‘Each of them brought something different’: The value of working with non-covering analysts

Oct 27, 2020
Panelists at Small Cap Forum discuss tactics for working with sell side

There are a number of benefits to be gained from marketing with non-covering analysts, even if you don’t expect them to end up following your company, according to panelists at the IR Magazine Forum – Small Cap. 

At the virtual event, one session focused on how to boost analyst numbers now, when factors such as Mifid II, economic pressure on the sell side and Covid-19 are making it hard to attract new followers. 

But the discussion also explored the value of working with analysts from outside your coverage universe. Such opportunities have grown under Covid-19 as virtual engagement allows companies to attend more events. 

Jason Tsai, head of investor relations at Synaptics, said covering analysts always get priority. That said, other analysts can provide additional value to a company. 

‘We attended eight or nine conferences this quarter,’ he said. ‘Half of them were [put on by] covering analysts, half of them by [non-covering analysts]. But each of them brought something different.’

Tsai said he gauges the effectiveness of a conference by the quality of the schedule and whether the company is getting the chance to meet new investors. 

‘Are we just seeing the same investors over and over again?’ he asked. ‘For us, even throughout the quarter, we were still consistently getting about 20 percent-30 percent new investors at every conference, which in my book is a pretty solid number.’

Tsai noted that non-covering analysts will have relationships with investors your covering names do not. In addition, he said some brokers put on excellent events that are well worth attending regardless of your connection with the firm. He mentioned one bank where he had given up trying to get coverage, but still attends the conference regularly because it’s ‘one of the best’ he goes to. 

Victoria Hyde-Dunn, head of IR at 8x8, pointed out that non-covering analysts still get questions on your company. ‘It ultimately behooves you to have a relationship with the sell side, even if it doesn’t cover you and only covers your peers,’ she said.

Of course, building such relationships also improves your chances of picking up coverage in the future, added the panelists. ‘You never know, right?’ said Hyde-Dunn. ‘All of a sudden a slot opens up and you might be top of [the] list.’

Peter Tsvetkov, director of IR at CTT, said his company has been on a rollercoaster ride of analyst coverage over the last five years. The Portuguese postal service climbed from four to 16 covering names, before falling back to four again, which Tsvetkov put down to a sharp fall in market value alongside Mifid II. Since then, analyst coverage has increased to eight brokers. 

Over the last two years, Tsvetkov has focused on increasing coverage. To help with that challenge, he said he has gone on roadshows and to meetings with non-covering firms. ‘[We are] testing that and providing them with an incentive to cover us, to [show] we have interest among the investor base,’ he said.

‘It’s been a challenge, but we believe we are on the upswing once again, doubling coverage in a couple of years. Hopefully one or two more analysts will join in the next year or so, and we’ll be back in double digits.’

To access recordings from the IR Magazine Forum – Small Cap 200, please click here.

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