IPO Roadmap

The IPO Market Won’t be Frozen Forever. Prepare for Your IPO with Audacia’s Roadmap

After two HOT years for Initial Public Offerings (IPOs), the IPO market was due for a cooling period – and cool it has. “There’s an inverse correlation between market volatility and IPO activity,” said John Tuttle, vice chairman of Intercontinental Exchange’s ICE NYSE Group. The combination of rising interest rates, geopolitics, and shifting investor expectations have had a chilling effect on new listings. 

And while the IPO market is quiet – for now – it’s unlikely to remain that way for too long. In fact, many companies are taking this time to assess their readiness to enter the public markets. A great move, if you ask us. The Initial Public Offering (IPO) process is one of the most complicated and demanding events a growing company can go through. You need an IPO roadmap to be ready to deal with investors, auditors, lawyers, investment bankers, and accountants, among others. And then there’s the paperwork…

If you’ve never taken a company public before, you’re probably wondering what lies ahead of you. Never fear, with our IPO Roadmap you’ll be thinking three steps ahead. 

Audacia Strategies’ IPO Roadmap

We’ve talked about this before:  in a 3-part series, I broke down the process into three parts: developing your IPO story, building an IR team, and living with your IPO. Taken together, these three stages make up Audacia Strategies’ IPO Roadmap. Here are the highlights from each part.

1. Developing your IPO story.

Your IPO will include multiple filings that describe your business, your risks, and your opportunities. While you’ll speak with several different financial audiences (e.g., institutional investors, credit rating agencies, sell-side analysts, etc.), it’s important to develop a coherent story. We call this your investment thesis. Learn it, live it, love it. It is the core of your discussions with financial stakeholders and especially investors. Consistency is key.

After you have agreed on the  investment thesis for your business, it’s time to develop a narrative arc that answers the question: “Why buy this stock?” Make sure that you tell your story – not your competitor’s story – and that it goes beyond the numbers. Remember, investors are human. They respond to a real story like anyone else.

If you’re going public, that means you’ve spent some time honing your value proposition. Now is the time to expand upon and refine this message. Explain what makes your company unique? What’s your “why?” Think about where you can connect with investors in an authentic way and lean into that story.

Ideally, your story establishes your credibility and proof points and sets reasonable expectations. Keep the following in mind: your first few earnings announcements following the IPO will be closely watched to see how the company’s performance matches expectations set during the pre-IPO roadshow and how the management team characterized the firm’s performance in its S-1 (i.e., your initial registration statement with the SEC).

2. Building an IR team.

Once you have your investment thesis and narrative, it’s time to get operational. Put together your dream IPO team and make sure your team includes people with investor relations (IR) experience

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

And yes, there are some tools of the trade you’ll need to run an effective IR program:

  • An IR website: A place for investors, analysts, and the public to see your investment story. This should be easily accessible from your company’s primary website. 
  • An IR platform: A tool to track consensus estimates, trading patterns, analyze your shareholder base, research and target new investors, review ownership trends, etc.
  • Stock surveillance (optional): 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 their head in your office and says, “what the heck is going on with our stock today?!”

Your IR team will ensure that you don’t stumble out of the blocks and set you on the road to building long-term trust with shareholders.

3. Living with your IPO.

Yes, Virginia, there is life after an IPO. I know it may not seem like it now because you’re so focused on preparing for the IPO that it’s hard to think past next week. But trust me, your future self will be glad you thought about this third and final stage ahead of time.

Don’t get me wrong, going public is an achievement in itself. By all means, take your victory lap. But also realize that having an IPO opens you up to a whole new level of public scrutiny. This is good news, but it means you need to follow through on your public commitments, keep telling your story (even after a 15-hour day of investor discussions), and continue to educate and build your shareholder base.

The key to a successful life after the IPO can be broken down into four simple steps:

  1. Set reasonable expectations.
  2. Tell stakeholders about them.
  3. Execute on those expectations.
  4. Tell stakeholders about that.

When your company goes public, you step into the spotlight. Yes, the stakes are higher during life after the IPO. But it’s nothing you can’t handle. You’ve got this!

Nervous about prepping for your IPO? Audacia Strategies has your back! Contact us to schedule your consultation.

Photo credit: Close Up Of Multi-ethnic Group Working Together Around A Laptop by Flamingo Images from NounProject.com

CEO communications

3 Questions Every CEO Needs to Understand to Communicate with Investors

Communicating with investors is one of the most important tasks CEOs need to master. But strong CEO communications might not be beneficial only for the reasons you expect.

All companies want to hire charismatic leaders with strong communication skills. What you might not realize, though, is that a CEO’s communication style and presence can actually impact corporate value. According to a 2020 study, companies led by a CEO who communicates effectively, better withstood the initial negative share price impacts of the COVID-19 pandemic.

Of course, communicating with investors takes a special touch. Investors are a tough audience. The most successful investors approach new investment opportunities with healthy skepticism. And how CEOs respond to skeptical investors is key. Investors look for authenticity, authority, and credibility.

In our article for the Harvard Business Review, Audacia Strategies Partner and CEO of Green Room Speakers, Sarah Gershman and I distilled our advice from 20 years of experience working with executives and investors to three core questions. Here, let’s look at strategies CEOs can implement to better connect with investors.

1. Is the CEO confident, without being overconfident?

Investors want to see a CEO who has confidence in their company without being blind to the real challenges they are facing. We like to call this “reasoned confidence.” An overly optimistic presentation runs the risk of losing credibility. As one investor put it, “Don’t be a LEGO-movie leader telling us that ‘everything is awesome.’”

Reasoned confidence is especially critical during specific types of CEO communications, especially crisis communications. Feeling overconfident during a crisis can lead to over-promising or what I like to call the Top Gun Problem: “Your ego is writing checks your body (or in this case, your business) can’t cash” (and with the release of the new Top Gun: Maverick, this reference is more relevant than ever).

