VICTORIA GEDDES, Executive Director
Over the next few weeks, CEOs, CFOs and investor relations professionals will be gearing up for the post results briefing roadshow. For most it will be an intensive three days, maybe 4 or 5, of meetings with shareholders, brokers and potential investors in Sydney, Melbourne and maybe one or two other Australian cities, depending on the composition of the register.
I haven’t come across too many CEOs who wake up on day-one of their roadshow and think “How good is being a CEO, a whole week of talking to my fan group of adoring shareholders and investors about [insert appropriate phrase here…]”.
For some, a good roadshow might be characterised as uneventful with no surprises, a little repetitive perhaps and, towards the end, verging on mindlessly boring. This is undoubtedly better than one of those roadshows that every CEO or IRO experiences at some point in their career – gruelling and confronting, if not downright hostile, as well as being mentally and physically exhausting. There are good reasons why management teams put a great deal of effort into preparing for these events because how they manage these meetings and what they say is closely scrutinised. There are some investors, we are told, who are also into monitoring body language – how you prepare for that is beyond me, and worrying about it will needlessly complicate things, especially when there are plenty of other things to remember – key messages, Q&A and the name of the person you are talking to. But it is unavoidably true that every outing is an exercise in reputation management both for the person leading the meeting and for the company.
So is there a way to make the roadshow an enjoyable and engaging experience? As with most things, preparation is everything and, having organised and attended more roadshow meetings than I care to remember over the past 20 years, it is clear to me that a good roadshow meeting has a well-defined structure and a clear intent. None of it is rocket science but often the simple things get lost in the pressure and speed with which things have to get done.
Building relationships with Investors
Before you walk into the meeting make sure that all the basics are in place to demonstrate to the person you are about to meet (shareholder, potential shareholder or analyst) that the time you are going to spend with them matters to you.
Here are 5 things you need to know before meeting with your shareholders:
- the name of the portfolio manager and/or analyst you are meeting and what role they have in relation to the investment decision concerning your stock,
- understand why they are invested in your stock and more broadly the investment style of the manager and their specific funds which hold your stock,
- be aware of how they have been trading in the stock since you last met and their history as a shareholder,
- review the notes of the conversation last time you met or spoke on the phone so you can make a point of referencing them in the meeting, and
- identify what information from your presentation, announcement or accounts is specifically relevant to this meeting and in particular the person you are meeting.
The last of these points are worth reflecting on. While roadshow conversations typically focus on ensuring there is clarity around the information that has just been released to the market, a great meeting will be customised to those areas that are important to the shareholder. Demonstrating that you remember what was discussed in the last meeting builds rapport and respect. For example:
- “you raised these issues last time, this is what we have done about it since we last met” or
- “last time we met we spent a lot of time talking about …. are you still focused on those areas or is there something else that you would like to explore?”or
- “I see you’ve bought more shares in your yield oriented funds. Would you like me to expand on our capital management plans?”
The alternative to this is arriving at the meeting, going through the formal introductions and exchange of pleasantries, then working through a slide deck and/or answering relevant questions before thanking them for their time and leaving for the next meeting which then follows exactly the same routine. That’s hard work!
Information Gathering – it works both ways
Investor meetings are tightly governed by rules that are designed to prevent selective disclosure. To protect both sides from straying into ‘forbidden’ territory, companies distil what they want to say or need to communicate about an issue into key messages. These are bolstered by Q&A decks which are designed to road test any number of scenarios where a CEO or CFO might unwittingly end up providing information that is not ‘in the market’.
It is in no-one’s interest for this to happen, so good meetings stick to the boundaries and, in the brief time available, reduce the complexity inherent in every profit result to the 3 or 4 key essentials that the shareholder/investor needs to focus on. They are also about sharing information so companies should also ask questions that will provide insights as to why a shareholder is invested, whether the presentations provide the information they need, what could management do better from a communications point of view. If suggestions are made, note them down and commit to following up. These should be the first things you report on next time you meet with them.
So the upside to roadshows is that companies should come away from their meetings with as much useful market intelligence, feedback and insights about their peers as they provide to the investor about their own business. It is often simply a matter of asking.
The other benefit associated with developing strong relationships with shareholders it that they provide a form of immunisation against activism. An activist shareholder is given a voice when the management/board of a company fails to engage with shareholders about persistent performance or governance issues. Activist campaigns succeed because the void created by the company’s absence is rapidly filled by others who feel they have the solution and are able to harness the discontent that their fellow shareholders feel about being ignored.
So be prepared, show you care, ask questions and treat the time spent as an investment in developing a long term relationship.