How Small-Caps Are Surviving Post-Pandemic
19 May 2020
By Amy Statham
With fewer internal resources and the lack of sell-side support that large- cap companies have, IR can be a heavier lift for small-cap companies and in the wake of COVID-19, even more so. But as the stock market begins to emerge from it’s COVID-fueled slow down, the spotlight is on small-caps as investors note a bounce that has lifted the S&P 500 more than 28% from March’s low. Here’s how small-cap companies can not only survive, but stand out in a post-pandemic market.
Review Your Targeting
Volatility can be the catalyst for opportunity. And although the long-term impact of COVID-19 on the markets is unclear, investors are still looking to find great opportunities and now is the time to increase outreach. That means it’s time to dust off and refresh your targeting list since you likely haven’t updated it prior to COVID-19. Before you get started adjusting your list, consider your market cap, valuation, margin, and competitive position as those have all likely changed.
Carefully assess the characteristics of your stock and where you currently stand today and reframe your approach accordingly. Amit Sanghvi, Managing Director of Europe at Q4, states “the hallmark of a good targeting program is rooted in data and technology.” Remember that there are a variety of tools and technologies that can help you effectively shape and refine your targeting practice so that it reflects your company as it stands today.
Getting Creative About Connecting
It goes without saying that meetings, conference calls, and outreach have changed drastically in the face of COVID-19. To make the most of a difficult time, small-cap companies have been getting creative in how they’re connecting with investors and the sell-side. This means going virtual and leveraging video, press releases, increased social media, interviews, podcasts, and other digital means of connecting.
When approaching your strategy, gauge not only where your audience is but also what their preference is in terms of communicating and receiving updates or information about your company. While unable to go into the office, it’s important to leverage your at-home technology, such as your phone’s video capabilities, but remember for bigger meetings and conferences that you can find a provider that offers webcasting services.
In a recent article from IR Magazine, Andrew Ballou, vice president of IR at BioSig, the medtech company with a market cap of around $200 mn, suggests finding thoughtful ways to engage covering analysts. ‘Maybe propose a topic for a conference call, like an update on a particular region or product, discuss that and then give an update on the overall company and how it’s managing in the current environment’.
Get Everyone on the Same Page
While leveraging a variety of avenues of communication it’s essential that in addition to your IR department, your whole company is aligned with your message. For stakeholder value as well as shareholder value, you want to ensure that your CEO is empathetic and addressing a much broader audience. Additionally, by hosting town halls or creating an online ‘newsroom’ you can help to streamline your narrative and create a single source of truth. Don’t forget that each of your employees acts as a spokesperson for your company and it’s important that they have the right takeaways. This also includes ensuring that your IR website and the FAQ section are all up to date.
Communicate When You Can, but Make it Count
While keeping the investment community well informed is important, you want to make it count by being certain that when you have their attention, you’re delivering material or near-material news. What investors need today and what they will need in 90 days are very different so give yourself room to navigate the current climate, but be ready to discuss business resiliency.
As Karen Greene, Vice President of Customer Experience, noted in a recent webinar, “Acknowledge and assess the impact of this crisis on your overall business, your operating performance, and the sector in general, and then elevate the discussion to the longer term investment opportunity your company provides to an investor, where you see things post-COVID.” Remember that in a time of so much uncertainty, investors are hungry and eager for information, and it’s important to effectively tell your story. Don’t let the Street lose sight of what you represent as an opportunity.
Lean Into the ‘S’ in ESG
Focus on the ‘social’ part of environmental, social, and governance (ESG) given the current climate. As mentioned earlier, it’s not just about shareholder value, it’s about stakeholder value and communications. It’s important to relay how you are taking care of your employees and your communities. Given the circumstances, if you’re not able to speak to revenue production, dial in on how you’re giving back and supporting communities in need to the best of your and your company’s ability.
Despite the current climate, it’s important to note that small-cap stocks have tended to outperform their larger peers six to 12 months after volatility declines. Everyone is wondering how quickly the economy can emerge but in the meantime, small-cap companies need to make the best of the situation and know that now is the time to increase outreach. To learn about engaging with investors during COVID-19, you can read our blog post on the subject, here.