To avoid over-promising during a crisis do the following:

  • Triage: You can’t put out all of the fires simultaneously. Instead, you need to prioritize carefully and make hard decisions about where to distribute your attention. An investor relations professional can help you with this.
  • Be transparent: It’s important to set expectations with investors – and other stakeholders! – during a crisis. But if you try to do this in a way that could be perceived as a cover up, you’re digging yourself deeper. Be honest and up-front about issues and what you don’t know.
  • Continue to monitor the situation carefully: Your initial statement is only the beginning. You next need to implement the crisis plan and follow through on your commitments. The absolute worst outcome after a crisis is for a new crisis to develop as a result of mishandling the original crisis.
  • Keep internal communications open: It’s critical to maintain an open dialog within your company, especially during a credibility crisis. In addition to stabilizing the team when they can feel in freefall, employees are your frontline communicators to customers and business partners. 

2. Is the CEO a straight talker?

In addition to being overconfident, CEOs may overcompensate by trying to gloss over the truth or talking in circles. Say it with me: More words does not equate to better outcomes. We often work with CEOs to ensure that they use plain language and give the news to their investors straight. 

Further, while strong preparation is crucial for investor presentations, it is possible to over-rehearse, over-polish, and completely forget about connecting with your audience. An overly polished presentation can leave the audience wondering whether you’re simply telling them what they want to hear.

Investors want to feel seen and heard in a way that sounds authentic and credible. It’s time to get human. Here’s how:

  • Think like a reporter: Journalists are trained to give the who, what, where, when, and how of a story in the first sentence or two when reporting on a story. Replicate this tactic by getting your communications teams together (or go outside of these departments for a different perspective) to brainstorm.
  • Dump the buzzwords: Buzzwords do more than whitewash the stuff we don’t want to talk about. They also obscure your message and make your organization seem less authentic. If you confuse investors with jargon or industry terminology, they will ignore you.
  • Get vulnerable: If you’ve faced a genuine struggle that has made you rethink your company, now may be the time to pull it out and share what you learned. Don’t be afraid to step back from the spreadsheets and share your bigger vision with investors.
  • Step away from the webinars: The formality of webinars can result in investors feeling totally disconnected. Consider how you can incorporate less formal discussions, roundtables, open mic Q&As, etc. While it may make sense to give a short written statement or update to kick off an investor meeting, listening to written remarks being read for any longer than 10-minute intervals is probably too much to ask from those on the other side of the camera.

3. Do they know how to listen? 

Sure, as a CEO, you likely know how to talk. It’s tough to become a successful leader without having the ability to communicate your vision with others. But, how good are you at listening?

Listening is one of the most undervalued skills of CEO communications and a CEO who lacks the ability to listen happens to be one of the biggest red flags for an investor. For CEOs who master the art of listening, however, answering questions from investors can be a great way to boost your credibility. Every question expresses a need, and your answer should show that you hear what’s behind the question. 

A question about your research and development investment strategy, for instance, may actually also be about whether an investor can trust you with their money. If you can’t suss out the deeper need, then you may need to ask for clarification before attempting an answer.

One way to make sure to prioritize listening is to run a murder board before the presentation. To make sure you’re prepared for investors, you’ll want to call in your toughest internal financial analysts and encourage them to live out their wildest inner Shark Tank dreams. Assemble your investor relations murder board and have them begin coming up with “tricky” questions regarding different angles on your message and the numbers.

For example, suppose your firm calls for 10% year-over-year growth. That sounds amazing to your team, unless your biggest competitor comes out with an expected 15% growth rate. Now you’re behind in an investor’s eyes. What does it mean for your business and key competitive differentiators?

This type of preparation can remind you to listen closely to the question and its intent, focus on the facts and not speculation, and practice answering in a way that connects with the audience.

There’s no doubt investors are a tough audience. We have found that the best investor presentations happen when CEOs stop focusing on their own performance and instead speak to investors using reasoned confidence, straight talking, and masterful listening.

For more tips about how CEOs can prepare to answer these three core questions, read the original article in the Harvard Business Review. And if you’d like to learn more about how Audacia Strategies can help you prepare for your next investor meeting, schedule an initial consultation.

Photo credit: Professional Woman Standing In Boardroom Giving Speech To Team by Jacob Lund Photography from NounProject.com

IPO

The IPO and SPAC Market is Hot. Is Your Firm Ready for the Public Eye?

2021 has been a record-breaking year for Initial Public Offerings (IPOs). Analysts predict that by December 31, we will have seen roughly 1,000 companies hit the market. As of now, there have been 372 IPOs and 535 SPACs, for a total of 907 companies representing $266 billion in proceeds. 

Among the most notable companies on the upcoming IPO agenda are giants like mobile payment company Stripe, San Francisco-based Instacart, which has more than half the U.S. online grocery delivery market, and Impossible Foods, the maker of plant-based burgers. Others include Databricks, an artificial intelligence company and a Brazilian digital bank, Nubank, backed by Warren Buffett’s Berkshire Hathaway.

With the market this hot, we know that you may be considering joining their ranks and raising capital either through a traditional IPO or a SPAC. And while you can find plenty of IPO checklists and guides, making the process seem deceptively simple, the decision to take your firm public requires careful consideration. So, we thought it might be appropriate to look at some of the questions founders tend to overlook.

Make Sure You Know Your ‘Why’

There are a lot of good reasons to go public, but being the CEO of a public company adds several layers of complexity to your job. So it’s important to make sure you know your ‘why’ and why your ‘why’ makes you unique in your market (AKA your differentiator). This will help you stay grounded throughout the tough moments.

Many firms may think, “I need to raise capital, so I think I’ll take my company public.” Maybe you need access to capital to support planned acquisitions or maybe you want better access to debt and equity markets to carry out your growth plans. That access comes with costs both in flexibility and on the bottomline. Whatever your reason, spend some serious time evaluating it from every angle. A murder board can be a great resource here as well.

Another reason knowing your ‘why’ is important is that you need to be prepared to own the IPO process. Don’t assume that the investment bankers, lawyers, accountants, and consultants you hire will manage the process. Make sure you (and your team) manage the timeline and understand the process. Ask a lot of questions. Avoidable delays may cause you to miss your window in your industry. When you stay in charge of the timeline, you stay in control of the process.

What are SPAC IPOs?

In the past few years, we’ve seen a surge in what’s called a Special Purpose Acquisition Company (SPAC) and these relatively new types of deal are fanning the flames of the IPO market. Also known as a blank check company, SPACs are another way to raise capital.

