The aim of a for-profit company, public or private, is to earn a profit through its operations. In a perfect world, stock returns of public, for-profit companies would be positively correlated with corporate fundamentals; unfortunately, equity markets are inefficient. Scheduling a non-deal roadshow (NDR) is one of the easiest ways for senior management to introduce and educate institutional investors about its company and products.

The ultimate objectives of an NDR are:

  • Meet potential investors of your company
  • Educate and correct any misconceptions investors may have about your company or products
  • Listen and learn from industry analysts/experts

Successful NDRs don’t happen on accident. They take planning and preparation. Read through the factors below to see how to get the most out of your company’s next NDR.

Determine which institutional investors to meet. Institutional investors come in all shapes and sizes, so it’s best to determine the ultimate goal of your NDR before building a meeting schedule. Investor category (growth, income and value), investor type, assets under management, typical position size, average holding period and location can all influence the decision-making process of current and potential shareholders. For example, a small market capitalization company with thinly-traded shares should not focus primarily on meetings with large mutual funds. While some funds may want to meet with small companies, many may request a meeting only to learn about a potential competitor to one of its own companies. Instead of scheduling a full day of meetings with large mutual funds, meeting with family office-type investors could prove to be a better use of management’s time.

Determining which type of institutional investor to meet can also determine what region of the country a company should visit, as certain cities in the U.S. may have more hedge funds than mutual funds or more growth investors than value investors.

Know who you are meeting with. Analysts and portfolio managers are all different. Typically, analysts are specialists in sectors and industries, while portfolio managers focus on a much broader group of sectors. Analysts usually ask detailed oriented and product specific questions, while portfolio managers generally ask macro-level questions. Companies should also be aware that portfolio managers are the ultimate decision makers on what and when to buy and sell.

Be prepared. The adage “you only have one chance to make a first impression” holds true for NDRs. Whether meeting with potential investors or long-term shareholders, companies should always be prepared to make a great first impression. Management should know who they are meeting with, demonstrate company and industry knowledge, and stick to a clear, consistent message. Investors are much more confident about investing in a company when they know the right personnel is in place.

Avoid selective disclosure. In August 2000, the SEC announced Regulation Fair Disclosure, commonly known as Reg FD. This regulation mandated that all public companies release material information to all investors at the same time. With this new regulation, companies must be very cognizant of what information has and has not been made public. Selectively disclosing material information during an NDR is illegal, and it brings into question the integrity of management.

Conclusion
Non-deal roadshows are an integral part of being a public company and can be beneficial to both companies and investors. Having a clear plan, building a solid schedule and being prepared are key factors for a successful NDR.

Greg Chodaczek, Managing Director