CEOs/CFOs – Maximize Your Time on the Road

Posted by on October 15th, 2012

The leaders of publically-traded companies often face a Catch-22: They’re reluctant to go on the road to meet investors because it takes away from running their business. But if they don’t meet with investors, how will they get anyone excited about their stock?

The conundrum is especially acute for CEOs and CFOs of smaller, lesser-known companies. And with some investors shying away from equities, the competition for investment dollars is fierce. In today’s market, simply going through the motions is not enough; leaders must go on the road. But leaders of these smaller companies must also maximize their time. Those that do will be rewarded with fair valuations, higher stock liquidity and more attention from the sell-side.

The key to maximizing investor outreach is to focus on quality, not quantity.

KCSA was recently approached by a small-cap company that had a robust investor relations program already in place, but felt that its outreach effort was not being maximized.

Our initial audit of the Company’s investor relations effort quickly confirmed management’s concerns. But the problem wasn’t how much time the Company spent on the road; it was who it was meeting and where it was going.

During 2011, management spent a total of 32 days meeting with investors at conferences and on roadshows. To put that in perspective, according to a study by Xb Insight and IR Magazine, the average U.S. CEO spends 17 days per year and the average CFO spends 26 days per year meeting with investors at conferences, roadshows and other IR events. While it’s common for us to be sought out by companies who haven’t invested enough time in enhancing their exposure and supporting their sell-side analysts, this was the first time we were approached by a company that was overdoing it.

Although there’s no formula, we generally advise most of our clients to participate in conferences sponsored by the sell-side firms that cover them. That equates to 3-5 conference presentations per year for the average small-cap company. We also recommend they spend about two days per quarter on roadshows that we coordinate and co-sponsor with one of their research analysts.

Returning to our small-cap company, a deeper look into its investor relations activity uncovered a number of inefficiencies.  Below are two of the issues we identified and quick tips that others can use to maximize time on the road:

1. Spread the love…

The company traveled to New York five times last year for events sponsored by the sell-side (three conferences and two roadshows). The investor overlap from these events made me cringe. Management visited the same former investor on every trip they made to New York. Guess what? All that time and money resulted in zero buying.

Instead of trekking to the major finance hubs and seeing the same faces over and over again, we recommend spending time in other locations. For instance, cities such as Milwaukee, Philadelphia, Baltimore, Seattle and Dallas are great targets for small-cap companies.

In addition, diversify who you are meeting with.  A healthy mix of existing holders, new targets and former investors can provide a well-balanced audience for your roadshow

2. Leverage your assets

The company has several analysts covering them and used a West Coast-based sell-side institution to schedule a roadshow in New York and a New York-based firm to schedule meetings in Chicago.  When a covering sell-side firm based in the Mid-West suggested a roadshow in Chicago—a city they knew intimately and where they had a strong investor network—management declined because they had recently traveled there.

So remember, by properly planning and being strategic, you can maximize your outreach effort. Focusing on those investors and events that are the best fit for your company will ensure your time away from the office is well spent.