Not your typical IPO stock, SPACs start out as shell companies that raise money by issuing stock. Then they use the proceeds, combined with bank financing to buy and take privately held companies public. SPACs typically set two-year time limits on completing the acquisition and if the deal doesn’t go through, then investors get their money back.

Although SPACs aren’t new, they have seen a rise in popularity after COVID-19 shut down the IPO market in Q1 of 2020. Prior to 2020, we were seeing about 15 SPACs per quarter. During Q3 of 2020, that number jumped to 82, and it jumped again to 129 the following quarter. In the first quarter of this year, we saw a record of 298 SPACs.

But whether SPACs are a temporary trend or have real staying power is yet to be determined.

3 IPO Tips from an IR Pro

There’s one other point that founders should be aware of when considering whether it’s time to take their company public: it’s all about the investors. Sure, you need to focus on the SEC regulatory requirements and keeping the analysts on your side. But when it comes down to brass tacks, public companies live and die by their investors’ decisions.

To that end, here are four tips from Managing Director of Investor Relations and Financial Transformation, Mike Pici:

1. Get your house in order.

There’s no reason to be in a hurry to go public. In fact, we’re seeing trends go in the opposite direction. Whereas a startup receiving a healthy stream of venture capital might have once gone public in four years, today the process might take eight years or more. Companies are waiting longer and growing larger before they go public. 

This is a positive trend because it is hard to course correct when you’re being publicly held to the results. So make certain your house, both financial and non-financial, is in order before going public.

2. Be prepared to show a track record of growth.

If you’re thinking like an investor, then you know that investors aren’t just looking for positive cash flow or past success. They’re also looking for evidence of future growth. The amount of revenue is not as important as showing healthy growth quarter over quarter. To this end, we recommend that you show a minimum of 1-2 quarters of growth before filing for your IPO.

3. Consider whether the firm can withstand the amount of stress going public will create.

You’ve likely faced obstacles in the growth of your business. And you should be proud of how you were able to face and overcome those obstacles. But if you believe overcoming adversity qualifies you to take your company public, you would do well to talk to other founders who have gone through the process.

You need to know what you’re walking into before you sit down at the table. The stress of going public is a particular type of challenge and while most founders will only do it once in the lifetime of their businesses, remember that you’ll be working with experts who have done hundreds of deals. Make sure you and your management team are up to the task.

Your IPO Roadmap:

Once you have decided to take your firm public, you’ll need a plan. At Audacia Strategies, we work with our clients through every stage of the IPO process. Here is a preview, which we call our IPO Roadmap:

Part 1: Developing your IPO story 

Although you’ll have multiple filings that describe your business, your risks, and your opportunities, you’ll also want to develop an overarching narrative to share with diverse audiences. Now is the time to refine your value proposition, establish credibility and proof points, set your guidance strategy, and set up internal processes to establish consistent communications.

Part 2: Building an Investor Relations (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. You can schedule a consultation with our Managing Director of IR, Mike Pici, here.

Part 3: Navigating life after IPO

Once you’ve successfully taken your firm public, it’s time to follow through on the commitments you’ve made and deliver against those proof points. Remember the IPO is really just the beginning of your journey.

If you’re ready to start your IPO journey, contact us today to discuss your needs. Our team is ready to develop a transformational strategy that works for you.

Photo credit: Team of two women analyzing charts and diagrams by Jacob Lund Photography from NounProject.com

Investor relations

Ask an Expert: Managing Director, Mike Pici, Discusses How Investor Relations Drives Value by Looking at Ordinary Events in an Extraordinary Way

Communicating with investors and potential investors can feel like walking a tightrope. Investors want to know how you’re going to protect and ideally increase their investment. Investors and analysts don’t appreciate uncertainty and surprises can add volatility into your stock’s trading.

Enter the Investor Relations expert.

First things first: Investor relations is not about pumping up the share price or sweeping surprises under the rug. It’s about supporting an accurate valuation and understanding of the firm.

IR professionals are there to keep your investors and analysts grounded. They are the first point of contact between investors, the Street, and the company. And their job is to effectively communicate the management’s mission, vision, and strategy, while being prepared for anything any stakeholder might ask.

Do you know what your investors are thinking? Or are you walking a tightrope?

Interview with Managing Director of Investor Relations and Financial Transformation, Mike Pici

To get you started down the IR road, Audacia Strategies CEO, Katy Herr, sat down with Managing Director of Investor Relations and Financial Transformation, Mike Pici, to talk about the what, the why, and best practices for coming up with an investor relations strategy.

Mike brings to Audacia 20+ years of financial and capital markets experience including investor relations, business modeling, budgeting, forecasting, and planning processes, as well as thorough experience with financial statements, i.e., 10-Qs and 10-Ks. He has also been a key internal advisor on portfolio transformation activities including $1B+ of acquisitions, multiple corporate spin-offs, asset divestitures, integrations and associated stranded cost mitigation planning, strategic portfolio reviews, and transformation messaging. 

To find out how your firm can benefit from working with an Investor Relations and Financial Transformation expert, check out these highlights from Katy’s interview with Mike.

Q | Can you talk a bit about what a Managing Director of Investor Relations does and how Financial Transformation fits into the picture?

Investors and potential investors naturally have a lot of questions about the companies in which they’re investing. Of course, they’d love to talk to the C-suite directly, but this isn’t always feasible. So IR steps in to answer investor questions between earnings calls or annual shareholder meetings.

Now, when your IR professional is doing their job well, they are on the same page as the managers and effectively communicate the managers’ narrative in a way that puts investors at ease. Credibility and transparency are key here. When investors trust the IR liaison, they can better weather any storms that may affect the company. It’s a win-win.

For example, if the IR manager can explain how a CEO transition fits into the broader business model and overall big picture, investors will feel more grounded and comfortable staying the course. Without earning their trust, though, IR and leadership will face a barrage of questions that could trigger significant turmoil.

Here’s where the financial transformation piece fits in:

What kinds of questions do investors ask most often? Questions about the financials, of course. 

Clearly, IR professionals have to know their numbers. But they also need to be able to communicate about the numbers in a way that makes sense to investors.

There’s no degree in IR. Typically, you’re either a finance person or a communications person. I have a financial background (Financial Planning & Analysis (FP&A)), so I’m often falling back on the numbers. This is helpful because the Street is always trying to build a model. So my financial background gives me the ability to think like an analyst and communicate in a way that steadies the waters for investors.

