Communicating with Research Analysts Pre IPO: Do’s and Don’ts

By Marc Silverberg

If you are on the path to taking your company public, you know that it’s a long, winding road that begins months and months before listing day. Communications with stakeholders of various types is key, and a misstep can be disastrous.

Those stakeholders include the research analysts from investment banks whose job it is to “cover” public companies in a specific industry and make stock / investment recommendations to the bank’s clients. These research analysts are experts and have extensive knowledge about your industry, the current market, business model and competitors. They are very informed, connected, and inquisitive. They will also “cover” your company shortly after the completion of the IPO. They become experts on your company via a due diligence process and will make independent recommendations to their clients based on the investment attractiveness of the business.

These individuals play a pivotal role in shaping the narrative and perception of your company in the eyes of potential investors and the broader market. However, while research analysts play an important and collaborative role during the IPO process and life as a public company, it is important to be mindful of how you interact with them.

With that in mind, following are some essential do’s and don’ts for how to interact with research analysts (and others) in both formal and informal settings.

Do’s

1. Prepare: Familiarize yourself with your story – know how to talk about your financials, growth drivers, and potential challenges. You may also want to take the time to familiarize yourself with the research analysts and their work. Much of their work is in the public domain, including stocks that they cover, and professional backgrounds. Research analysts appreciate well-informed individuals, and part of what they will be assessing is the overall quality of your leadership team. Feel free to ask them about their background and if they have any views on a particular topic – they like to talk!
2. Stay On Message: Make sure you have a cohesive story about your company, its growth, and its future prospects. Stick to it. While it’s tempting to exaggerate, always stick to the facts. What you say in public or private can help to inform the view of your company and could even end up in print / research reports. Further, these research analysts are often trained in the art of asking questions or interfacing with you in a way that gives them valuable information that others don’t have access to. Keep this in mind at all times during your interactions. Once you are public, you will also be required to share all material non-public information to the public markets at the same time (SEC Regulation Fair Disclosure). Make sure that your spokespeople have received “Reg-FD” training.
3. Ask for Clarifications: If you’re unsure about a question, it’s okay to ask the research analyst to clarify or repeat it. If you are unsure of an answer to a question or are unclear as to whether or not you should be sharing certain information, always ask. Never assume. Research analysts are used to hearing “let me get back to you on that one” – don’t feel forced into giving an answer.
4. Stay Professional: These research analysts meet numerous companies and public company executives weekly. The quality of your leadership team is a component of their assessment. Being cordial and respectful can help you stand out for the right reasons. But it’s also okay to be yourself and show your personality. It’s not all business – they are going to ask about your hobbies, your past experiences, your life outside of work, etc.

Don’ts

1. Speculate: Stick to what’s known and what’s been disclosed. Never speculate about future earnings, potential M&A activity, or other non-public information. Craft a narrative and set of disclosures that properly informs research analysts and others on your business and its exciting growth trajectory.
2. Discuss Valuation: Avoid commenting on the potential valuation of your company or any future stock price predictions. Leave this to the experts.
3. Overshare Personal Opinions: While it’s natural to have opinions, remember to represent the company’s stance and stick to established messaging as much as possible.
4. Bash Competitors: Research analysts are likely to have relationships and contacts with competitors, partners, and others. One of the biggest pet peeves to many research analysts is when public companies “bash” each other in a public or private setting. The fact that they are likely to know very senior people at all many companies emphasizes the need to avoid the negativity. Focus on what you do well and how you differentiate.
5. Impede Judgement: While you may interface with analysts and others in social settings, be mindful of how you conduct yourself. It’s okay to share a drink or two in a social setting, but don’t put yourself in a position that clouds your judgement or alters your ability to represent yourself properly as a company executive.

Remember, the goal is to present your company in the best possible light, while ensuring transparency in that communication. Every interaction shapes your company’s image and reputation.

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