A look ahead: North American IROs weigh in on NDRs in a MiFID II world
31 October 2017
By Amy Simmonds
Even in today’s hyper-connected, technological marketplace, investors still put a premium on face-to-face meetings with senior corporate executives. According to IR Magazine’s latest Global Roadshow Report this is especially true for small and mid-cap companies for whom non-deal roadshows (NDRs) are a critical component of their investor targeting and retention efforts.
As we discussed previously, the way in which many companies design and execute their NDRs will change dramatically in the wake of Markets in Financial Instruments Directive (MiFID) II — immediately in Europe and sooner than expected in North America.
To better understand the “MiFID ll effect” on NDRs, we sat down with two seasoned, North American IR professionals Amy Wakeham, VP Investor Relations at Integer Holdings, and Alexandra Roy, Senior IR Specialist at Plug Power, to hear what they are doing to prepare for this new market reality.
Amy Simmonds (Q4): Getting in front of the right investors at the right time is critical for any IR program. How do you go about doing that today?
Amy Wakehem (AW): At Integer, we find NDRs extremely valuable, as they enable me to put interested investors in front of management and make good use of time on both sides. We organize our own NDRs, which gives me more control over who we’re meeting with and when. We typically go on the road with a sell-side analyst, which is great, but the downside can be that they want the Company to meet with investors who we are not interested in meeting with — we manage this by proactively identifying who we want to be in front of and travelling with the analyst who can get us in front of our targets, and then we balance out the schedule by meeting with some of their priority clients. We augment scheduling of roadshows through direct outreach to investors to schedule meetings or to gauge interest in a meeting.
Alexandra Roy (AR): Plug Power has emerged as a leader in the commercialization of fuel cells, and we recognize we can leverage this to strategically grow our institutional investor base. Significant events thus far in the year, including multi-site agreements with two of the top global retailers and securing favorable financing solutions, have positioned Plug Power as a firm on track to achieving sustainable positive cash flow. While these events have put us on the radar of new institutional investors or enhanced existing prospective investors’ views of our value proposition, roadshows are an excellent means of facilitating our interactions with strategic targets. Relationships with our sell-side analysts help set the itineraries. We maintain an open line of communication with the corporate access team, ensuring a strong institutional presence with our high-potential targets.
Q4: Do you believe that your team will continue to attend roadshows at the same frequency in the future, or do you see roadshows on a downward trend?
AW: We will continue to use roadshows as a key vehicle for meeting with investors, both new and existing. It’s important for management to meet regularly with shareholders and hear what’s on their mind. Demands for management time and schedules can be challenging, but I do not predict a downward trend for Integer. We are lightly covered on the sell-side, so we must be more proactive about getting in front of investors to tell our story.
AR: We have seen an uptick in the number of roadshows we have attended, and expect to continue to see an increase as our business grows and we consistently deliver on our stated goals. In the past, investors have seen us as a “wait-and-see” story. With the track record we’re building, demand for our time from investors is only getting stronger.
Q4: Although it is a European legislation, MiFID II will no doubt have a ripple effect on companies around the world. What is your team doing to prepare for the integration of MiFID II come January 2018? How do you feel this will impact the relationship with your investors moving forward?
AW: We are doing more monitoring of the situation right now versus active preparation. We have very few European/international investors today and do not anticipate this changing in the near future. That being said, we do have a global manufacturing presence. I believe as our market cap increases, our story may become more interesting to European investors. As we think about how to attract European investors into our stock, I expect we will utilize many of the same tactics we have done stateside — proactively identifying potential investment fits and then doing European roadshows. Given that we have not relied heavily on brokerages to get us in front North American investors in the past, I would see us doing a lot of the outreach and heavy lifting ourselves in Europe.
Q4: What impact do you think MiFiD II will have on corporate access? For the industry at large?
AW: For Integer, I do not think that MiFiD II will have a significant impact. I can see how the industry, at large, may be impacted — particularly if companies rely heavily on a broker or a sell-side corporate access provider. I believe the new legislation will force companies to take more ownership of their investor targeting and outreach efforts if they want to do be in front of investors on a regular basis.
AR: Given our [Plug Power’s] current investor base, MiFID II won’t have a meaningful impact over the short-term horizon. That being said, the industry does need to prepare itself for the MiFID ll implications and educate itself how this may impact communications. More often than not, firms can be reactive versus proactive on the eve of regulations going live. I think there will be a learning curve, and should we find that MiFiD ll will have a more meaningful long-term impact on corporate access for our company, we need to have these conversations sooner rather than later.
Q4: What are the pitfalls of the current corporate access experience?
AW: I think over reliance on the sell-side to put the company in front of investors. It’s also challenging, as a “small-cap” with thin coverage, to find the right team to take us on the road sometimes.
AR: Transparency is key when it comes to effectively allocating our senior management’s time with prospective investors. Unfortunately, while NDRs and conferences are an excellent means to propel these interactions, more often than not we see missed opportunities due to corporate access communication shortfalls. Our team will be ready for a conference, but members helping coordinate meetings sometimes “overpromise” and “underdeliver” without providing details behind light schedules, or giving sufficient notice such that we can actively reach out to prospects in the days prior. We often face challenges in the absence of a sell-side analyst relationship in the ability to make direct introductions. Feedback is a critical component, exercised by some firms and not others as to how they believe our management delivers our firm’s message. In order to enhance our IR strategy, feedback and transparency will be the primary drivers to paring interested investors with company management teams who are well informed of their audiences’ goals.
Amy Simmonds is currently hustling in the Implementations team at Q4, and an occasional contributor to the Q4 Blog.