’t always been the case. In the 1990’s, financial services companies routinely held conference calls with market analysts and some institutional investors giving them in-depth information about the company. Recognizing that this gave institutional investors an unfair advantage over individual investors, the SEC ratified Regulation Fair Disclosure (Reg FD) in 1999.

As a result, companies are required to simultaneously make material announcements to all shareholders. Ideally, leadership would communicate the changes during a scheduled conference call with investors or town hall meeting.

However, if word of a material event or material information is inadvertently leaked to some investors or analysts (i.e., an “unintentional selective disclosure”), as soon as a senior company official learns of the disclosure, she is required to disclose the information publicly. Companies must make the announcement either (a) within 24 hours or (b) by the start of the next day’s trading on the New York Stock Exchange.

2. What are your competitors doing?

How much of a splash your announcement makes, at least partially depends on the behavior of your competition. If you have good news to share, you want to capture as much attention as possible. With bad news, you want to be as transparent and complete as possible in your initial communications to avoid continually referencing the issue and detracting from your broader corporate strategy.

Example: Product Launch

Let’s say you are ready to roll out a new product that will take your industry by storm. Sure, you are excited about the product. But if you rush to make the announcement without a strategy, you risk being overshadowed.

For example, if you know your competition always releases new products on the Tuesday before Christmas, it might seem that you could steal their thunder by announcing on the same day. But you also risk having to share the spotlight with a close competitor. And unless you are confident that your corporate communications team can outshine your competitor, it’s probably best to steer clear of this kind of shouting match.

While there’s no crystal ball to predict what opportunities are on the horizon, waiting a bit before releasing big news can pay off.

3. Does your corporate communications policy respect your staff?

Some announcements affect your internal staff more than shareholders or the general public. For instance, corporate reorganization could mean layoffs for staff members, while individual shareholders see a moderate increase in their returns.

Example: Corporate Restructuring

When making an announcement like a corporate restructuring, it’s important not to take your staff for granted. Relationships internal to your company are as important, or even more important, than external partnerships.

So, put as much thought into announcing corporate restructuring as you would into announcing a corporate acquisition. Just as you wouldn’t want investors to hear through the grapevine about a planned restructuring, you wouldn’t want your staff to hear about potential layoffs on the news.

As with any external message, be mindful of how your internal announcement will affect your audience. Don’t let emotions get in the way. If you are the head of a division, the corporate restructuring might be bad news for you as well. But when you make the announcement to your team, be considerate of their feelings in hearing the news for the first time.

Having the right overall strategy for timing corporate communications takes a blend of planning, finding the right words, and practicing authentic human engagement. At Audacia Strategies, we don’t do standup comedy, but we have helped many companies like yours find the right timing strategy for big announcements. Schedule a Free consultation to discuss your specific needs.

Photo credit: progressman / 123RF Stock Photo

3 Steps to a Competitive Intelligence Strategy

In my post last week, I kicked off our series on situational awareness with a discussion of the importance of knowing your company when it comes to discussing earnings with investors. This week we continue the conversation breaking down a second component of situational awareness, competitive intelligence.

While knowing yourself is key to putting your earnings in perspective for investors, another piece of this puzzle is knowing where your peers stand. In simple terms, figuring out a viable strategy for competitive intelligence means understanding your competition relative to your company and relative to major industry challenges.

Where do I even start?

Of course, figuring out where to start is far from simple. Clients often ask: How do I keep tabs on my competition in a respectable way? How do I create and implement on-going systems for competitive intelligence? And how do I translate the relevant information I find into the most meaningful format for my team?

Before I start going over details, let’s consider the big picture. I often describe competitive intelligence in terms of your company maintaining a “ready stance.” Like an athlete entering the ring with her opponent, you don’t want to be caught flat-footed by your competition. You want to be ready for anything and able to anticipate the moves your competition makes, so you can adjust accordingly.

So, what steps will help you take the competition by storm?

1. Rethink your competitive intelligence process.

Having a strategy is the best move you can make. Before you approach your board and investors, sit down with your team, develop a clear sense of scope, and think through the different roles members will play.

To guide your strategy, read through your competitors’ earnings transcripts. If their investor presentations are available online, look for clues about their perspective on the market. Are they taking a conservative, moderately conservative, or more aggressive approach? Finally, study their research reports. The more you know about their models and go-to sources, the more you can develop a competitive profile.

Also, make sure you don’t miss the forest for the trees. In other words, don’t just think hard about, say, your closest individual competitor. Looking at the market dynamic between several competitors can yield an innovative strategy, which could offer more guidance than studying any single competitor in isolation.

2. Talk to others in the industry.

When you see others in your industry at networking events or conferences, don’t shy away from talking shop. For example, when a colleague from research and development calls you up to ask about one of the models in your report, strike up a conversation about new federal regulations. While you should never ask about a specific company, it doesn’t hurt to ask for general feedback about your shared industry.

Now, I’m not suggesting that you do anything underhanded or anything that makes you uncomfortable here. Don’t think of this as digging for dirt. If you think of those you talk to as thought partners, your conversation will be cordial and mutually beneficial.

You will be surprised at what people are willing to disclose if you simply ask. Chances are you will come away from your conversation with information that can guide your investment choices and give you a better sense of where your competition is headed in the upcoming months.

3. Put processes in place for developing feedback loops.

Once you have thought about your own processes and gathered information about the competitive landscape, you can make the most of the information by establishing the right processes for getting it up the chain to your executives.

Bringing the information to the executives is really the final step though. You want to come to the table ready with a plan for implementing policy changes and systematically measuring results.

Also, keep in mind that data collection does not equal competitive intelligence. Competitive intelligence is more about creating strategy than it is about gathering loads of information. A little bit of information can go a long way. This means you don’t need to spend millions on a massive database and you shouldn’t simply dump data into the lap of analysts asking them to come up with a strategy.

Developing the right feedback loop requires an “all hands on deck” approach. Have a clear sense of the scope and role for each member of your team. Then take a few simple steps: mandate intelligence reviews at critical decision making stages; have a designated competitive intelligence analyst who sits in on all strategic meetings; and tap into any internal channels that can help implement strategies for competitive intelligence.

Parting thoughts

When it comes to competitive intelligence, the name of the game is to be proactive, predictive, and to revise your strategy according to what your competition might do. If you follow the above tips, you’ll be on your toes when it comes to monitoring your competition and staying on top of industry trends.

Used well, competitive intelligence will lead to increased strategic agility and the ability to adapt to market shifts. Don’t miss next week’s installment of our series all about what to do when markets behave badly. While we all have our fingers tightly crossed that the US election won’t upset the stock market, it doesn’t hurt to be prepared for the worst, right?

At Audacia Strategies, we’ve been practicing our “ready stance” for a long time. We don’t just provide flashy presentations and strategic advice from the sidelines. We roll up our sleeves and stand with you shoulder to shoulder until we achieve the measurable results you are after. Are you ready to schedule a free consultation and find out what a difference Audacia Strategies could make for your company?

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