At some point in every company’s life, there is a change in CEO. Naturally, a change in management can bring about a time of reevaluation among shareholders to determine if they still want to be owners of the company. While new CEOs often focus most of their attention on communicating with employees and customers, they also need to understand the importance of their initial interaction with Wall Street.
Here are five tips to help a new CEO get off on the right foot from an investor relations standpoint.
Understand how Wall Street views your company
One of the most valuable things a new CEO can do is to commission a perception study to help them understand how analysts and investors view the company. It can be an eye-opening exercise that helps a new CEO get a good sense for any “reputational baggage” that the company may be carrying, its current strengths and weaknesses, and where the focus should be going forward in order to maximize shareholder value.
Determine if you need to reset expectations
As CEO, you will be responsible for ensuring that the company meets Wall Street’s expectations, even if those expectations were established on the previous CEO’s watch. Assess the reasonableness of the expectations that the Street has for the company going forward. If they are unrealistic, it’s important to use forward-looking comments and/or formal guidance to reset the expectations to an appropriate level. Nothing shortens the honeymoon period for a new CEO like missing analyst estimates in their first full quarter of running the company.
Establish a timeframe for when Wall Street can expect to hear your strategies for the company
If you are a new CEO of a company that is struggling or underperforming, Wall Street will want to know what your plan is for improving the performance. No CEO is expected to have all the answers on Day 1. But Wall Street has a finite amount of patience, so it’s a good idea to let Wall Street know when they can expect to hear more about your strategies. Set some timeframe for when your plan will be revealed, whether that’s in three months, six months, or perhaps at a future event like an Analyst Day. Establishing a timeframe will help keep the natives from getting too restless while they wait to hear your plans for the company.
Build relationships with your large shareholders
Your large shareholders should be treated the same way that you would treat a major customer. Make the effort to reach out to them shortly after assuming the CEO position – don’t wait for them to contact you. Spend some time with them – either in-person or via telephone – where they can get to know you, hear about your background, and gain an understanding about why you were chosen as CEO. Making this effort and demonstrating that you understand that they are the owners of the company and you work for them will go a long way towards ensuring their continued support of the company.
Like the old saying goes, you only have one chance to make a first impression. Investors and analysts will form opinions about a new CEO based upon their first interaction, and those first impressions can be difficult to change if they aren’t positive. So take the time to prepare for your interaction with Wall Street. Rehearse potential Q&A before calls and meetings so that you can be in command of information and confident in your delivery on calls, presentations and meetings with investors and analysts.