The real advantage in working with an IR strategist, though, is that they are always focused on the reality on the ground and how to best communicate about it in a way that aligns with your overarching messaging. Everything I do. Everything I look at. I always ask, how does this affect the numbers?

And this one-pointed focus is important because people get really emotional about money. So if you’re facing a potentially destabilizing situation, your IR professional can look past the perceived impact to the reality of the situation and be able to talk about the reality in a way that grounds your investors.

For example, right now there are shipping containers on ships stuck outside the port in L.A. How does or could this affect your bottom line? When investors inevitably call up and start asking how much of your product is stuck in that port, don’t you want someone who can help you answer that question in the most diplomatic and accurate way?

The ability to answer questions like these during some of the most trying times in the lifecycle of a firm makes working with IR a game changer. Yes, IR must align with the management team while finding a way to connect with investors. But the trust needs to flow from management to the IR person as well. 

It’s true that sometimes I have to speak truth to power. Part of the job is bringing messages back from the Street or from investors to managers and telling them hard truths. I often start these conversations saying, “I think this is what you pay me to do,” which is code for “I’m going to tell you something you don’t want to hear.”

When management and IR can find common ground, managers trust IR, and investors trust the IR professional, then you have a streamlined system that sets everyone up for success.

Q | How does a typical IR process work? Are there best practices that companies should follow when coming up with an IR strategy?

When I start working with a new client, the first thing I do is gather information. Firms need to know, first and foremost, where they stand. So, I call up the analysts to get a sense of their perception of the company. I also call up the top 10 investors to get their perspective. Then I take this information to the managers and have a conversation about what I’m hearing.

This allows me to start shaping the narrative that can be proven out over time during quarterly earnings calls. We figure out what makes you different from your peers and why that counts in your favor. Then we make sure every earnings call references your special sauce.

But this early process only scratches the surface. To keep the momentum going, each quarter I approach quarterly earnings calls in the following way: 

  • About a month away from the end of the quarter, I get in touch with the FP&A group and ask them how the forecast is shaping up. This gives me a sense of how the firm is performing relative to the Street’s expectations
  • Then I get the analysts’ models — the most invaluable piece of information. I lay out all the models and compare them to the forecast. And I compare them not just on the metrics we guide (e.g., revenue, earnings per share (EPS), or cash), but also on what they’re expecting throughout the P&L. 
  • So suppose I see that our margins (profitability) are coming in a little lighter than what they’re expecting. I can also see, we’re bridging the gap because we have fewer Selling, General, and Administrative (SG&A) expenses than they’re expecting. 
  • Now I can start to frame a narrative that the firm can build on each quarter. 
  • Armed with all this information, I’ll have a meeting with my management team two or three weeks before the end of the quarter to talk about key themes for the next earnings call. Obviously, we will always talk about the financial results. But we can also discuss major program wins or new product launches. And of course, I’ll ask management what they want to deliver during the call. Often we discuss market trends or the competitive environment. There will be some give and take here.
  • Within hours after each earnings call, I do follow up calls with analysts to correct the record and make sure the note reflects what we want.
  • Prior to the earnings call, I proactively extend an invitation to the top 10 active shareholders to meet after the call as well.
  • Because accessibility is key, I also go on the road with management once a quarter immediately after each earnings call.

The above process reflects what I see as best practices in IR: consistency and transparency. Knowing where your firm stands is imperative, but you also want to have a plan for where you’re going, knowing that you may need to pivot, but all the while maintaining continuity of your messaging. When you maintain a credible message with the Street and with investors and you support that message with facts, then you have a brilliant IR strategy.

Remember, good numbers can fix a bad message, but a bad message can hurt good numbers.

IR is all about communicating the future and getting others to see your vision. So how do you know you have a strong IR message? You know you have a strong IR message when the questions on the earnings calls and in conversation with buy-side investors become more strategic, than tactical. At this point, you know they see your vision and they’re with you.

Other key questions to ask:

  • Who’s investing in our peers and not in our firm?
  • Who do we want to be investing in our firm? Which rooms do we need to be in to make this happen?
  • Which analysts are tracking our peers and not tracking our firm?
  • Who should management meet with when they do the next roadshow?

Q | If there were one thing you wish your clients knew to get better outcomes or something that would make the process easier, what would it be?

Keep your audience at the forefront. To get the best outcome possible, you have to make sure you’re hitting on the points that are most important to the person on the other end of the call. Whether that’s an investor, an analyst, or a member of the media, you have to understand how they perceive you, meet them where they are, and get them to walk the path with you.

For managers, this takes an incredible amount of situational awareness. It means proactively reaching out to the right people and addressing the right issues. But it also means considering key components of communication that often get overlooked.

Consider your tone of voice when talking to investors, for instance, it’s not just the words that you say, but how you say them. If your numbers are off and you’re calling down your guidance for the quarter or year, you know it’s going to hurt. But when you’re in this situation, call down the guidance, acknowledge it, own it, offer a solution, and show investors how you plan to move forward. And if you deliver even a less than stellar message with confidence, you’re far more likely to get the outcome you’re hoping for.

Q | So what can an IR professional do for your firm that even a combination of PR, media relations, and marketing can’t do? 

An IR professional offers your firm the unique blend of communications skills and financial prowess that allows you to gain the trust of analysts and investors alike. Like it or not, successfully wooing investors is a game of controlling the narrative around the numbers. 

The unique thing about IR is that it forces you to look at ordinary events in an extraordinary way.

If you’re ready to look at ordinary events in your firm in an extraordinary way, schedule a consultation and let’s talk about your next business transformation.

Photo credit: Businesswoman leading a video conference call from her tv screen by Jacob Lund Photography from NounProject.com

murder board

Murder Board—It’s Not As Bad As It Sounds. How to Use Criticism to Prepare Your Team

When you have what seems like a game-changing idea, what do you do? You probably start by doing some low-stakes, crowdsourced testing. You tell trusted friends and family before taking the idea to friendly colleagues. Eventually, you get around to proposing the idea to those who can help you implement it.

