No small victory for small-cap IR

Mar 31, 2014
<p>A global selection of small-cap IROs who successfully deal with attracting sell-side coverage, targeting and retaining the right investors, and maintaining liquidity for their stock</p>

Pacific Basin Shipping

Emily Lau, Pacific Basin Shipping
‘Our objective is to meet each of our top 20 investors each quarter’ – Emily Lau, Pacific Basin Shipping

Pacific Basin has been a near-permanent fixture in the IR Magazine Greater China Top 30 and often comes away from IR Magazine’s China Awards with the best in sector award for transport. The Hong Kong-listed firm achieved just that in 2013, as well as reaching an impressive 27th place in the overall IR Magazine Asia Top 50. In 2012 the company’s head of IR, Emily Lau, and her team walked off with four awards and appeared on four further short lists, including recognition for the company’s CEO, Mats Berglund, and CFO Andrew Broomhead.

Lau works alongside another IRO in a compact, two-person team, and their performance reputation in IR is all the more impressive when considering the shipping industry has not been a top target for investors in recent years. Many potential shareholders are waiting for a turning point in the success of the logistics sector before choosing to back the firm, a factor that has led Pacific Basin to focus its IR program on continuous engagement. Lau, who has been at the firm in an IR position for the past nine years, prides herself particularly on her efforts to travel to meet investors and communicate with them online.

What’s the biggest challenge currently facing small caps when it comes to IR?
Internally, the small size of the IR team: we are only ever one or two people, which is not enough to do all the work required. Externally, we are less attractive to some investors when compared with large-cap firms. Sometimes, market cap is key when investors are deciding whether they want to meet you during a roadshow.

Has a meeting with an investor/analyst ever influenced or helped shape your strategy?
We conduct our own investor perception studies annually to gauge our constituency’s perception of our annual report, IR program and the group’s wider strategy. We always welcome comments and feedback from the Street.

How would you describe your tech strategy for IR?
Our website is very important, not only to investors but also to all of our stakeholders, including our customers, suppliers and employees. We also maintain company pages on a number of social networks, including Facebook, LinkedIn and Twitter. We find the audience is different on each of these three social media tools: more staff, crew and their families will visit our Facebook page; professionals are more likely to go to our LinkedIn page; and ships’ agents and brokers tend to use our Twitter page. We also provide webcasts of our calls after results announcements.

Do you focus on wider macro or industry issues when keeping investors informed, or is the company view smaller in scope?
Actually, both. We are an industrial provider of freight services to producers and end-users of raw materials and commodities, which a lot of investors consider as a signal of the world’s economic development. At the same time, however, they are very interested in the company’s development from time to time.

What tips would you give an IRO at a small-cap firm in terms of attracting investor interest or research coverage?
Actively engage with analysts and investors. We organize both online and telephone perception studies every year to get feedback from investors on our group strategy and IR program.

We also have our own analyst day every year, to which we invite department heads from our commercial, operational or technical divisions so they can share their experience with analysts. We produce an online annual report for investors to provide easier access to our financial information. And we have our own key performance indicators to measure the performance of IR as well as having an objective of meeting each of our top 20 investors every quarter.

Capstone Mining

Cindy Burnett, Capstone Mining
‘Be responsive: listen to what they want and provide it’ – Cindy Burnett, Capstone Mining

Vancouver-based Capstone Mining is a relatively new, exploration-focused firm that came together as a result of the merger of a number of smaller mining companies and which, until recently, had no investor relations function. In 2011 mining IR veteran Cindy Burnett was hired to develop Capstone’s IR program in-house, helping the management team solidify the company’s external messaging and focus on institutional relationships. The good work of her three-strong team led Capstone to feature in this year’s IR Magazine Canada Top 50, and to be short-listed for the small-cap grand prix for best overall IR and best IRO awards.

As an IRO at a small-cap firm, how are you finding wearing several hats?
My team takes care of all communications for the company and has an oversight role in setting standards for our operating sites in terms of community and other communications. I am a member of the management team first, however, with IR as my portfolio, as opposed to some companies where IR is your world outside of the management of the company.

I think that’s been a huge factor in the success of the IR program here. A lot of people talk about ‘having a seat at the table’ and this is a company where that’s truly the case. Firstly I’m involved in strategy-setting and decisions that are being made in all the management meetings, in presenting to the board. Secondly, the rest of the management team includes my peers; that’s really given me a strong platform.

How do you conduct investor targeting?
Our investor base is primarily Canadian, with a preponderance of mining investors. We have reached a point now where pretty much anyone in Canada that should own us, does own us, so we’ve turned our attention to targeting foreign investors, giving us access to a much larger pool of capital. Our targets tend to be shareholders that are active in the mining space: we’re reaching a size they should be interested in and we’re starting to get enough liquidity to attract them.

