As Warren Buffett says: “Time is the one thing you can not buy”. The time that a CEO spends on investor relations is valuable time away from customers, prospects and employees. If the time a CEO invests in investor relations is productive, it has a profound impact on the value of the business. But too often CEOs spend far too much time on unproductive investor relations activity that not only has diminishing returns but in fact, kills value.
March 12, 2019 - IMS Investor Relations (IMS) announced that three of its client companies will participate at the 31st Annual Roth Conference, to be held March 17-19, 2019 at the Ritz Carlton, Laguna Niguel in Dana Point, California. Senior management from XPEL, Inc. (TSXV: DAP.U), Sharps Compliance, Inc. (Nasdaq: SMED) and Hudson Technologies, Inc. (Nasdaq: HDSN) will be available for one-on-one meetings.
According to a poll conducted by SimCorp, over 50% of buy side participants in North America say they will need to comply with MiFID II requirements. As a result, asset managers are expected to source considerably less research from large investment banks and brokerage firms, instead focusing on strengthening their in-house research capabilities. This development will likely lead to public companies increasing the amount of time they allocate to calls, meetings and conferences with buy side individuals. In addition to speaking directly with management, an increasingly popular trend among buy side professionals is their rampant exchange of investment analyses with one another within popular, online investor networking communities such as SeekingAlpha, SumZero, Value Investors Club and many more.
Interacting with investors, either in person or by phone, is the lifeblood of a public company. But how much time should management allot to each meeting? Each situation is different, and should be evaluated in line with the complexity of your business and industry, and the level of familiarity an investor is bringing. For example, an investor call or meeting following a straightforward quarterly earnings report can be allotted less time than a call following a material announcement or major industry shift; certain developments require lengthier conversations than others. In any case, setting guidelines both internally and with the call or meeting participants not only helps to manage your time appropriately, but also helps focus the conversation.
At Berkshire Hathaway, the annual shareholder meeting is a 3-day event which includes a shareholder shopping day, a 5K race, shareholder night at a local Omaha steakhouse and of course the meeting itself which begins at 9:15 a.m. and wraps up approximately six hours later.
At IMS, we work closely with clients to identify, and then obtain access to, the right conferences for clients. Just as important as choosing the right investor conference is ensuring that your time spent at the conference is productive. A few guidelines:
What is MiFID II?
MiFID stands for The Markets in Financial Instruments Directive. It provides the framework for legislation regarding investment services in Europe. MiFID II is the second installment of the initial directive aimed at addressing issues that were not fixed in the first version. Effective January 3, 2018, MiFID II’s mission is to improve the transparency and accuracy of research in the market and to enhance investor protection. Although MiFID II was legally introduced to the European Union last summer, The European Securities and Markets Authority (ESMA) was given until January of 2018 to create detailed rules for the member states to implement. The directive has set forth to change parts of how the market functions including overall market structure, governance, investor protection, business conduct, investor research, client categorization, algorithmic trading, best execution, pre-post trade transparency, transaction reporting, trading rules, and third-country access.
Leaders in financial research are calling ESG a global movement. World renowned companies like Intel and Coca Cola are creating innovative approaches to integrate ESG into their investor relations, and the majority of the leading large public companies are publishing ESG reports. But what are small public companies doing and, more importantly, what should small public companies be doing? As more and more companies adopt sustainable policies and begin disclosing ESG information, this question will only become more imperative.
Unfortunately, stocks go down -- often faster than they go up. Stocks frequently decrease for reasons tied to performance, but stocks also decrease for reasons unknown or unrelated to a company’s business. Smaller public companies with lower liquidity are particularly susceptible to this volatility.
Who buys microcap companies? More investors than most companies think. It is an amorphous and elusive audience, but one also filled with fundamental investors looking to outperform the averages by capitalizing on an inefficient sector. At IMS, we live and breathe among this group.