When you go through this early testing phase, you’re looking mostly for validation. This can bolster your confidence, which is great if you’ve hit on a truly great idea. But how often have you watched an idea fizzle and die a slow death all the while wishing you had killed it sooner? This is one reason to seek not only validation, but criticism in the early stages.

In the investor relations and corporate communications world, we have a name for doing this in a formal setting: Murder Board. What is it and how does it work?

Murder Board in Context

The term murder board originated in the U.S. military, specifically from the Pentagon, but is also used in academic, journalistic, government appointment, and business contexts.

Here are a few recent examples:

Political Hearings: As soon as Secretary of Veterans Affairs nominee, Ronny Jackson, was scheduled to go before Congress for his confirmation hearing, officials began intense preparations, including murder board sessions. Reportedly, these sessions went on pretty aggressively during the past few weeks, but have probably slowed a bit now that the Senate has postponed the hearing.

PR Crises: When Mark Zuckerburg went on his recent apology tour after agreeing to testify in front of Congress, he was put through the wringer by a team of lawyers and outside consultants. In addition to a “crash course” in charm, Zuckerberg received a real grilling during murder board sessions. Essentially, his team created as identical an environment as possible and went through a series of real run-throughs of what’s likely to occur. These lengthy sessions were strictly private and videotaped for review and critique.

murder boardAlso, known as a “red team,” the murder board team’s main job is to poke holes. In the military, the red team tries to penetrate your defenses. In the high tech world, the red team tries to hack into your system. In short, the murder board finds the problems, risks, and bugs that the insiders miss. In high stakes situations, murder board sessions can save you from making a terrible mistake.

Why Is It important?

Murder board sessions might seem like overkill. It’s easy, especially for less experienced spokespeople, to believe that they are prepared for Q&A. But until they have practiced responding to questions under pressure, your preparation is not complete. So, make sure you impress upon your team the importance of setting up a murder board.

1. Prepares you for real-world experience and Q&A.

It’s helpful to consider worse-case scenarios before facing one in real life, so you can strategize as a team. Otherwise, you risk your spokesperson going off script and saying something that makes matters worse. I want my executives and clients to face the toughest questions for the first time in the room with me, not in front of an investor, a client, or a camera. The preparation will remind your spokesperson to focus on the facts and not speculation.

2. Stress tests company-held beliefs.

When pitching an idea or trying out new messaging, It’s always hard to be objective. This is as true of individuals as it is of teams. When you really want to step outside of the echo-chamber of your firm, a murder board with external voices can help.

Use a murder board to test beliefs about:

  • Company preparedness—especially good for crisis communications
  • Messaging—Is your message really resonating?
  • Customer relations—What do we actually know about our customer?
  • The organization—Does our message really hang together? Where are the confusing parts?

3. Stress tests your sales team and sales message.

Role play scenarios with your sales team ahead of a high-stakes pitch. Ask questions such as: How could the meeting go off the rails? What are the toughest questions the client could ask? What are the worst responses to our message we could imagine? Murder board sessions will ensure your team arrives prepared and ready to keep the meeting productive.

4. Gets you away from group think.

The most important part of the murder board process is bringing in a fresh perspective, often that of the client or stakeholder. Forcing a team to consider worst case scenarios requires them to think critically and figure out how to defend their position. Alternatively, forcing them to consider the client or stakeholder view, helps identify any gaps or missing angles that need strengthening.

Murder board sessions are simply the most powerful way to ensure that your media relations, investor relations, or sales team are ready for high stakes interactions. If any of these teams are “winging” high stakes meetings, their lack of preparation could put the whole firm at risk. So, let’s talk about when and how to use a murder board.

When to Use a Murder Board

A murder board can be used for any written or oral communications. It’s all about ideas and messaging. Here are three areas where a murder board can be most beneficial for improving communications.

1. Preparing for crisis situations.

If your firm has never had to deal with a full-on crisis, consider yourself fortunate. But also realize that your big crisis could be lurking just around the corner. It’s always a good idea to have a plan for dealing with a crisis and murder board sessions can play an important role in such a plan.

Assemble your damage control murder board and have them begin identifying issues and vulnerabilities within the company. It’s best if you can assemble a team who understands both the media and your firm’s weak spot. Next, have the team work on questions and ideal answers. These should be the toughest questions they can come up with and the best possible answers based on the facts. Finally, refine the answers and work to prep spokespeople.

2. Preparing for investors.

Murder boards are also great prep for analyst meetings, especially one-on-one meetings where executives need to be on top of their game. Here you’ll want to focus on both the message as well as recalling key company metrics.

For this one you’ll want to call in your toughest internal financial analysts and encourage them to live out their wildest inner Shark Tank dreams. Assemble your investor relations murder board and have them begin coming up with “tricky” questions regarding different angles on the numbers.

For example, suppose your firm calls for 10% year-to-year growth with sounds amazing, unless your biggest competitor comes out with an expected 15% growth rate. Now you’re behind in the investor’s eyes. What does it mean for your business and key competitive differentiators?

3. Preparing for customers.

Customers can be one of the toughest audiences. Murder board sessions are great training for sales teams. Use these sessions to prep them for their sales calls, a big pitch, or proposal presentation.

Assemble your customer relations murder board by having sales people role play with each other. Have newer salespeople play the “customer” role first to test the more experienced team members. Besides the benefits of being prepared for hard questions, this kind of exercise forces salespeople to put themselves in their customer’s shoes.

Final Thoughts

A murder board is an effective way to test your firm’s communications skills in a close to real-world situation. For high stakes interactions, there is no better preparation. Remind your team, though, that this is NOT a hazing experiment designed to throw off another team member. The point is to prepare your team, better understand your messaging, and better relate to key stakeholders.

One way to ensure that you get an objective perspective is to bring in an expert from outside your firm. Audacia Strategies can be that expert voice. We’ve prepared teams for investor meetings, crisis communications, and high stakes business transformations. We’ll help you put on your game face!

Photo credit: racorn / 123RF Stock Photo

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.

ipo roadmapA 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

investor relations’ relevance

From Niche to Necessity: 3 Tips for Increasing Investor Relations’ Relevance in Your Firm

Today’s, investor relations pros do a lot more than just talk to the Street. We serve as a critical conduit for information between the Street and internal business channels AND as a connector of information within companies. Everywhere we look, investor relations’ relevance is rising.

