Feedback: do you get enough?

When it comes to roadshow broker escorts, North American IROs are still searching for Mr Goodfeedback. Sure, they hear plenty of solicitous promises and it might even lead to an exciting whirlwind of encounters with strange and extraordinary people.

Yet all too often, afterwards, even as he’s waving goodbye to your taxi-load of executives, Mr Sell Side has forgotten you, dreaming instead of the next trip. Fortunately, IROs are coping with the heartbreak.  
 
Not much delivered to FedEx  
Despite a herd of 31 sell-side analysts clamoring for a job as tour guide, FedEx doesn’t get offered much post-roadshow feedback. ‘You get a little bit about what institutions liked or disliked and whether all their questions were answered,’ says Mickey Foster, vice president of IR at the logistics company. ‘That’s always good, but the ultimate feedback is whether they buy your stock.’           

As Foster notes, however, that can often take a while. He gives an example of actionable broker feedback that can potentially sweeten the pot along the way: ‘One institution recently complained our dividend was lower than a competitor’s. If I hear that time and again I can pass that on to management. Eventually, we may listen.’

Foster recently visited Europe on a tour organized by a non-broker outfit. ‘We get excellent feedback from it about what people liked or disliked,’ he remarks. ‘But we are paying for that upfront.’  
 
F5 Networks doesn’t want much
F5 Networks ‘occasionally’ gets broker feedback. The dearth is no tragedy, however, says John Eldridge, director of IR at the Seattle-based network equipment maker. ‘It’s not hugely important to us,’ says Eldridge. ‘Our IR program is pretty simple. We run our business well and, when we get a chance to talk with investors, we explain our business and market opportunities. If they like what they hear, they buy the stock. We wouldn’t tailor our message to investors based on feedback we got from the broker. The message is what it is.’

While acknowledging broker-provided feedback could be valuable to ‘others who use it in ways we don’t understand or haven’t thought about’, some of Eldridge’s encounters with it have left him downright gun-shy. Broker-supplied commentary following a recent trip to Toronto was along the lines of We thought the presentation helpful but wish the IR person hadn’t been typing on his BlackBerry.

‘Another thing that can be damaging is if you have two executives on the road and one is praised and the other not,’ laughs Eldridge. ‘You don’t necessarily want to hear that. That kind of feedback can just be a distraction.’
 
Rogers Communication doesn’t believe in it
‘I usually don’t get specific or meaningful feedback,’ says Bruce Mann, vice president of IR at Rogers Communications, a $20 bn communications and media company. And neither does he expect it. ‘An institutional equity sales person telling me, I’ll get back to you with feedback is like saying, The check is in the mail’, he quips.

Nor does the 15-year IR veteran place much hope in the prospect of gaining meaningful insight from any feedback that does trickle in through brokerages. ‘There is absolutely no incentive for institutions to give actionable feedback about their impressions to the broker,’ Mann explains. ‘They certainly won’t say if they are about to buy or sell a ton of shares, because the broker will alert its other clients.’

Taking charge of organizing roadshows in-house, Mann often throws a bone to supportive analysts in the form of an invitation to host meetings or a group lunch in specific cities. But he is firm on one point. ‘We pick the target institutions and if [the broker] can’t deliver them, we’ll arrange those meetings ourselves,’ he says. ‘As for the smaller, high-turnover hedge fund clients the broker wants you to have management spend time with, we’ll generally group together into a lunch.

‘We always start from the reality that the company is a product, not a client. The system is designed to support institutional equity trading desks and sales – not companies.’
 
All in the methodology for OdontoPrev  
Brazilian dental health services company OdontoPrev has a highly proactive IR approach. With three quarters of its shares in the hands of global investors, OdontoPrev IRO José Roberto Pacheco, escorted by various US and European brokers, has just returned from his seventh overseas IR expedition this year. The pace isn’t likely to let up; he’s aiming to soon add three more analysts to the company’s current roster of 10.  

For roadshows, he chooses brokers based on research quality and their readiness to maximize his time as well as analyst willingness to join the trip. ‘We want them to listen to the story and hear what investors are saying about it,’ says Pacheco. ‘And we would be delighted to have feedback from them.’

Unfortunately, the loop is thin gruel for him as well. ‘It would be extremely valuable,’ he says. ‘But few [brokers] send us after-trip reports. Brokers need to develop a systematic feedback methodology. Most aren’t there yet.’

Pacheco gives a nod to Banco Santander as one that is: 10 days after the roadshow, the Spanish bank sent him a letter describing meeting attendees along with their impressions of OdontoPrev’s story. ‘Feedback helps us not only fine-tune our presentation but also plan where we should go next and who we should see again,’ says Pacheco. ‘It’s important information, and Europeans seem to understand that.’

