It is a key factor for success on the stock market and for a positive company valuation: regular and reliable communication that creates trust and credibility on the capital market. To strengthen relations with investors, the IR team has an important format at hand in the form of the roadshow.
by Enrico Prinz
Wiesbaden, February 11, 2022. Roadshows serve as a stage for management to influence investment decisions in their favor. The aim is to build and further consolidate trust in the capital market. Basically, roadshows can be divided into two categories: those where companies sell their products and non-deal roadshows. In the following, we take a look at non-deal roadshows. But regardless of which of the two categories it is, a roadshow stands and falls with its preparation.
Preparation is half the battle
The target groups of a roadshow can be existing investors such as investment companies on the one hand, and new investors on the other. In addition, buy-side analysts who prepare and make a fund’s buy and sell decisions should always be present at the roadshow. To find out which potential investors are eligible, companies should conduct a comprehensive investor analysis or have it directed by professional service providers. This analysis identifies all major investors and organizes the so-called entry poll. This involves analyzing in advance which specific topics an investor would possibly like to address and what management should prepare therefore.
The company presentation is also of great importance. It conveys the development of the past business period and the equity story of the company. The company should integrate the results of the entry poll into the presentation as far as possible. In addition to the many organizational hurdles of a roadshow, such as the technical equipment, the content is the biggest challenge. Here it is important to understand how and with which methods institutional investors and financial analysts evaluate the company. Which hard facts and soft facts are of particular interest to them? You should identify these in advance and incorporate them into the equity story.
Transparency: the be-all and end-all
To build trust, the company must provide information about goals, strategies and business development in a transparent and fair manner and communicate changes to relevant parameters of the business model proactively and on time. Companies should provide relevant information in roadshows to ensure fair evaluation by financial analysts and investors. After all, investor confidence can be quickly squandered. For example, after going public, the share price may initially rise sharply and subsequently fall significantly. Possible reasons could be write-downs on the company’s portfolio. The reproach on the part of analysts could be a lack of transparency with regard to the development of the portfolio company and the valuation approach. This makes it all the more important for investors to have confidence in the company’s stock. As a result, it is in greater demand and achieves a valuation advantage over its peer group, i.e., industry competitors.
During a roadshow, management can hold a large number of one-on-one meetings (one-on-ones) with investors and interested financial experts. The special thing about one-on-ones is the exclusive personal atmosphere in contrast to large conferences. Investors tend to ask the really critical questions in personal one-on-one meetings, and some investors even avoid large events. It is therefore advisable to draw on a large investor network to ensure a high number and quality of discussions.
Long-term relationships for the future
Furthermore, the COVID-19 pandemic and the associated travel restrictions call for a rethinking of how roadshows are conducted. The result is virtual roadshows, which we have already reported on: an efficient way to reach key investors in times of the COVID-19 pandemic.
Whether digitally or physically, the regular and exclusive one-on-one meetings with investment professionals offer management the opportunity to build a long-term personal relationship in order to exert a lasting influence on their loyalty and thus the company’s value. Roadshows increase the credibility of management’s strategic decisions and can convince investors of the company’s future viability. This gives the company tailwind for long-term growth and profitability.
You want to convince investors of your business model with your roadshow? We will be happy to support you. Learn more about our Investor Access Program and how we give you access to new investors.
Enrico Prinz: Consultant
After studying political science with a focus on NGOs, governance and civil society, Enrico Prinz gained many years of experience in the field of international energy policy in development cooperation and fundraising for an international non-governmental organization.
