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On the analyst circuit, it's all about meeting the right investors.
Lori Calabro, CFO Magazine
January 1, 2008
All Hollywood may clamor for tickets to the hottest Oscar soirees, but CFOs yearn for entrée into a different sort of party: the broker conference. "Conferences are an efficient way to talk to investors," says Mark W. Joslin, CFO of Pool Corp., a Covington, Louisiana-based swimming-pool and irrigation company, who spoke at four conferences in 2007, including the Piper Jaffray Industrial Growth & Business Services Symposium in New York. More important, says Thomas C. Chesterman, CFO of Bionovo Inc., a pharmaceutical company based in Emeryville, California, they offer the opportunity to "get in front of the right investors."
But getting the most out of the experience requires more than getting invited and just showing up. CFOs and investor-relations professionals agree that conducting due diligence on the audience, developing a distinctive presentation style, and offering targeted information are key to attracting top investors. Your effectiveness at "enticing" those investors during the typical two-to-three- day events, says Chesterman, absolutely influences whether they buy into your future potential.
At the same time, says Erik Knettel, managing director of The Global Consulting Group, companies should never forget that they are guests at these events. "Conferences are a two-way, mutually beneficial relationship," he says. Companies seek visibility, but it is the conference sponsor — an investment bank, trade association, or paid vendor — that has control over the attendees, the speaking slots, and the one-on-one meetings. To gain any advantage, says Knettel, companies need to view their relationship to the host as one that needs to be managed.
On the Circuit
The easiest way to get in the door, says Knettel, is to have a healthy market cap, extensive analyst coverage, and a successful business model. "If you are a mortgage broker, you are not going to get a lot of invites right now," he quips.
For smaller companies like Bionovo, an invitation to a conference has to be viewed as a command performance. "We don't have much choice," says Chesterman, whose company presented at four conferences last year, including the recent Ninth Annual Acumen BioFin Rodman and Renshaw Healthcare Conference in New York and the Bank of Montreal's 2007 Focus on Healthcare Conference. Says Maureen Wolff-Reid, president and partner at investor-relations firm Sharon Merrill Associates, "You must do your covering-analysts' conferences. It hurts your relationships if you don't."
That's true no matter how low the analyst's rating. "If the institution has a hold [rating] on you, and it is a conference you would normally attend, then go," says Knettel: it is still an opportunity to present your side of the story and sway potential investors. Paul Gifford, vice president of investor relations at Goodrich Corp., says company executives have presented several times at conferences where the host had a sell rating on the defense contractor.
Paradoxically, companies with more analyst coverage can afford to be choosy. Given that 23 analysts cover Goodrich and most sponsor at least one and sometimes two conferences per year, it is virtually impossible for the CEO and CFO to attend each one. Which take priority, he explains, depends on many factors, including the availability of management, the location of the conference, and whether there are enough potential investors to make it worthwhile. "Luckily, we are popular right now," says Gifford. "We never have a problem getting to see the people we want to see."
Companies that lack analyst coverage altogether have two options. Wolff-Reid says that for many small- and micro-cap companies, courting analysts for presentation slots is a year-round endeavor. Others pay firms like Red Chip or Friedland Investment Events to facilitate meetings with prospective investors. The base price to attend a Red Chip conference is $7,499 for a 25-minute presentation, one-on-one opportunities, a booth, Webcast, breakout session, and a one-page ad in the event guide. A Friedland event — which can range from a cocktail party to a conference slot — costs anywhere from $1,000 to $10,000, "depending on the customers' needs," says CEO Ross DiMaggio.
Such conferences are often the only way to "get the word out," says Brandon T. O'Brien, CFO of Zagg Inc., based in Salt Lake City. In August, O'Brien presented at Red Chip's Small Cap Investor Conference in New York, his first such event since taking the electronic-accessory company public. The finance chief chose the Red Chip offering based "on other people's perceptions" and was able to negotiate a 10 percent discount on the price. Still, he insists the opportunity "to find the diamonds in the rough" was well worth the expense. "We're a company with real revenues and real operations," he says. "We just needed people to listen to our story."
There is another option for those not lacking in chutzpah: piggybacking on an existing conference. For example, Brooke D. Wagner, vice president of corporate communications for Indevus Pharmaceuticals Inc., in Lexington, Massachusetts, plans to go to San Francisco in January for the venerable JPMorgan Healthcare Conference without an invitation and simply arrange his own meetings with investors he knows are attending. "Why not?" he asks. "Everybody is there anyway. Besides, lots of people go to the Super Bowl without tickets."
Substance and Style
New conference formats are making it easier for companies to tailor their presentations to different audiences. In order to differentiate themselves, some conference organizers are moving away from the standard format of presentation, Q&A, and one-on-ones, says Sharon Merrill's Wolff-Reid. Needham & Co., for example, recently ran a bus tour for Massachusetts-based cosmetic-laser companies (including Palomar Medical Technologies Inc. and Candela Laser Corp.) that brought investors to similar companies within a short distance. CJS Securities organizes theme-oriented conferences, such as its New Ideas for the New Year conference held this month.
There is also a movement to limit formal presentations. Cynosure Inc. recently presented at a nontraditional-format conference held by Leerink Swann & Co., where managers were given speaking slots of only 10 minutes. One of the more popular formats is the "fireside chat," in which executives forgo formal presentations and simply answer questions. "It's much better than the traditional dog-and-pony show," says Goodrich's Gifford. In a long-cycle industry like aerospace, he explains, "things do not change rapidly," so simply fielding questions is a better use of executive and analyst time.
Whatever the format, CFOs who have spent any time on the conference circuit agree that it is important to develop techniques to stand out from the crowd. Bionovo's Chesterman learned his style from his father. "My father was a minister," he says, "so there is a little bit of the preacher in my offering, a bit more drama." Pool's Joslin plays it straight. After all, he says, "I am not a stock promoter. My purpose is to share information with investors in an open and honest manner without being a salesman." He tries for an early time slot, "when I am feeling fresh, energetic, and spontaneous."
Presentations can also be more effective if targeted to the audience. Chesterman, for example, recently rebalanced his mix of science and market information more in favor of science. Given the success of Bionovo's products to combat menopausal symptoms, investors want to know about specific drugs and "why we think they will work," he says. Joslin has had to reorient his presentation to attract value investors in the wake of a 50 percent stock drop.
While most conferences are rigidly structured, there are ways to leverage participation on-site. Executives can fill any downtime in their schedules by working with the one-on-one coordinator. More potential investors can be reached by doubling or tripling up on one-on-ones. And by aligning an announcement with a conference, a company can have a greater impact on its stock price. That's not always possible, of course, says Indevus's Wagner. "For a biotech company like ours, whose news flow is often dependent on the FDA or when a drug trial ends, IR is never a one-day activity."
Still, the one-day experience can offer plenty of insight. Chesterman is always on the lookout for "style points" at conferences. For example, he used to develop Bionovo's presentations on a laptop. But after seeing how the colors were washed out when the presentation was backlit, he changed them for better visibility. And, of course, much can be learned from attending competitors' presentations.
The success of a conference presentation can be hard to measure. Zagg's O'Brien was able to document that more investors have been brought into the fold. Joslin seeks to "minimize volatility in the stock price." While larger companies, like Genzyme, use the forums to rate their sell-side analysts (see "Saving Face Time"), smaller companies such as Indevus measure success in terms of attendance and the quality of one-on-ones — then hope for long-term investment. "The instances of immediate gratification are rare," says Wagner.
Lori Calabro is a deputy editor of CFO.
How to get the most out of your conference slot