Metromedia's IR repositioning
In the beginning was Metromedia International. And the Street looked, and said, 'What on earth is that?' And then came IR and all was explained. Last year, when billionaire John Kluge and partner Stuart Subotnick floated Metromedia International, following it shortly with Metromedia Fiber Network and Big City Radio, it was a real-time experiment in before-and-after IR. As Subotnick says: 'We were coming back to the public market after twelve years, so obviously we no longer had anyone internally for investor relations.' He adds, 'We like to run companies, but we'd never had to talk to anyone but ourselves before.' To outsiders the story looked somewhat confusing.
IR consultant Gary Kraut was made well aware of the problems when his agency took on the brief: 'People looking at Metromedia's financial statements would have found it hard to see what the company was doing. And what they did see didn't look good because the whole story was off the balance sheet, off the income statement and in the footnotes.' Foreign partnerships and start-ups showed as one-line - usually income-free - items, while the consolidated statements gave the impression that the major business of Metromedia International was its anomalous Snapper lawnmower company.
New focus
In fact, since selling off highly-visible interests in movie theaters and film distribution, Amex-listed Metromedia is mainly focused on emerging markets communications - wireless cable TV, paging and mobile radio in eastern Europe and China. Also listed on the Amex, Big City Radio operates much closer to home with a Manhattan country music station as well as stations in Chicago and Los Angeles. Nasdaq-listed Fiber Network, though closely held by Kluge, is even easier for investors to grasp: it operates a fiber optic network around New York City which is expanding across the US and to the UK.
From GA Kraut Co's preliminary investor survey for Metromedia, Silvia Kessel, Metromedia's CFO and president of Kluge & Co, gained an understanding of what their investors needed, and above all what those shareholders wanted. 'They attacked this the way we'd attack a business position,' she says approvingly, 'finding out what your customers are looking for, and doing everything you can to satisfy them.'
'We've seen a broadening of Metromedia's investor base since the company became more understandable and recognizable by the investment community,' is the blunt verdict of analyst Frederick Moran at Furman Selz. 'And that's due to the increased amount of information available.'
Informal pursuit
Early on in the process Kraut and his colleagues discovered that Wall Street wasn't thinking clearly about Metromedia. 'People just thought they should be in it because Kluge was in there. It was the Warren Buffett effect, getting on the coat-tails. Nobody really knew what business they were in.'
Investor relations is partly about just getting the story out and Kraut, along with his co-director Eric Leeds, began by defining that story with the company. None of the businesses were easy to explain. Complex technology mixed with political volatility and emerging ex-communist markets are bad enough, but it was further complicated by the type of local partnerships you need to work in that environment. Even Big City Radio involved hard-to-understand technology to boost the footprint of cheaply acquired suburban stations. It acquires two or more stations broadcasting on the same frequency and simulcasts them to achieve broader coverage in metropolitan markets.
The story, they decided, was the great expectations inherent in Metromedia International's hundreds of millions of potential customers worldwide. 'We had to work with the management teams to create a clear message. And then we had to position the financials so people could easily appreciate that message. The sell-side felt completely ignored and was extremely frustrated. They needed tremendous handholding - and no-one was holding their hands,' says Leeds.
Krant and Leeds have not exclusively focused on the sell-side since, though. 'The buy-side relies a lot on buy-siders talking to each other,' says Leeds. Consequently, they have spent a lot of time getting executives to meet money managers. But with a very busy management running 30-40 different operating companies, 'It's up to the IR practitioner to use as little management time as possible, but as effectively as possible. Of the ten things we would like to do, we have to decide what the two most important are, and then do those so well that they make up for the rest.'
That boils down to the message which, Leeds says, has to be 'that much better, since we can't provide the numbers that would normally make them comfortable. In fact, the message has to be so good you don't have to give fundamental guidance. The spreadsheet is something investors create to give themselves confidence. We want to position these companies as no-brainers, where investors won't need that reassurance.'
At GA Kraut's urging, Metromedia is currently recruiting someone to do in-house IR for all three listed companies 'and maybe others down the line.' However, Subotnick says, 'In addition we're going to need GA Kraut to continue its work, to bridge what we know with our investors, and get the right format set up: meetings, conference calls, one-on-ones and the like.'
Subotnick adds that the IR firm has 'made us more responsive to investors, made us better communicators. And they have made us talk to the people who have put their dollars in our company. We're never going to be perfect, but those shareholders critique us constantly, giving feedback, positive and negative. The negative is what's important. You only learn from discovering what you're doing wrong.'