It’s more important than ever for organizations to find IR experts who can wear multiple hats and deliver value across the organization. Let’s discuss the drivers of change and how modern investor relations pros are adding value.

Drivers of Change in Investor Relations’ Relevance

While there has always been (and still remains) a bit of a mystique around investor relations experts, that mystique is beginning to fade and make way for more of an MVP role in companies.

Historically, IR as a function was considered mainly for big companies and primarily to communicate with investors about big events that could affect a company’s stock valuation. As a result, traditionally, investor relations’ relevance was seen as more of a back-office function, which involved responding to queries from private investors about non-receipt of dividends, annual reports, share certificates, or legal cases about ownership of shares. Institutional investors interested in contacting the company would meet directly with the CFO or CEO.

But times have changed. The demands from both the sell side and the buy side have intensified because of less reliance on expert networks, increased regulations, the pace of communications, and technological advancements. Additionally, increasing numbers of startups, especially in the software sector, has led to increased investment opportunities.

3 Ways Successful IR Professionals Provide Value:

What used to be purely a communications and public relations role has quickly evolved into a specialized blend of key front-office responsibilities. Today’s Investor Relations Officers (IROs) are responsible for conducting competitive analyses; supporting corporate portfolio-shaping activities (AKA M&A, divestitures, etc.); ensuring regulatory compliance; engaging in corporate sustainability efforts; and acting as in-house market structure experts.

Let’s look at just a few of the ways IR adds value:

1. Playing a more direct role in business strategy formation.

According to the most recent Korn-Ferry survey, 67% of Fortune 500 executives rate having a strategic mindset as the most important leadership characteristic for CCOs. But we didn’t need a survey to tell us that IR professionals are taking on more leadership roles within companies.

Taking the lead on communicating and positioning naturally means deeper knowledge of business operations—such as budgets and forecasts, financial planning and analyses, IT systems, risk assessments, and other facets of the enterprise.

2. Dissecting the financial analysis of peer companies.

Successful IR professionals not only have a deep understanding their own firm’s business operations, but they also research the finances of their peers. Modern IR pros are especially well-situated to do this work because they increasingly come from finance or analyst backgrounds and 72% have worked for three to six companies over the course of their careers. Companies are smart to use this institutional knowledge to their advantage.

3. Communicating the company’s position in highly tailored ways.

Yes, communications is still a big part of the work that IR professionals do. But even this traditional role has evolved. Communicating with stakeholders is more complicated than ever. As investor populations become increasingly diverse, there are more complicated market forces to take into account. It makes perfect sense that IR experts rely upon their comprehensive understanding of the company when communicating with investors and other stakeholders.

Lessons and Recommendations:

So what does all of this change mean for individual IR pros and their corporate partners?

First and foremost, valuable information needs to be shared. The relationship with the Street means that IR pros get a candid (often unfiltered) view of the company, the market and the competitive environment. Investor relations’ relevance has grown largely because sharing this information with the rest of the company is easier than ever.

This information needs to be shared:

1. With the C-suite – for situational awareness, strategy development, market approach, messaging, and as fodder for future investor meetings. Obviously. Depending on how your C-suite likes to receive info, this may take the form of a quick email or text or conversation; an end-of-day update from a conference; or a weekly/monthly update on the state of the firm’s communications and/or market movement.

2. With the broader leadership team – trends in investor/analyst comments must be shared with the extended team. This is valuable information about our market and competitive environment. It also provides real-time feedback on strategy… are we hitting our milestones (and communicating that we do so)? What do investors like about our competitors? What do they see as our key discriminator? (Sometimes that’s different than what we might think!) What are they watching in the industry? What do they ask about most? (Think: interest rates, low barriers to entry, regulations, pricing pressure, etc.).

The key is to offer trends in feedback combined with insight about your company’s competitive positioning, trading dynamics, and market conditions. The goal is to provide unique insight that business leaders can use as they assess their operations, competitive strategy, and markets. Often, this takes the form of a weekly/monthly or even quarterly updates as part of your quarterly business review process.

3. With employees – this is both outside in AND inside out. As important as it is to spend time with investors, analysts and other financial stakeholders it’s equally important to spend time learning more about your company.

Personally, I have found it incredibly helpful to make it a point to visit distributed corporate locations regularly. This serves two functions. First, it gives me the opportunity to get a better understanding of the operations of the business, check out a manufacturing line, spend time with the local sales team, get a demonstration of the latest R&D projects, etc. All of this is important to being able to discuss the depth and breadth of our business initiatives.

Second, I recommend returning the hospitality by holding an open discussion about how your company is traded and viewed by Wall Street. Discuss what it means to be a “deep value” or “growth” stock. Discuss what your institutional holders look like and why. Discuss your peers institutional profile and any similarities/differences. And, share some of those key trends in Street feedback.

Among distributed sites/field sites there sometimes is a perception that HQ roles are disconnected from the realities of the business operations. By sharing the Street perspective, you can make a more direct connection to an employee’s day-to-day work and the company’s performance and public perception.

Conclusion

Increasing regulatory, technological, and investor demands have profoundly altered investor relations’ relevance. What was once primarily a communications function has been transformed into a leadership position requiring economics, finance, and business operations expertise.

The evolution in investor relations’ relevance provides an opportunity to share critical market feedback more broadly and strengthen the connection between internal and external operations. It’s also an optimal moment to engage partner firms that are prepared to embrace the expertise of their IR professionals and showcase it as a differentiating factor.

Audacia Strategies has been evolving right alongside this new era in IR. Isn’t it time that we talk with you about your investor relations goals?

Photo credit: pressmaster / 123RF Stock Photo

authentic voice

Drop the Buzzwords. 3 Ways to Find Your Authentic Voice.

If there’s one big lesson to learn from last week’s Presidential election, it’s never underestimate the power of an authentic voice. For months, political pundits called the 2016 Presidential election the “authenticity election.” And the Trump team can largely attribute their win to developing an (at least perceived) authentic communications strategy that resonated with millions of Americans.

Candidate Trump never missed an opportunity to remind voters that he was “from outside the Beltway.” Additionally, he used social media to speak directly to his constituency without the media’s filter. In other words, the Trump campaign successfully managed to capture their candidate’s authentic voice.