I’m a big believer in using the broker’s sales team. The criticism of this is that you’ll only see that broker’s clients, the ones that are generating trades, but if you spread it across the platform, using both large banks and boutique firms, you’ll usually cover everyone.

What tips would you give an IRO at a small-cap firm in terms of attracting investor interest or research coverage?
Make it easy for [investors and analysts] to own the stock or cover the company. Offer management meetings, be responsive, be transparent, listen to what they want and then provide it.

Also, understand that analyst relationships are important, even if they don’t cover your company, and every bit as important for a small-cap IRO to cultivate. When an analyst is talking to an investor about your space, you want him or her to be able to say, Yes, I know those guys well and answer questions about you, even in the absence of official coverage.

At Capstone we have 21 analysts covering us, so an investor can get a lot of different viewpoints. But the normal issue at a much smaller-cap company is to get any analyst or institutional attention at all. I’ve had both experiences: at the last company I worked for – where just two or three analysts were covering us – I considered using a paid-for research firm just to give a broader view. It’s really identifying the niche, identifying the analysts in the space who would have an interest. If you’re dealing with an analyst or fund that isn’t happy with marketing, you can hire the services of a consultant.

Wright Medical Technology

Julie Tracy, Wright Medical Technology
‘The biggest challenge is finding ways to cut through the clutter’ – Julie Tracy, Wright Medical Technology

This year marks Wright Medical’s rapid ascension up the US Top 100 rankings: after registering a 135th-place finish last year, the medical device company is now rated as the seventh-best company for IR in the country. Such success is in no small part down to the influence of the company’s head of IR and chief communications officer, Julie Tracy, who has guided the company to a receptive investment community, and to three IR Magazine Awards, including the grand prix for the best IR program at a small-cap company.

Has a meeting with an investor/analyst ever influenced or helped shape your strategy?
I believe there is always something you can learn from your investors and analysts that will help you communicate your story better. I am fortunate to be part of a management team that values investor feedback and places a high value on soliciting regular investor input, whether through an informal quarterly pre-earnings call survey or a formal perception study. Ultimately, it’s all about communicating a consistent proposition to build value, and feedback from your investors and analysts is an important component in achieving this goal.

How would you describe your tech strategy for IR?
I spend most of my time making sure we do the basics really well. For example, ensuring our website is updated and offers relevant content to enhance our investment proposition. I also co-ordinate with our media team on our company’s Facebook page and Twitter feeds. We have dipped our toe into videoconferencing and I see this as a technology that will play a bigger role in the future for our investor outreach.

Do you focus on wider macro or industry issues when keeping investors informed, or is the company view smaller in scope?
As a fast-growing medical technology company, we primarily focus on issues that are more specific to our company to enable investors to gauge the progress and execution of our plan. That said, there are times when macro issues in the healthcare environment – such as government policy, reimbursement or regulatory considerations – might come into play. It’s important to be able to strike the right balance for your specific industry and company.

What tips would you give an IRO at a small-cap firm in terms of attracting investor interest or research coverage?
Although some small caps may enjoy less sell-side coverage and deal with tighter constraints on time and resources, ‘small’ can definitely have its advantages, too. I’ve found an astute, well-informed, small-cap IRO who can communicate the company’s strategy as well as the CEO and CFO can – and should – doing investor marketing and meetings on his or her own. You can also attract attention by focusing on building deep relationships with a smaller group of analysts and investors. Don’t be afraid to get out there!

What’s the biggest challenge currently facing small caps when it comes to IR?
The biggest challenge for small caps is keeping your story in front of investors and finding inventive ways to ‘cut through the clutter’ and stand out. Being proactive in seeking out opportunities is key: for example, attending investor conferences or perhaps arranging a non-deal roadshow with an analyst who doesn’t currently cover your company are ways to increase visibility and exposure to the investment community.

What is the most useful advice you have been given during your time as a small-cap IRO?
To always remember that your ‘credibility is the currency you trade in’. Always be fair, balanced and transparent, and the rest tends to take care of itself.

Great Portland Estates

Stephen Burrows, Great Portland Estates
‘We recently used virtual reality goggles at an investor event’ – Stephen Burrows, Great Portland Estates

Great Portland Estates has been a regular at the IR Magazine Awards – Europe for the past four years, taking home the real estate sector award in 2013, two years after Toby Courtauld claimed the prize for best IR by a CEO. Following a management change in 2002, the firm divested a string of non-core property holdings in order to focus purely on central London. This proved a timely move by the real estate investment trust, which was able to raise funds during the downturn and buy prime-located assets at very low prices. Great Portland has since seen its share price increase steadily, causing the firm to recently outgrow the small-cap category it has historically competed in. Stephen Burrows, the company’s head of financial reporting and investor relations, started his career as an accountant in the civil service, joining Great Portland from Ernst & Young’s (now EY) real estate team in 2003.

