Getting the right company people engaged with the right analyst
Building and sustaining coverage is one of the main aims of the game with sell-side interaction so what steps can IR professionals take when looking to build their coverage?
‘When I have an initial conversation with any potential new analysts, I make a point of acknowledging how important management access is to the sell-side business model,’ says Timken’s Neil Frohnapple. ‘I let them know I will immediately put them in the non-deal roadshow/conference rotation and do everything in my power to allocate them a day as soon as possible after they initiate coverage.
‘As a follow-up, I’ll ask if I can add them to our analyst distribution list and then check-in with them at least once every six months.’
Liz Scorer of Foresight Group advises that it’s important to clearly identify your potential targets in the space. ‘Make a long list of who covers you, who covers your peers and who the aspirational targets are,’ she says.
‘From that longer list, you can then make a more realistic shorter one and start identifying potential hooks to find your ‘in’: have you had any prior contact? Do you have a common link with any of their other activity? If you use a financial PR agency, can it offer any input? It’s also worth exploring the issue with your IR peers and asking their advice. Yes, it’s a competition for capital, but many IROs will give 10 minutes of their time to help out a fellow IR professional.’
Make a long list of who covers you, who covers your peers and who the aspirational targets are
For Victrex’s Andrew Hanson, a ‘quality over quantity’ approach and the tactical use of different company team members has proved effective. ‘It’s good to have a reasonable spread of coverage but, if several of your covering analysts are not engaged outside of reporting cycles or are simply based on results analysis, it may have limited influence on the wider market,’ he says.
‘Engagement through key leaders in an organization – not just the CEO or CFO – is important, too. For example, we use our chief scientist to explain how our products help reduce carbon dioxide in cars and planes. IROs need to have an engagement plan and a clear vision and be willing to spend the time with analysts as they build their knowledge. They should offer access to management and others so that the culture and aims of the company come through, rather than just the numbers or the near-term outlook.’
Scorer agrees that the use of department heads can add an extra dimension of interest for analysts and has used the tactic to engage them at dedicated in-person events, such as business breakfasts.
‘You don’t always have to spend a lot of time and money on engagement – sometimes it’s more about getting the right people from the company in front of the right analyst,’ she says. ‘Once a quarter or so, we host smaller structured events that might, for example, look at one business division with department heads. These colleagues are really passionate about what they do and how they do it, and these events mean we can capture the interest of the sell side and increase its knowledge of us.’