Covidien gets it in Europe
Another grateful connoisseur of European feedback is healthcare products company Covidien. Calling the feedback structure for US meetings ‘basically non-existent’, Cole Lannum, vice president of IR at Covidien, relishes the relative cornucopia he gets after European excursions. ‘It’s timely, frank – often with attribution – and very useful,’ says Lannum. ‘It’s what we all wish we had when we do US meetings.’

The feedback he gets overseas is so good, in fact, that Lannum says it’s an incentive to keep traveling to Europe. He says one reason the situation is not mirrored in the US is that corporates don’t demand it. ‘When they don’t get demand for it and their institutional clients aren’t used to providing it, brokers aren’t likely to do the work,’ he concludes.
 
Jack in the Box demands it
Given a market cap of just over $1 bn and 15 analysts covering the stock, Carol DiRaimo, vice president of investor relations and corporate communications at restaurant company Jack in the Box can afford to be choosier about roadshow partners than many of her small-cap peers. And so she is. When it comes to feedback, she wants it specific, detailed and promptly provided. Otherwise, the offending broker may find itself out of the rotation.

‘I remind the broker that I gave it a roadshow last year and it gave me no feedback,’ says DiRaimo. ‘Then I give it to another firm.’  

With the opportunity for future travel based on the quality of their feedback, brokers are pressed for explicit results. ‘We ask for information like how long the investor has followed the stock and what attracted it, what the company could do to increase shareholder value or improve disclosure,’ says DiRaimo. ‘I’m perfectly fine with it being anonymous. But I like it formalized and in writing so I have a document to show management if it becomes an issue.’   

Sterling Resources likes it casual
Feedback isn’t always something you want to have a record tied to. Indeed, George Kesteven, manager of corporate and investor relations at Calgary-based oil and gas firm Sterling Resources, has never seen an unfavorable written summary of investor sentiment. Accordingly, what he’s looking for is the informal connection.  

‘That’s where we often discover issues that need to be clarified,’ says Kesteven. ‘I can then pick up the phone and say to the investor – usually a more timid and less knowledgeable prospect, rather than a current holder – I understand you have concerns and can I help you with more information?’

The ultimate informal feedback, according to Kesteven, is an analyst call announcing a client liked Sterling’s story so much it bought the stock. ‘But there are often a number of steps to get there,’ he observes.

‘The investor has to be comfortable with what you have presented to it and, if issues need clarification, it’s the IRO’s job to fill in the blanks. If an investor hasn’t bought because of some misunderstanding or lack of information, that’s very useful feedback.’[Soft Break]Kesteven remembers the time formal feedback generated a complete communications loop: a request via the broker for a follow-up conference call. ‘The institution liked our story so much it wanted more of its staff to hear it,’ he recalls.
 
Cascades gets it upfront
Quebec-based packaging products firm Cascades doesn’t see much feedback from brokers after a roadshow. But Didier Filion, director of investor relations at Cascades, says he gets plenty of valuable feedback before his presentation is even fully prepared. ‘I’ll ask firms what questions their clients are asking about our company prior to the roadshow, and they are always helpful,’ he notes. ‘I’ll ask about our press release and presentation and how we may address various issues.’

Afterward, along with the usual courtesy letter to investors and an examination of post-roadshow trading patterns, Filion contacts analysts to get a sense of who invested in the stock. He says while comments gathered this way can be valuable he’d prefer a more formalized approach.

Management spends a lot of time meeting with investors and want to see whether its efforts are rewarded,’ says Filion. ‘I’m always asking for feedback on investor impressions, and who invested and why. But brokers don’t seem set up to provide it.’  
 
TD Bank gets it direct
The IR team at TD Bank also makes a point of frontloading the feedback. ‘We want as much investor intelligence as possible before the meeting,’ says Rudy Sankovic, senior vice president of IR at TD Bank. ‘We want to know current investors’ thinking about TD, and prospective investors’ investment philosophy and company knowledge.’

While obtaining that information usually requires proactively contacting the sell side, Sankovic finds most brokers willing to part with it. ‘Some know more than others,’ he notes. ‘But it can give management a good sense of what to expect and raise the quality of discussion.’

Recently, TD began experimenting with a new technique Sankovic believes further lifts discussion quality. Before the meeting begins, he asks investors to consent to carving out 10 minutes at the end of the session. ‘We create a two-way dialogue and ask them questions about their thinking on the sector, TD and our IR services,’ says Sankovic. ‘We can do a better and quicker job directly asking investors for feedback ourselves as opposed to waiting for the sell side to do the job.’