As an IRO at a small-cap firm, how did you find wearing several hats?
Prior to my arrival, there was no dedicated IR function at Great Portland apart from the activities of the CEO and CFO. My involvement in IR started four or five years ago, when I started helping out the CFO with the sell side. My role increasingly spilled over from the finance side and, a couple of years ago, my job title caught up with what I was actually doing. Now, between a third and half of my time gets dedicated to IR. I head up the accounts team as well, pulling together the annual report, quarterly numbers and valuations.

How would you describe your tech strategy for IR?
We’ve recently launched a Great Portland Estates IR app that gives people the ability to get to products on our website in a more user-friendly fashion on an iPad. It’s very recent so we’ll see whether it actually makes any difference.

We also use a product called CBS Direct, which has information on all our shareholders and a database of all the fund managers around the world. If we’re thinking about who we’re going to see, we’ll have a look through who has been a recent buyer or seller in our stock, and see who’s underweight or overweight. Over the last four or five years we’ve been much more forensic in making sure we actually record who we’ve met and when, and keeping more meeting notes. All this is typically held on an iPad so we’ve got it to hand when we go into a meeting.

We also use iPads in investor meetings to show images of key assets. More recently, we used virtual reality goggles at an investor event to bring a large development to life. We don’t currently have a social media presence, but we might do a bit in the future.

What tips would you give an IRO at a small-cap firm in terms of attracting investor interest or research coverage?
We are, if anything, over-covered, as a relatively small company with 20 analysts covering us. The key to getting people to cover you is getting them really engaged. We make sure we keep them interested by getting them out and about around the business: taking them on one-on-one tours around some assets, getting them on the roofs of buildings to look out across our big development sites – just making it a bit more interesting.

We are quite privileged: as our assets are focused in the center of London, we can walk out of our offices and easily see 75 percent of the portfolio within a very short period. If we were a European manufacturing firm, getting investors and analysts around different parts of the business would be much harder.

Galapagos

Elizabeth Goodwin, Galapagos
‘Keep reminding people of your story and they will come round’ – Elizabeth Goodwin, Galapagos

Euronext Brussels-listed Galapagos is a biotech company set up in 1999 as a joint venture between Tibotec, now Janssen Therapeutics, and Crucell, where US-born Elizabeth Goodwin, initially a marketing and PR professional, first learned the IR ropes from her CFO. She joined Galapagos to set up the IR function after its public debut in 2005 and has since greatly enjoyed ‘pitching the story to so many people’ in a role where ‘no two days are the same’. The firm, which is headquartered in Mechelen, Belgium with operations in Leiden in the Netherlands, ranked seventh in the best in country award for Belgium & Luxemburg and 25th in the healthcare sector at last year’s IR Magazine Awards – Europe, as well as gaining a high score for the quality of its investment meetings.

How is your team set up?
Our team is really quite small, with one department head, one junior person and a team of secretaries we share with several other teams. The head of IR does more front office and strategic work, is responsible for all external and internal communications, and liaisons with regulators, banks and so on. The junior person supports more back office areas but is also involved in roadshows.

Has a meeting with an investor/analyst ever influenced or helped shape your strategy?
Yes, we are very fortunate to have great dialogues with our shareholders and investors. We try to listen as much as we talk so that we learn what the markets are thinking on certain developments.

Do you focus on wider macro or industry issues when keeping investors informed, or is the company view smaller in scope?
We do bring industry issues into the picture when pitching, but macro issues are more of a sidenote. We are in the business of discovering medicines that work in completely new ways, and unfortunately people get sick no matter how the economy does. Our investors tend to want to zoom in on our specific investment story.

How would you describe your tech strategy for IR?
As a leading European biotechnology company, we prefer to bring our story to investors in person as much as we can and organize conference call follow-ups or site visits. This really helps us to communicate clearly and get feedback on our story. We mainly rely on press releases and our website and webcasts to support these efforts. We have shied away from social media until now, simply because our team is so small we can’t man the effort.

Have you benefited from having foreign investors?
One of the keys to success for a European biotech firm is to attract larger US specialist healthcare investors, as there is much more investment funding there and risk appetite is larger. We have worked hard to build a following in the US and now have around 35 percent US shareholders.

How do you conduct investor targeting?
We access databases, ask peers, ask investors who else we should see, and use our networks as much as possible. We also have great IR support in the US from Susan Noonan, a communications consultant providing IR services to healthcare and biotech firms, who continues to introduce us to new and very useful contacts there.

What’s the biggest challenge currently facing small caps when it comes to IR?
Getting the most bang for your buck with limited budgets and small staff numbers. You have to love to work hard in order to get to the next level.

What tips would you give an IRO at a small-cap firm in terms of attracting investor interest or research coverage?
Be patient and keep chasing. Keep reminding them of your story, and they will eventually come round. They are very busy, so help them in every way and show quick turnaround times.

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