The central problem: explaining your equity story. The complexities: a specialist topic and generalist investors. The horizon: a meeting environment made up of conferences, roadshows and corporate headquarters with meetings usually limited to 45 minutes to an hour. Sound familiar? I would think so.
Communicating with generalist investors tends to rely very much on a personal effort from IR, while meetings with specialists tend to be more target-oriented, making them feel more productive. And yet the shift in the industry toward generalists is quite visible.
Meetings with generalists tend to shake us out of our comfort zone, especially as IROs often get comfortable retelling our stories with much of the same jargon. But generalists are comfortable asking questions – and lots of them. They know they don’t know and are looking to us to point them in the right direction. As they are not necessarily bound by industry beliefs or opinions, they also tend to question the business operations more and, in some cases, are more comfortable with uncertainty and inconsistency. It is this multi-perspective approach that leads them to their overall success in predicting outcomes.
Connecting the dots
So when I tell the Doğuş Otomotiv equity story to a generalist in a discovery meeting, I usually start with the country and the sector. This way I create the basic understanding for currency and country risk, high taxation and customer sentiment. I then move on to talking about my company, the general historical brief and what to focus on – and for my conclusion I connect the dots between all the points I have made.
Depending on how the conversation progresses, I sometimes refer to analysts or how they structure their valuation. By this time I will usually have most of the information set out in front of the investor so I need to direct the dialog to determine a time to continue the story once that investor does its homework. At the end of the conversation I would agree a time for a conference call and, once back at my desk, make immediate contact to get it set up.
After the initial meeting with a generalist, for all other follow-up meetings at conferences or headquarter visits, the update that is typically necessary is, as the name implies, getting the general idea across. So I usually try to cover the general environment first, pointing out all the things that might have affected our business indirectly and then move on to the general operational landscape. At this point, I find that whatever was discussed in the first meeting is either completely understood or needs repeating. You’re unlikely to find this in a meeting with a specialist.
For things to be better understood, I tend to illustrate the necessary detail by drawing and calculating with examples in front of the investor in the initial meeting, and I have created diagrams that I use specifically and only during follow-up meetings of this repetitive nature. A customized slide pack, therefore, tends to be a more productive approach for these follow-up meetings.
By this time, depending on how sincerely the investor is thinking about investing in the company, many would share their models in order to see whether their thought process is correct and whether there is anything else in the assumptions they would have to consider. After all necessary reviews, I would ask for feedback on where we are in the process and how imminent an investment would be.
In some instances, the investor may not be able to share this and in other instances there would be at least a timeline on any investment consideration. Finally, as Turkish legislation restricts companies from seeing their shareholder base, I try to touch base within two to three months and find out the investor’s holding position for our records, if any.
Müge Yücel is the head of IR at auto importer and distributor Doğuş Otomotiv in Turkey