In corporate communications, just as in politics, the power of authenticity can go a long way. So what is a good strategy for capturing your organization’s authentic voice?

Skip the Buzzwords

While it’s tempting to get caught up in business jargon when talking to other experts in your industry, just consider how stale industry buzzwords sound when you hear them used constantly in messaging. How many times have you heard someone refer to a budget item as “mission critical” or an industry leader as a “change agent” or a “thought leader?”

While insider industry buzzwords might make sense to us, they are rarely informative for investors or customers. Imagine how frustrating it must be to make financial decisions based on such empty, generic talk.

To differentiate yourself from your peers, as well as persuade both customers and investors to give you more of their hard-earned dollars, it is crucial that you eliminate buzzwords from your communications. But this is the easy part.

How to Capture your Company’s Authentic Voice

Once you have eliminated the buzzwords, it’s time to get proactive in finding your company’s authentic voice and incorporating it into your messaging. Here are some tips to get you moving in the right direction:

1. Pay attention to the voice of your leadership team.

The key to developing an authentic voice when communicating is for the talking points to align with the actual language and tone of the speaker. This is Communications 101: If the voice of the message is completely foreign to the one presenting it, the message will sound artificial and insincere.

This means if you are the CEO or CFO of a business developing messaging to present to investors, make sure the voice you use is your own. Don’t get bogged down in trying to sound like someone you think investors want you to be. Speak to the values that motivate you and be genuine.

Alternatively, if you are charged with the task of developing messaging for your leadership to present, remember that tone is important. A similar message presented in a cautiously optimistic tone can achieve radically different results from one presented using a cautiously pessimistic tone. So consider what tone best represents your leadership.

2. Find a voice that accurately represents the culture of your company.

Beyond making sure that your communications reflect the authentic voice of leadership, it’s also important to consider the unique voice of the company. For example, even though Coke and Pepsi offer similar products, their public personas are very different.

Don’t think of your branding and voice as simply a matter for the marketing department. If you want your customers and investors to immediately connect your company with a perceived culture (for example, innovative engineering with a global reach) that message needs to be consistent in communications across all departments.

3. When responding to questions, take a step back and consider the big picture.

Often the scariest part of communicating with investors are the off-the-cuff remarks. It’s one thing to develop precise language and practice with your team before a presentation. But when it comes time to answer questions, do you revert to vague jargon or hide behind your quantitative models?

During these times it’s especially useful to take a step back and simply talk. Don’t be afraid to “get real” with your audience. Yes, being honest requires you to be vulnerable and potentially face tough questions, but avoid the mindset that these circumstances are necessarily bad. No matter who your audience is -Investors, customers, employees- they want to hear your real thoughts on your business otherwise why would they listen? To take the pressure off, learn to approach these conversations from a position of collaboration, rather than confrontation. It’s an opportunity to share and educate.

At Audacia Strategies, we’ve seen it all and we can help you sort out your authentic voice. We know which questions to ask and how to help you zero-in on what matters most. Contact us today to discuss how we can help you develop a corporate communications strategy to address your needs.

Photo credit: rawpixel / 123RF Stock Photo

US election and stock market

3 Things to Remember When the Stock Market Responds to the US Election

Raise your hand if you’re ready for the US election to be over. I know, me too. But, as tired as we are of the vitriolic finger pointing, cringe-worthy Facebook posts, and waking up to new scandals (and non-scandals) every day, many are terrified that the worst is yet to come. Could we wake-up on the morning after the US election to a plummeting stock market?

In keeping with our theme of situational awareness, there is nothing quite as challenging, from an investor relations standpoint, as a drastic shock to the market. However, if you know your company and you know your competition, you will be in better shape to weather whatever storm is brewing. In this final installment of our series, we’ll discuss three ways to know the market so you can prepare for the worst-case scenario.

Why are stock speculators feeling spooked about the US election?

We know financial markets respond to geopolitical events. For example, if this summer’s Brexit vote is any indication of what’s in store for us after the US election, we could be in for a wild ride over the next few weeks. After the Brexit vote, the British pound collapsed and global stock markets plummeted.

What is the economic explanation for why black swan events like Brexit or the terrorist attacks on September 11, 2001 cause stocks to fall? Basically, increased uncertainty about the future means more investors get out of than into the stock market during a certain period of time, which leads to falling stock prices.

So how could the US election lead to a significant stock selloff? It’s all about uncertainty.

Think of it this way: If Donald Trump wins there will be a lot of uncertainty. How will our allies and adversaries around the world respond if Commander In Chief Trump pulls us out of NATO? Will Trump’s promises to deport undocumented workers and build a wall on the Mexico-US border spark widespread protests?

While most policy wonks agree that a Hillary Clinton victory would have a stabilizing effect on the aerospace and defense market, the US has never been so politically polarized. Not to mention that if the popular vote is close and the election is contested, the result will be increased uncertainty. Too much uncertainty makes investing in the stock market feel closer to gambling, so risk-averse investors will simply choose to save their money rather than risking it on an uncertain future.

How do you deal with your investors if the worst happens?

While it is impossible to prepare for all that could go wrong, if you have maintained that “ready stance,” you will be more confident when you explain to investors what steps you are taking to make the best of a bad situation. And your investors and analysts will appreciate a thoughtful message delivered confidently, particularly when others are reactively grasping at straws.

Follow these three pieces of advice whenever markets behave badly:

1. Stay engaged

When scary things happen to us, our first instinct is to curl up in the fetal position (if not literally, then figuratively, which can be just as bad during times like these). But we need to do what we can to resist this paralyzing instinct.

The most productive thing you can do if the markets are volatile on November 9th is stay engaged. It will be difficult to pick up the phone and talk with investors, but accept that while you may not have all the answers, investors will feel better if you tell them what you do know. And remember to return to our discussion about knowing your business and how it fits into your broader market.

So, do your homework, get the facts, stay in touch with your team, and be ready with a game plan as quickly as possible. All investors can ask of you in times of uncertainty is that you are candid and timely in your assessment of the situation. This is not a time to read the tea leaves or speculate.

2. Be transparent

When you speak with investors and analysts after the US election, be transparent. As tempting as it is to sugarcoat or avoid tough questions from investors, now is not the time to be evasive. Be candid about what is known and unknown. Return to what you know about your company, your strategy and your competitive landscape.

