DELIVERING A PRESENTATION INVESTORS WILL LOVE

Crafting a persuasive equity story and roadshow presentation

When companies compete for capital in a traditional IPO or a SPAC transaction, and also in a non-deal roadshow, they only have one or few chances to make a “good” impression.

What may attract most is a clean presentation, people can come in and they know what they’re talking about. It’s also important that entrepreneurs demonstrate likability and flexibility.

by Simona D’Agostino Reuter

But what is an Equity Story? A company’s equity story is a combination of all the compelling reasons why investors should buy your stock. It is a document that should position the issuer as an attractive investment. The Roadshow Presentation is perhaps the most important sales pitch a CEO and CFO ever make. 

Simply put, we should be able to answer the question: Why is this company a better investment opportunity relative to the thousands of other publicly traded stocks investors can have? 

Investors are always on the lookout for “alpha” investments because their primary goal is to ensure the clients’ equity portfolios are outperforming their benchmarks. While this has traditionally meant examining financial KPIs, more and more investors are actively tracking and analysing non-financial information. Let’s think of non-material indicators such as ESG performance and the equity story itself.

The equity story reflects the company’s positioning on the market, which, in turn, influences equity value and share prices.

From the investors’ point of view, being able to differentiate this company from its competitors provides clarity over why they should choose A instead of B or C. At the same time, bankers and financial analysts rely on the issuer’s equity story to advise on its public market valuation.

Any company should try to cover a few fundamental points in the pitch, in our view:

1. Describe the total value of the market addressed
2. Briefly sum up the Company’s product. Clarify the deep and costly need for your product or service by addressing what “pain point” you are solving
3. Explain why your solution is better than anything else on the market..
4. Provide some highlights from your financial projections that indicate the kind of healthy return on investment your backers can expect
5. Identify how much money you are seeking and how you expect to invest it.
6. Outline why you or your team have the right combination of skills and experience to solve this problem and bring the product or service to market
7. Finally, write down a few points about the Investment Opportunity

It may sound simple, yet not all entrepreneurs or managers are able to articulate these points in the best way. And almost no one can do it in under 20 minutes or so.

We know the following are not easy points to address:

• The company is presenting to people never met before
• Less than an hour to convince savvy institutional investors to take a bet on the business model and ability to execute. 
• Some investors may come to the meeting with genuine interest; others will know next to nothing about your company and make you work hard to educate and engage them. 
• A portion of our audience will have no intention of owning that stock; they’re there mostly to get market intelligence because they own a competitor..
• Others will go straight to Q&A rather than allowing the top management to present the story. They will ask a series of granular questions on topics and risk factors that give them the information they need to decide if they want to participate in the transaction or not.  

What some executives don’t fully appreciate is that investors are betting on the leadership team’s ability to execute the strategy. First impressions count; they want to quickly understand and evaluate the managers of the company, and judge whether it is credible and capable of delivering on promises. 

Here are three key recommendations for a successful Roadshow Presentation in our view:  

1.      Know your audience and what they care about  

Success starts with knowing the markets audience. The presentation must address the following questions:  

1. What do you do? What unique problem do you solve?  
2. What is your market opportunity and what part of that market can you capture over the next several years? 
3. What is your growth strategy and what are the growth drivers? 
4. Who is your competition and what are your sustainable competitive advantages?
5. What is your business model — how do you make money?
6. What is your plan for value creation near and longer-term? Why will your company be worth more a year from now than it is today? 
7. What is your financial position?
8. What is the background of the leadership team and what have they done in the past that would give investors comfort they can execute? Who is the “bench” that will support management in executing the growth plan?
9. What are the intangibles that drive value creation for your company? 
10. What metrics and milestones are most important in benchmarking progress against the plan? 
11. What is your ESG story/narrative? 
12. What are the key risks associated with owning your company’s stock, and how are you mitigating them? 

2.  Present an effective business model: Company uniqueness

 It is a fact that the market potential is big enough to make investing worthwhile. So, the product or service should “preferably” be unique. Most of the times, investors look for features that distinguish the company A from potential competitors, and give it some sort of advantage, such as intellectual property protection, exclusive licenses and exclusive marketing and distribution relationships.

3. Prepare for each meeting like it’s the most important sales pitch ever

Investors have distinct approaches to decision-making ranging from growth to value orientations. Each investment manager screens for specific characteristics that align with their investment objectives. You need to know what those are so you can map your investment story to their stated investment parameters and anticipate their questions and objections.

4. Share your financial and operational track record

We always need to prove to potential investors that a company has excellent financial performance, also, or especially, if the company is seeking funding from a bank. The management has to be ready to answer questions about the financial stability of his company. Investors may ask if and how the company shows signs of growth and if there’s some plans – such as issuing shares or borrowing money – to stimulate growth. The debt repayment plan should also be properly presented, it is extremely important to prove the business is capable of handling its financial obligations.

5. Know when and how to provide company guidance 

This is a key point I have been addressed several times by top managers and CEOs. A lot of listed companies wonder if they should provide an annual (or midterm) guidance to the market. This may grow the stock prices in the short term but, if you fail to meet your targets, trust in your company will erode, bringing more challenges in the long term. 

If a company provides forward earnings guidance, it is important to set objectives achievable, in order to build loyalty consistently and maybe overdelivering on targets.

If a company decides to provide guidance, the equity story is the opportunity to inform investors which metrics you present on a regular basis. The KPIs and forward multiples will depend on the sector. These details also help analysts compare that specific company with the peers in the market, which can provide confidence in the future prospects.

6. Rehearse the presentation and prepare for Q&A

Most companies realize that effective delivery skills are a competitive advantage and set time aside for formal presentation training ahead of an IPO roadshow.

Is the leader charismatic? Can he/she speak “good English” when necessary?

In the Q&A, investors want to see if management can think on their feet and answer unanticipated and sometimes tricky questions. With an investor audience, understanding the intent of the question is also important – what are they trying to get at or what are they missing? Every question offers an opportunity to reinforce your investment thesis, drive home a key message that will add to their understanding — but in our view it’s impossible to navigate the process to the best outcome without thorough preparation. 

7. Who discuss the Equity Story? 

We conclude here by statement that it is important that management tells the equity story as it is their job to deliver on the promises.

It is always tempting to over-promise in order to achieve the best possible price for the company’s stock, but the risk is to underwhelm investors when it becomes obvious the targets are not achievable. This is why the investor relations officer (IRO) – internal and/or the external advisor –  would work closely with the top management to put out an impressive and powerful, but ultimately achievable, equity story consistent with market expectations and with the reputation of the company. They should think about how their statements will stand up in a few years when shareholders will decide whether to remain invested or move on.

Today’s CEOs need a new breed of skilled IROs to bridge the gap. These persons must be proactive leaders, building constructive relationships throughout the shareholder base to help the company mitigate various risks, since day one.