In my more than 25 years as an investor relations professional – having survived the dotcom bust, 2008 recession and 9/11 – I thought I had seen everything. Fast forward to March 2020 when it became clear Covid-19 was gaining strength and poised to become a global pandemic of epic proportions. In short order, the status quo was turned upside down and, ever since, people have been grappling with how to live and conduct business within what has quickly become the cliché du jour: the new normal.
Here is my take, and that of my clients, on how the pandemic has affected how publicly traded companies communicate with investors. It starts with a review of the capital markets.
Even though the IPO market took a punch to the gut in March and April, the capital markets came roaring back in May. According to Renaissance Capital, as of July 20, 2020, 78 IPOs were completed (of which 45 were in healthcare), raising $25.4 bn, down 12.4 percent and 22.3 percent year on year, respectively. At the same time, according to Dealogic, the follow-on market raised $50.3 bn in May – the second-largest dollar volume since at least 1995. All things considered, things could have been much worse.
These results are very positive for companies and investors alike, demonstrating the overall resilience of the capital markets. Even more impressive is the fact that most, if not all, of these deal roadshows were completed via the phone and internet. While I do not predict the end of physical roadshows – two weeks of crisscrossing the country or globe, meeting face to face with prospective investors – it’s good to know that transactions (and a lot of them) can get done even when significant travel restrictions apply.
The strength of the deal market has trickled down to and has had a positive effect on the non-deal market. Within my firm’s client base, over the past three months the total number of non-deal roadshows has increased approximately 100 percent year on year. We attribute this increase to a number of factors: (1) the overall ease with which meetings can be scheduled and held virtually; (2) increased availability of buy-side and sell-side professionals as a result of working remotely and not traveling to visit companies and/or attend conferences; (3) the ability to expand outreach efforts to garner meetings with larger institutions and family offices.
Other positive takeaways from client virtual investor outreach:
- Daily investor calls – Our clients are beginning to view investor outreach as a normal course of daily business activity. Simply put, as opposed to struggling to string together three or four days each quarter to go on the road, our clients are increasingly hosting two or three virtual investor meetings every week from the comfort of their office or home office. They have noted the ease with which these meetings can be slotted into their existing schedules
- More face time with investors – Another positive outcome is that, instead of being pressed for time at a conference or running around New York and being late to each and every meeting, our clients have surprisingly found that their calls with investors during the pandemic have actually become less rushed and are much longer – up to one and a half hours – than the typical 30-45 minutes they were previously allotted. This increased level of face time and engagement has allowed our clients to tell a more cohesive story and build stronger relationships with the buy side and sell side
- Showcase the bench – Finally, our clients have been able to cater to the needs of investors, bringing in different members of the management team, such as heads of sales, production, marketing, and so on, to provide different and deeper insight into their company than the typical CEO or CFO roadshow team allows. This serves as an opportunity, similar to analyst days, for companies to demonstrate the depth of their bench.
The main beneficiaries of increased non-deal roadshow activity have been micro-cap companies, which, as we all know, have struggled to gain traction with the buy side because they receive fewer invitations to present at conferences and have to compete with hundreds of other micro-cap companies to access a finite pool of capital. The positive effect of this change has been two-fold: in addition to the increase in meeting volume, our clients are meeting more high-quality investors and experiencing a dramatic reduction in roadshow travel costs.
But don’t just take my word for it – here’s what our clients have to say:
‘Since the beginning of the pandemic, we have seen a marked increase in both the volume and quality of meetings with the buy side. More than anything, the pandemic has served as an opportunity to broaden our outreach efforts and enabled us to get in front of fundamental institutional healthcare investors. Additionally, with tele-access becoming the norm, we have experienced tangible cost savings while credibly delivering our company message to a potential shareholder base whose investment thesis aligns with our business model and product offerings.’ – Dennis McGrath, CFO at PAVmed, a multi-product medical device company
‘Since migrating to a virtual format for non-deal roadshows and conference participation, we have benefited significantly from the efficiency of speaking with the investment community. As our e-commerce business continues to do well in this environment, it has been critical to continue to socialize our story. This successful initiative including the tangible savings of operating virtually has benefited our company and shareholders.’ – Christian Schenk, CEO of Driven Deliveries, the first publicly traded cannabis delivery service operating in the US
Other interesting findings include:
- International investor conferences not resulting in exposure to international investors – We’ve had a number of clients participate in virtual conferences aimed at attracting European investors. Interestingly, as opposed to meeting institutional investors from London, Zurich and Frankfurt, they’re meeting investors from New York, Chicago and San Francisco. It seems that as a result of the virtual format of events, US investors that may not have historically traveled to these events are now attending – even dominating – them
- More detailed and frequent conference calls – To overcome the lack of face-to-face interactions with investors, companies are also providing an increased level of detail during earnings conference calls, as well as hosting intra-quarter investor calls that provide additional insight into key announcements, such as clinical readouts for our life sciences clients. With diminished scheduled touchpoints throughout the quarter, our clients are going above and beyond the status quo in terms of disclosure and the level of detailed insight they’re providing into the inner workings of their business and the trends affecting their industry. At the same time, many of our clients are experiencing an increased level of investor participation in their earnings calls.
Without a doubt, the past four months have been devastating to populations around the globe and will take years to overcome. Fortunately, Covid-19 has not broken the will or spirit of investor relations professionals or their clients: they are determined to not just get through the current situation, but rather adapt and innovate in a world that has forever changed.
Jeffrey Goldberger is managing partner at KCSA Strategic Communications