Are Virtual NDRs The New Normal?
While most states are slowly beginning the re-opening process, it will likely be awhile before life returns to normal. The entire country has gone virtual; kids are distance learning, adults are working from home, even happy hours look different. Your investor marketing should follow suit.
Virtual non-deal roadshows (NDRs) are becoming increasingly popular in the second quarter of 2020 and are likely to be part of our world for the foreseeable future. In the current environment, sell-side analysts want even more time from management teams for investor outreach. Regardless the size of your company or investor relations program, these re-envisioned NDRs should be part of your investor outreach plan.
As many fund managers are scrutinizing their portfolios, now is a great opportunity to get in front of potential investors and highlight your company’s ability to emerge from this crisis and execute on the long-term strategy. Not sure how to organize a successful virtual NDR? We have seen them structured many different ways – multi-day, multi-city and multi-platforms. That said, NDRs, whether virtual or face-to-face involve considerable planning, but going virtual adds new complexities to the process. Below we offer some useful tips and insights when considering taking your management team on the “road” in this new environment.
Understand the Format – Video, Audio or both?
While the speed-dating format of traditional NDR’s has remained consistent, what previously included an early morning flight and a day full of meetings has evolved for the time being into video calls from your living room.
Pre-pandemic NDRs had a fairly straight forward format; 1×1 meetings and the occasional group lunch. Virtual NDRs seem to add a layer of complication. It is important to understand the logistics and format of the event. Will there be video or just audio? Will there be a “formal” presentation by management? Will there be a group call where participants queue up to ask questions or individual 1x1s or both? Will it be a fireside chat format where management provides a brief overview and then the analyst moderates with Q&A? Will you have a list of participants in advance? Understanding the format will help you and your management team feel more prepared.
Prevent Technical Difficulties – Can you hear me?
We can use an app on our phone to order groceries or schedule a car to take us where we want to go, but for some reason we have trouble with the mute button on video calls. We highly recommend a test run prior to the event. There are many different technology platforms to help facilitate virtual meetings and each one is different, so a brief run through is essential to work out any kinks before the live event.
Provide Boundaries – You can’t keep going to the same well
NDRs historically have been planned around an investment center or metropolitan area. In today’s virtual world, location is no longer a restriction. Consequently, a sell-side analyst’s initial request might include unlimited boundaries, which can eventually lead to investor fatigue as a company with multiple covering analysts is likely to experience considerable overlap.
We recommend insisting on boundaries – geographic or otherwise. Refer to your engagement and/or targeting work to focus on specific geographic areas with the highest potential and disperse among your sell-side analysts. This way you can ensure that you are maintaining control of the targeting tactics and avoiding overlap in outreach.
Furthermore, this is a prime opportunity to target investors in second-tier cities that your team may not have had a chance to go visit like St. Louis, Kansas City and Milwaukee. And because video conferencing has temporarily replaced air travel, now may be a good time to reach out to potential investors in Canada and the UK as well.
Value Stock Pickers are Back – You may need to find your own
The current environment of depressed valuations has opened the door for value stock pickers to get back in the game after being pushed out by the significant rise in quantitative and passive investing over the past several years. These value stock pickers are not likely the “usual suspects” of your sell-side firms based on the past stock market run. You may need to find your own.
Materials – Stick to your key messages
Virtual or face-to-face, preparation is always critical. Make sure to stick to the key messages and include a brief yet comprehensive overview of the Company and its investment thesis no matter what format the NDR takes. When the conversation wanes, pivot back to “others have been asking about [insert topic]” and then bridge back to your key messages. Never miss an opportunity to tell potential investors what you want them to know and understand about your company’s story. During this time of heightened uncertainty, your message and materials should strike a good balance between short-term strategic actions to endure the crisis, as well as long-term vision of strategy execution. In any environment, a one-page fact sheet is an important investor marketing tool and a succinct format to communicate the investment appeals of your company.
Determining ROI – Come up with an internal measurement system
It is difficult to calculate ROI on an NDR. Investment decisions are not made quickly so it could be several quarters before the investor you met with yesterday takes a position in your stock. So how do we know if our efforts are bearing fruit? It helps to come up with an internal measurement system for NDRs. As a former IRO, I measured ROI by the number of “high-quality” meetings my team and I attended in the day, which we defined as a meeting with an investor who can take a meaningful position, has been properly vetted and has or would invest in companies with similar characteristics or fundamentals. Five to six of these of meetings in a day was considered the benchmark. Whether face-to-face or virtual, the last thing you want is to attend a meeting with an ill-matched investor who took the meeting with management as a favor to his sell-side buddy.
Virtual NDRs may or may not be here for the long term, but they should be part of your investor communications strategy today. Understanding the NDR landscape will help you and your management team prepare for the evolution of investor marketing and ensure the ROI is maximized.