Financial Community Perception Surveys

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Is it time to consider a financial community perception survey?

At some point in a public company’s lifespan, it’s prudent to consider conducting a formal survey of the financial community. The primary goal is to reach out to a targeted group of analysts and investors to identify how they currently perceive certain aspects of your business. This analysis can be used to identify gaps that exist between a company’s strategy, market opportunities, leadership, guidance, key metrics, etc., and how the market perceives these attributes and assigns a relative value as an investment opportunity.

Part of best practices in any IR program should be a continuous feedback loop with analysts and investors. Open, candid dialogue is critical to continuous improvement in messaging and communications. Following a non-deal roadshow, investor conference participation, or an earnings cycle is an ideal time to reconnect with your investors and prospective holders to see if your presentation and messaging landed as you intended. If it didn’t, you have the opportunity to make immediate adjustments.

However, a perception study goes way beyond routine feedback. It is not specifically event driven, the outreach is much broader, and the scope of the questions goes well beyond a recent meeting or presentation. The results should reflect longer-term strategic thinking rather than short-term tactical changes. When making the decision to move forward on a full perception study, there are several important things to consider.

Is this the right time?

Some public issuers include perception studies as part of their ongoing IR program and build them into their plans and budget on a regular cycle, such as every few years. Other companies may want to pursue this exercise when they have completed or are contemplating a significant change in their strategy or a financing activity. Another consideration may arise if there is concern that key messages are not resonating with the street or if the street’s valuation doesn’t seem to be in sync with internal growth expectations. A perception study can be invaluable in uncovering where there is a disconnect and reveal opportunities for bridging that gap and/or prioritizing strategies for improvement.

Who should I include?

A perception study should canvass a broad audience that reflects your coverage, your investor profile today, and where you want it to be in the future. It should include not only the analysts that cover your company, but also those that cover the broader sector and your competitors. They will most likely have knowledge of your company but can put it in perspective of the overall landscape. Similarly, you will want to target current investors in a range of sizes. Some of the smaller investors may be much more familiar with your story because their position may be a more meaningful part of their portfolio. Also, look at investors that have changed their positions over time, as well as those that have once had meaningful positions and are no longer involved. Insight as to why they sold or what catalysts they are looking for in the future can be just as useful as why an investor holds. Finally, target investors that you have met but have not yet taken a position, as well as investors that hold your peer group but not shares in your company. Canvassing a broad base of the investment community can reveal certain widely accepted sentiments, rather than only those of the investors closest to your story.

What should I ask?

Create a formal questionnaire that encourages open dialogue. Multiple choice and yes or no answers provide interesting datapoints for quantitative analysis, but getting to what’s behind that sentiment is where real value lies. It’s important to ask questions that make participants feel like they are really adding value. Getting to their candid feedback is crucial to a successful outcome. The questions should be general enough to be used with a broad base of participants but targeted enough that you can gather feedback on the topics that are most important to your purpose. For example, if this initiative is for the purpose of determining what drives the current valuation of your shares, questions should revolve around how what characteristics are most important in making an investment decision. Also consider the perspective of the respondent in developing your questions. As an example, there is a very significant distinction in the question “How would you characterize XYZ Company’s strengths and weaknesses as a business?” and “How would you characterize XYZ Company’s strengths and weaknesses as an investment?”

How do I get the most participation?

It seems that we are all inundated with survey requests these days. “Did you enjoy your recent stay at [insert hotel name]?” “How was your service at [insert restaurant name]?” “Would you have time after this call to participate in a short survey?” Add to that the frequent surveys that are initiated within the investment community sector by the sell-side. As a result, it’s critical to identify a time when you won’t have to compete for mindshare and other critical timelines. Avoid times that overlap with quarterly reporting, so essentially 45 – 60 days following quarter end. Heavy conference times should also be avoided. This is typically the weeks following the earnings reporting cycle and through the midpoint of the quarter. Investors are focused on meeting with management teams, gathering updates, and new ideas. We suggest targeting the weeks just before quarter end and right after, when management teams are closing their books, entering quiet periods, and are unlikely to be on the road meeting with investors.

How do I get started?

Financial community perception studies can be a great way to gain important insight from your current and potential investors to ensure that the way the company is being managed internally is connected to how it is being presented to the outside world. It is also a powerful tool for signaling that your leadership team values the input of its investors and prioritizes shareholder value creation.  Critical to the success of your perception study is identifying a partner that has the ability to understand your business and also has the trust of the financial community to keep feedback confidential and impartial. The team at Gilmartin Group has conducted numerous perception surveys for our clients. If you are considering one for your company, we’d be happy to share our insight with you. Contact our team today.

Leigh Salvo, Managing Director

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