Evaluating your sell-side engagements
It’s important for IR teams to be able to assess whether the company’s sell-side efforts are on the right track and efforts are paying off.
‘Of course, everyone would like all ‘buy’ ratings for the company,’ comments Revvity’s Steve Willoughby. ‘But I think a better and truer evaluation of how successful your sell-side engagements are is how accurate the analysts’ facts are about your company, and whether they are understanding your disclosures and messaging.
‘They may not always agree with what the company is saying, but if they are at least portraying factual data and guidance about the company in an accurate and consistent way, I think that shows they are hearing you, are engaged and are paying close attention to your company.’
Success is about the quality of engagement and coverage, rather than simply the number of covering analysts
Mitch Haws of Skyworks echoes this sentiment. ‘There are fewer analysts covering more firms so there is less analysis and more earnings and other event-driven coverage,’ he notes.
‘This isn’t a criticism: it’s just reflective of the new environment. Do analysts get the nuances of the story and are their estimates current and realistic? Even if their coverage isn’t positive, is the messaging on target?’
The value of being proactive in seeking feedback should also not be underestimated, says Informatica’s Victoria Hyde-Dunn.
‘Your messaging should resonate as seen in published research such as post-earnings and from events such as investor days,’ she says. ‘A post-event perception study or survey can also help determine whether your objectives were met.
‘Use non-deal roadshows or conferences to answer questions and solicit constructive feedback about your firm. Folks are open to sharing the positives and negatives around your story. It’s a two-way street.’
Engagement and coverageIt’s clear that proactive engagement alongside effective targeting and a clear and compelling narrative are all important factors in boosting coverage, but for those IROs still finding the sell side a tough nut to crack, Hyde-Dunn has some final words of advice.
‘You need to have patience,’ she says. ‘Relationships with sell-side analysts aren’t built overnight – you have to be credible and transparent and appropriately manage expectations. It takes many months of engagement and may not lead to direct coverage.
Even if the coverage isn’t positive, is the messaging on target?
‘Coverage and engagement are two different things. Work on expanding your engagement with non-covering analysts is an essential way to help raise your company’s visibility.
Getting mentioned in an industry research report, being a stop on a bus tour or even getting invited to participate in a fireside chat with a banker or sell-side analyst are all great exposure. Working with independent investment firms and paying for coverage is also a viable option for micro and small-cap firms. It’s important to remember that success is about the quality of engagement and coverage, rather than simply the number of covering analysts.’
Our IR experts share where their engagement with the sell side has proved particularly successful
‘Through a mutual connection, I met a specific buy-side portfolio manager and thought my company’s stock would be an excellent fit for her portfolio. I found out that she was connected to a sell-side analyst and we tag-teamed to help her come up to speed on the story and eventually take a position.’
– Victoria Hyde-Dunn, Informatica
‘In the last few years, we’ve carried out a number of virtual fireside chats with key analysts focused on specific topics such as an area of our business, or a strategic priority. It’s a great way to get in front of a larger group of investors and carry out a deep dive into topics that cannot be covered at length during quarterly earnings calls or conference presentations. The subsequent analyst note also further builds investor awareness.’
– Olga Levinzon, Coty
‘After moving into investor relations, I was surprised by how some analysts never really interact with the company outside of the day of quarterly earnings. I’ve found that being proactive and intentionally reaching out to my covering analysts to set up a time to connect within the quarter has been well received on their part, given their very high acceptance rate. It has helped facilitate the conversation and understanding of the company to go one or two layers deeper than you might accomplish on a quick call immediately after reporting earnings.’
– Steve Willoughby, Revvity
Find your lead steer(s): Everyone has an analyst who stands out in research, engages with you, does his/her homework on the sector and champions your company and industry.
Get organized early: Map out your calendar as far in advance as possible – at least six months out – especially in-person traveling with executives. Executives don’t need to be in every meeting, so think about how you, as the IRO, can extend travel time and your budget.
Relationships matter: You may work multiple times at different firms with the same sell-side analysts and their corporate access teams. It's a small world in IR, with only one degree of separation.
Recognize that building sell-side relationships is a long, tedious process and requires patience. We have 30 analysts covering us and typically prioritize those who need help along the learning curve.
Take the time to build understanding of your story and don’t overreact to analysis that isn’t favorable.
If you’re under-followed, focus on buy-side analysts. Attracting new coverage is tough given the dynamics in the sell side at the moment. Play the long game: the sell side doesn’t work for you.
– Mitch Haws, Skyworks
Be proactive, not reactive. Don’t wait for the phone to ring or someone from the buy side or sell side to email you. Be intentional and build rapport with those who follow your firm closely: relationships matter.
Make it as easy as possible for sell-side and buy-side analysts to track your company. If you have confusing or complicated metrics, disclosures or businesses, find a way to make it easier for outsiders to quickly interpret and digest.
Try to build a personal relationship with analysts you are targeting for coverage. Once you can move the relationship beyond just strictly business to one where you really get to know each other, it helps build trust, which can go a long way.
