Establishing and maintaining good relationships with research analysts is critical to successful investor relations for public companies. Strong analyst relationships are an asset, while poor or neglected relationships can lead to significant challenges.
Here are eight ways you can improve analyst communication and strengthen these relationships:
1. Only allow designated executives to speak with research analysts.
Analysts are free to share anything that company representatives say to them with the public markets, so you should be very careful about who is allowed to speak on behalf of your company. This is usually the CEO and/or CFO, although it might also include the CMO, CIO, or other members of the C-suite.
Sometimes, unauthorized employees can let things slip during casual conversations with research analysts that would be better left unsaid. For example, a sales manager might discuss sales goals with an analyst at an industry trade show. This information becomes fair game for analysts to share, whether it was the sales manager’s intention or not. So make sure all employees know who is and isn’t authorized to talk to analysts on the company’s behalf.
2. Respond promptly to analyst queries.
Research analysts usually face strict deadlines for issuing commentary and advice, so it’s important to get back to them quickly if they ask you any questions. Slow responses will not only frustrate analysts, but this also might raise red flags and suspicions, whether they’re justified or not. Fast responses are especially critical in breaking news situations.
Similarly, if you tell an analyst that you’ll get back to him or her with certain information, make sure you follow up. Analysts don’t have time to track you down in search of critical information — they expect you to follow through yourself.
3. Create an investor relations calendar of events.
It’s helpful to let research analysts know when you will make earnings announcements and when representatives from your company will be at industry conferences and trade shows. The best way to do this is to draft a calendar of events and share it with analysts at the start of each quarter to establish a timeline for investor relations communications.
In planning these communications, try to follow the patterns you’ve already established. For example, if each quarter’s earnings call is held the first week of the following month, stick with this timing whenever possible. Announce any changes as soon as possible to avoid raising any red flags among analysts.
4. Treat all research analysts equally.
Without meaning to, companies can sometimes give preferential treatment to a particular analyst by granting personal meetings or favorable conference and road show scheduling. Non-preferred analysts who feel excluded will probably be less enthusiastic about covering your company.
Offer all research analysts the opportunity to attend at least one road show per year. And don’t blackball analysts who downgrade your company’s shares. Instead, talk to them about the reasons for the downgrade, the specific challenges your company is facing and how you plan to deal with them.
5. Don’t get too friendly with analysts.
It’s human nature to like or get along with some people better than others, and this includes research analysts. But it’s important to keep your relationships with analysts at a business level, because getting too personal could jeopardize their ability to perform their jobs objectively.
Remember, analysts are allowed to share anything you tell them about your company with the public markets. So you and your executives must be careful to avoid getting too chummy with analysts and inadvertently saying something you wish you hadn’t.
6. Communicate consistently with both buy-side and sell-side analysts.
Simply put, you should provide the same information to buy-side and sell-side analysts while being transparent and straightforward with both. In fact, Regulation FD requires public companies to treat both sides equally.
At the same time, recognize that there are important differences between the two types of research analysts. Buy-side analysts have a different role from their sell-side counterparts, so they may each interpret the same information differently.
7. Respect analysts’ time.
The typical research analyst may cover up to 30 companies or more, so their time to interact with each company is limited. Before contacting an analyst or requesting a meeting, make sure there is actually something worthwhile to discuss. If not, wait until you have something significant to share.
The same thing applies when it comes to hosting investor days: Don’t plan them if you don’t have something new or insightful to talk about. These are very time-consuming for your company and for analysts, especially if they aren’t located nearby. Therefore, make sure it’s worth their time before you plan an event.
8. Don’t neglect meeting with sell-side analysts while you’re still a private company.
Executives of private companies that are planning to go public often spend lots of time with investment bankers, but little time with sell-side analysts. This can be a mistake because these analysts have a lot of influence in the investment community.
Building strong relationships with sell-side analysts before going public can strengthen your company’s reputation on the Street. Many of these analysts also have relationships with leading buy-side analysts, which can prove helpful down the road. In addition, they may be able to share competitive intelligence with you and uncover new business development opportunities.
By following these communication tips, you can strengthen your company’s relationships with research analysts and improve your investor relations.
For additional insight into creating a comprehensive and effective investor relations plan, download our eBook, Investor Relations Primer: The Basics of an Effective Plan.