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Strategic Investor Relations for Technology Companies

7 Rules for Wall Street Messaging Strategy


If you’re an executive of a late-stage start-up, a recent IPO or an established public company who interacts with Wall Street analysts and investors, it’s probable that you’ve been flummoxed by the ways and language of “The Street”.  How do CEOs and CFOs keep analysts and portfolio managers (PMs) engaged?  Here are 7 rules for your Wall Street messaging strategy:

1. Tie Everything to Your Story.

You understand the fundamentals of your markets, offerings and financials.  You can comfortably pitch your value prop to a prospect.  But when it comes to the Street, explaining your mission, strategy, portfolio and markets is more challenging because it’s an audience whose language, needs and motivations you don’t understand as well.  Flesh out your story using the KISS principle below.  Then map all aspects of your business and results back to reinforce that story.  As the shampoo bottle says, “apply, rinse, repeat”.

2. Keep It Short and Simple.

Most analysts don’t have the time, inclination or chops to do thorough research and due diligence any more.  Sell-siders have to spend disproportionate time “marketing”, while at the larger firm their reports are often written overseas.  Buy-siders are overwhelmed by the number of companies they track, or are busy with their own clients.  It’s incumbent on you to distill your message into easily-digestible bites that become as familiar as a mantra.  Short and simple because your audience is impatient and has a limited attention span.  Also keep in mind that executives who speak too long may raise suspicions about whether they are doing so to shorten the backend Q&A session or more warily, to distract from or hide something.

3. Provide Metrics that Matter.

A compelling story gets investors excited, but Wall Street is driven by numbers.  Analysts and PMs can devour your financial statements because that’s what they’re trained to do.  But the key metrics that really drive your space or your business are not going to be explicit in your financial reports.  And most – like net new customer adds, percent of business from existing customers vs. new ones, number and mix of products per deal, average deal size or selling price – are not that sensitive.  These add valuable color to your story.  Sharing them with analysts and investors helps their understanding of what to look for and forecast.  It also helps reinforce your story.

4. 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.  Your shares may get hit – and hard – in the near-term.  But if your disclosure was plausible and honest, they will recover.  We’ve seen many companies experience hiccups and then go on to greater successes and higher valuations.  Stocks trade on perception.  And a perception that you whiffed more on your explanation than you did on performance, may cause your valuation to suffer more over time.  Lastly, if the news is more permanently damaging, you still should address it head on.

5. Always Stick to the Facts.

Detective Joe Friday on the TV series Dragnet was famous for his line, “Just the facts, ma’am”.  Pressure to meet or exceed Street expectations and to drive stock price or valuation (if pre-IPO) 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.  Moreover, comments on earnings calls or at investor conferences and road shows are publicly accessible.  Even a comment that “sounds off” in a one-on-one meeting can find its way into circulation.  We’ve seen many executives lose their companies and jobs to activist investors or larger acquirers, face regulatory fines and lawsuits, and embarrass themselves and their boards.

6. 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.  Full year guidance can help get the Street to think about your business longer-term.  But regardless of the guidance you do give, never say anything to the effect that you’re “trying to provide numbers you can make”.  Guidance is just meant to help analysts do their models.  As we suggested in a recent post, you won’t get penalized if you just provide annual guidance.

7. Never Lose Your Cool.

The investment community is full of skeptics and cynics.  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.  This is particularly true if they hold a grudge – one that you may or may not know the cause of.  No matter how annoying the analyst or the question may be, never question the question.  Always answer with poise.  In most cases you’ll have an audience tuned in.

A 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 and be supported by hard metrics that tie to your financial results.

Does the Street get your story?

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