Maximizing the ROMT (Return on Management’s Time) of Shareholder Engagement
Building credibility with investors and analysts has never been more important. It is a pathway to fair and sustainable valuation and a barrier to activist interest. Senior managements of public companies are daily confronted with the dilemma of balancing the demands of running the business with the important duty of being responsive to shareholders.
At Financial Profiles, we have many collective years (far more than we want to admit) of helping our clients maximize their ROMT. No one size fits all in the area of available resources, but for the purpose of this articleâ€”let’s consider the tremendous time pressure on today’s CEO and CFO.
Most active investors would like access to the CEO and CFO if they have a stake or developing interest in a company.
Many companies do a decent job of staying in touch with their top holders through venues such as one-on-ones during conferences and visiting them on non-deal roadshows. This is a tried and true outreach protocol, and the interaction management has with key holders is an important gauge of market sentiment. The questions they ask are the most important questions and should be carefully considered.
Beyond conferences and NDRs, what else?
In the interest of time and maximizing your ROMT, here are a few ideas to expand your outreach to potential new investors while satisfying the needs of your current ones.
1.Take full advantage of your quarterly conference calls. Analysts and investors struggle through prepared remarks that regurgitate what they can read in the press release. Seize the opportunity to reinforce your investment thesis by specifically pointing out how events and results during that quarter relate to your growth strategy. Feed them some fresh informationâ€”even anecdotallyâ€”that adds to their insight and comfort level with the story. Also nothing spooks investors more than a shaky Q & A. This interaction is the most important aspect of the callâ€”be well prepared as a team; don’t pile on each other’s answers, and know that the paper shuffling amplifies confusion.
2.Make your key analysts feel important and save time in the process. We found that some analysts are very happy to have a marketing day at your headquarters or a site that shows something special about your companyâ€”as long as they can get their institutional customers in and out in a day. It is like a mini-investor day that is exclusive to your sell-side analyst.
3.Speaking of an Investor Day. This can be a very powerful engagement that allows you to showcase your management bench. That said, it requires considerable planning and is time consuming for both management and participants. There are hundreds of pieces on planning an effective Investor Day so we won’t rake over those coals. Just remember that every Investor Day needs a “crown jewel”. It can be a product introduction, an important announcement, a customer panel or an industry expert but there should be a special objective to assembling all your key influencers.
4.More intimate events are a welcomed break from the routine. Some of our clients have held events at interesting venues like a great restaurant or a special private home. The business meeting takes place but it is more informal with an emphasis on relationship building. In some instances, it has become an annual event that everyone looks forward to attending.
5.Introductory calls are a great way to bring newcomers up the learning curve. Companies that are blessed with a steady stream of new interest need a way to effectively manage the time commitment of individual calls. We have found that having a set date and time for a group call is very time efficient and works especially well in giving smaller investors access to management.
All investors know that the most important job of the CEO and CFO is executing on strategy to create long-term, sustainable value. They will all tell you thatâ€”preferably face to face! So consider an investor communications plan that incorporates some creative time management to improve your own ROMT.