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7 Rules for Investor Messaging

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7 Rules for Investor MessagingExecutives at late-stage start-ups, recent IPOs or established public companies are often flummoxed by the language and ways of “The Street”.

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7 Rules for Investor MessagingHow do CEOs and CFOs keep analysts and portfolio managers engaged?

We suggest 7 rules for your Wall Street messaging strategy.

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7 Rules for Investor Messaging1. Keep it Short and Simple

Most analysts don’t have the time, inclination or chops to do thorough research and due diligence.

Buy-siders are overwhelmed by the number of companies they track, or are busy taking meetings with their own clients.

It’s incumbent on you to distill your message into easily-digestible bites that become a mantra.

Short and simple because your audience is impatient and has a limited attention span.

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7 Rules for Investor Messaging

1. Keep it Short and Simple

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7 Rules for Investor Messaging2. Tie Everything to Your Story

Explaining your mission, strategy, portfolio and markets to the Street is more challenging. It’s an audience with different language, needs, time span and motivations than your customers.

Flesh out your story using the KISS principle in Point 1.

Then map all aspects of your business and results back to reinforce that story.

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7 Rules for Investor Messaging

2. Tie Everything to Your StoryOnce you’ve got your story, “apply, rinse, repeat”.

Photo: Johnson & Johnson

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7 Rules for Investor Messaging

3. Provide Metrics that MatterA compelling story gets investors excited, but Wall Street is driven by numbers.The key metrics that really drive your

business are not going to be explicit in your financial reports.

Share metrics that add valuable color to your story.

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7 Rules for Investor Messaging3. Provide Metrics that Matter

Sharing metrics that matter helps analysts and investors understand what to look for and forecast.

It also helps reinforce your story.

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7 Rules for Investor Messaging4. Don’t Shy Away From or Hide Bad

News A straight-forward explanation of an unexpected

shortfall or other bad news earns the most respect.

It mitigates credibility issues and downside risk. Stocks trade on perception. A perception that

you whiffed more on your explanation than you did on performance may cause long-term valuation damage.

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7 Rules for Investor Messaging

4. Don’t Shy Away From or Hide Bad News

Honest and plausible disclosure leads to faster stock price and valuation recovery.

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7 Rules for Investor Messaging5. Always Stock to the Facts

Pressure to meet or exceed Street expectations and to drive stock price or valuation higher compels some managements to deviate from the facts. This practice may work for a while, but eventually it catches up with them.

Experienced analysts have a good ear for it. Even a comment that “sounds off” in a one-on-one meeting can find its way into circulation.

Executives have lost their companies and jobs to activist investors or larger acquirers, faced regulatory fines and lawsuits, and embarrassed themselves and their boards.

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7 Rules for Investor Messaging

5. Always Stock to the Facts

Photo: SusansSteps.com

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7 Rules for Investor Messaging6. Consider Giving Annual Guidance We advocate providing annual guidance only, with

quarterly calls to review progress toward the full year targets.

The Street is already obsessed with handicapping quarterly results. Your share price will likely fluctuate during earnings season whether you provide quarterly guidance or not.

Guidance is just meant to help analysts do their models. Full year guidance can help get the Street to think about your business longer-term.

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7 Rules for Investor Messaging

6. Consider Giving Annual Guidance

As we suggested in a recent post, you won’t get penalized if you just provide annual guidance.

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7 Rules for Investor Messaging7. Never Lose Your Cool

Certain analysts may get under your skin. Their motives may vary, but during private or public Q&A sessions they will ask questions using language that is intended to trap you or trip you up.

No matter how annoying the analyst or the question may be, never question the question. Always answer with poise. Remember that In most cases you’ll have an audience tuned in.

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7 Rules for Investor Messaging

7. Never Lose Your Cool

Marvel Comics

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7 Rules for Investor MessagingA clear, concise and consistent messaging strategy to the Street is the best policy.Your story should: Explain how and why you win in the marketplace; Be supported by hard metrics that tie to your

financial results; and, Show how you will build value for shareholders

over time.

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7 Rules for Investor Messaging

Does the Street Get Your Story?

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7 Rules for Investor MessagingAbout Tech-Tonics AdvisorsWe help technology companies communicate how they will build value for shareholders over time. Our expertise is synthesizing complex concepts and technologies into clearly understood and actionable value messages. Our IR Toolkit is a turnkey blueprint for creating, implementing and executing an investor relations strategy.  Learn more at http://tech-tonicsadvisors.com/

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