A big drop in the stock market affects everyone. It does no good to pretend that your company or industry is magically better off than every other company or industry. So be honest.

Your investors look to you to tell them what is rational in this frightening time of uncertainty. They look to you to set their expectations. So you need a gameplan. Your job is not to be a cheerleader. Your job is to provide as much clarity in an uncertain situation as possible.

3. Go back to fundamentals

When a catastrophic event occurs causing a huge shift in the market, return to fundamentals. Analysts will develop complex models that attempt to take into account outliers caused by highly improbable events. But often their views will contradict. It’s important to that you remain aware of the incoming information, clear-eyed in your assessment and rational.

Take a deep breath and consider what has changed and what hasn’t changed about your industry. Get your team together and discuss whether your strategy should change. Sometimes it makes sense to ride it out. If you stick to your message and core values, you will be in the best position to guide investors in their decision making.

Also, don’t ignore your intuition. Often when markets behave badly and unpredictably, the usual models fail us because circumstances are unusual. In these difficult times, those who ignore the old models often come through the crisis best.

I’m optimistic that the great experiment that is America will survive the 2016 presidential election. But the fact is that we are living in volatile times. Do you have clear procedures in place to keep your strategy moving forward when the unexpected occurs?

If you need help staying up on shifting markets, let Audacia Strategies be your port in this storm. We can guide you through developing a consistent, strategic message to communicate to your investors. Schedule your FREE consultation today (before or after you vote).

Photo credit: rawpixel / 123RF Stock Photo

investor relations

Investor Relations Starts At Home: 3 Tips for Disclosing Q3 Earnings

This week it seems like everyone in the financial world has been obsessing over companies like Apple and Google releasing their Q3 earnings reports. For analysts, preparing to disclose earnings is one of the biggest challenges of investor relations. Wall Street has been in a holding pattern during the past 30 days. But the perceived wisdom is that if any of these big companies reveals an earnings surprise, it could be just the jolt investors need to bring them out of their malaise. I’d say the jury is still out though.

There is no doubt that quarterly earnings are a crucial measure to watch. Still, as you develop a strategy for communicating your company’s Q3 earnings to investors, consider that finding the right message is as important as the actual data you are communicating. It’s always a good idea to keep things in perspective. Since companies aren’t valued in a vacuum, having situational awareness is essential to communicating the right message to your investors.

In fact, situational awareness is so essential to investor relations that we think it deserves a three-part series of its own. So we’ll start off in this post with tips for helping you view your company from the outside in. We will follow up with posts about knowing your peers and knowing the market.

What is situational awareness and why is it key for your quarterly earnings strategy?

As you might have guessed, there are three main components to situational awareness: knowing yourself, knowing your peers, and knowing the market. Each of these components plays a role in preparing you to discuss your company’s valuation with investors. Investors want you to give them the numbers, but they also want you to help them interpret the numbers. Remember that they are looking to you as an expert on their investment.

This is especially true when it comes to disclosing earnings. Building a successful investor relations strategy is about getting into the minds of your investors. From an investor’s perspective having more information is always preferable to having less, so anything you can do to put those numbers in context will be well received.

Think of it this way. Which is more helpful for investors to know:

  • Your earnings rose 10%?
  • Or your earnings rose 10% while your closest competitor’s earnings rose 8%?

That the second one jumps out as more helpful demonstrates the power of situational awareness. Now, we’re not saying you call out your competitors’ results specifically but you definitely want to note the “industry-leading” results during your earnings call. An investor relations strategy that integrates situational awareness doesn’t simply focus on telling the story of your quarter. It also positions your company relative to how your peers performed and to how the market itself performed, giving your investors a more complete picture of your company’s performance.

So let’s talk strategy.

What does it mean to know yourself?

1. Know your company better than anyone else.

This should go without saying, but no one external to your company should understand your company better than you do. So develop your own models, craft earnings polls, and get into the minds of analysts to understand how they are really evaluating you.

Additionally, rather than making assumptions about what analysts are thinking about your company based on their research, reverse engineer the research whenever possible. Get your sell side analysts’ models and compare and contrast. If it becomes obvious to you that analysts are operating under incorrect assumptions, build some commentary into your earnings call discussion to explain any discrepancies and to give more context for their revised models.

2. Know what the analysts ask.

Examine the questions analysts asked about your company and your peers during the last quarter (or even during the last few quarters). Compare those questions to what they are asking during the current earnings season. For example, if analysts asked about the risks associated with a particular raw material three quarters ago, but haven’t asked since, this might explain discrepancies between your internal reports and the external reports you’re seeing.

Don’t simply assume the questions analysts ask are consistent from quarter to quarter. While it can be tempting to dismiss a lower than expected valuation from analysts on grounds that they don’t have the complete picture, investors will rightly hold you accountable for failing to anticipate and adjust internal models.

3. Know yourself relative to your peers.

This bleeds over into what we’ll talk about in more depth next week, but part of knowing yourself includes knowing how you will handle the release of peer earnings reports. Because many data points are more meaningful in the context of understanding industry trends, keeping tabs on your competition is key to understanding how to position yourself with investors.

For instance, in the defense industry where there has been a mostly flat business landscape for much of the past year, it makes sense for defense contractors to pull back and take a more austere approach to allocating resources. But if you know your competition is taking this approach, while your company is increasing its investment in research and development, for example, you may have a powerful discriminator that sets you apart from your peers. Well communicated and in context, a carefully considered, seemingly contrarian investment strategy could really pay off in potential valuation.

Long story short, if you aren’t keeping tabs on your competition and how they handle macro-issues facing your industry, then you are operating at a serious disadvantage. It’s a little bit like showing up to a tennis match with a ping-pong paddle. Of course, it’s important to work on your backhand, but if you haven’t studied your competition carefully, you risk underestimating them.

Stay tuned for next week’s continuation of this series on situational awareness and investor relations when we’ll discuss knowing your peers on a deeper level. In the meantime, if you would like help communicating a consistent and compelling investment story, we’re always ready to talk disclosure strategy (with as much geeky detail as you can handle, of course). No matter how well you know your company, we understand that it can be challenging to know how to frame your message and to develop the right outreach plan. Contact us today. We’ve got your back!

Photo credit: Wavebreak Media Ltd