Tag Archives: Investment Tools

Stories about trends in the U.S. and global economies. The hottest new IPO. A cool product or service intended to change the world. A big earnings gain or miss. Reports about various countries’ fortunes both politically and fiscally all across the world. CEO changes, restructurings and recessions, just to name a few.

Absolute Value is our sounding post where we hope to exchange ideas and commentary on why all of this matters. We believe our point-of-view about events and communications helps our clients matter more in an era of unprecedented global connection.
 

Twitter’s Official Foray into the World of Finance
August 9, 2012


Last week, Twitter launched the “cashtag” feature, adding the “$” to its eponymous #hashtag and @reply operators. Similar to its hashtag system and StockTwits’ established $TICKER system, by adding the “$” in front of a ticker symbol, it becomes clickable and aggregates all content in the Twittersphere related to that stock.

While a quick Twitter search of some of the most talked about stocks, including Apple and Facebook, yields an incredible amount of results, usage is presently dominated by news services and retail investors similar to the activity on the StockTwits platform.

We’ll have to wait to see if Twitter can gain traction with this development among the venerable institutional investor community, but in the meantime, it provides another tool for IR departments to add to their social media arsenal to monitor and engage in real-time conversations with their retail investor base.

Stacy Feit is a Senior Vice President at Financial Relations Board with over 10 years of investor relations and Wall Street experience. She provides strategic financial communications counsel and helps clients increase their visibility within the financial community. She has guided numerous clients through major milestones, including IPOs, spin-offs, acquisitions and restructurings.

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SEC’s Decimalization Report: Unexpected Take of the Sell-Side and Impact on Small-Cap IR Programs
July 25, 2012

Last week, as mandated by Section 106(b) of JOBS Act, an SEC Commission delivered a report regarding the effect decimalization – or trading and quoting securities in one penny increments – has had on IPOs and trading volumes for small- and mid-cap companies.

Since being implemented in 2001, decimalization has faced steeped criticism and was actually cited as a “death star” by auditory firm Grant Thornton, and has played a contributing role in the decline of the U.S. IPO.

Despite this negative legacy, the Commission’s report, while an interesting conversation piece, did not offer any practical conclusions. It notes lower spreads may have negatively impacted capital formation, but it’s one of several factors that could have, and current data cannot isolate the effects of decimalization alone. The report also discusses how equity markets have changed over the past decade.

The final preparers’ recommendation is to not proceed with specific rulemaking to increase tick sizes at this time, but additional research may be needed to determine whether rulemaking should be undertaken in the future.

Small-Cap, Sell-Side Research
However, what we find extremely interesting was insight as to how decimalization has “put the economic sustainability of sell-side research departments under stress.”

The report highlights that independent equity analyst coverage has significantly shifted away from smaller capitalization stocks towards highly liquid, larger capitalization stocks. This report further suggests that analyst coverage of smaller public companies has become unprofitable both because of the Global Analyst Research Settlement in 2003, prohibiting direct compensation of analysts through investment banking revenue, and decimalization itself, which reduced spreads that formerly helped fund analyst coverage. The conclusion is that less analyst coverage of smaller capitalization companies means that less information on these stocks is generated, which, in turn, reduces market interest in these stocks.

This is a sad state of affairs and something that every investor relations professional can relate to. In the past few years, we’ve increasingly seen sell-side research departments consolidating staff and reducing coverage to compensate for reduced resources. So, it becomes increasingly incumbent on smaller companies to find ways to proactively tell their story. Some tips we can offer include:

  • Be proactive, get out there and meet with investors:

Yes, the days of large group broker lunches are dwindling, but one-on-ones remain one of the best ways to meet with your shareholders and prospects.

  • At industry conferences, focus on your buy-side meetings:

Consider consolidating sell-side meetings into a group event, as sell-side analysts on the whole are more receptive to this venue than buy-side individuals.

  • Become an industry resource for your sector’s sell-side analysts:

As a former corporate practitioner, I’m proud to say that while a former company was only covered by five analysts, I regularly spoke with most of those covering my industry and got frequent calls for information, to schedule calls with management, etc. That’s how that number went to five from originally two analysts in only a year and a half.

  • Establish a presence at retail/broker investor events
  • Utilize social media – Twitter, Stock Twits – to broaden proactive outreach to the investment community.

Make no mistake – the competition for investor dollars has and will always be fierce. As sell-side research becomes more competitive to obtain, it makes it that much harder for investor relations professionals to help our companies achieve that essential “mind share” that differentiates an “interesting prospect” from a “company that I want to own.”

Scott Eckstein is a Director of Account Services at Financial Relations Board and brings over 15 years of experience in financial communications both in agency and corporate roles. Scott has worked with a number of companies developing integrated communications programs as well as developing targeted institutional and retail branding campaigns. He has also provided advisory services for a variety of small- to large-cap companies.

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NAREIT’s REITWeek Conference – Notes and Takeaways
June 20, 2012

Last week I attended NAREIT’s Annual Investor Forum in New York: REITWeek. It was an educational and rewarding opportunity to meet with many of the 1,000+ attendees representing REIT industry management teams, institutional investors and sell-side analysts. NAREIT is the worldwide representative voice for REITs and listed real estate companies with an interest in U.S. real estate and capital markets.

Jim Cramer, host of CNBC’s “Mad Money,” started the festivities at NAREIT’s Investor Forum by addressing attendees at a luncheon on June 12th. Cramer gave his own perspective on how REITs have performed during the downturn. Unlike other industries, Cramer said REITs have taken a number of steps to successfully manage through the financial crisis in “shareholder-friendly ways,” such as refinancing and issuing equity. Cramer emphasized the importance of investors having a diversified portfolio that includes REITs.


NAREIT organized presentations with over 100 REIT management teams led by some of the industry’s top influencers. While I could not see them all, I left with many significant takeaways that our team wants to share with you here at Absolute Value:

  • Management teams’ remarks were optimistic, and most anticipate further industry improvement going forward, although this is expected to remain gradual due to slow economic growth.
  • In general, REITs are focusing on improving their balance sheets as well as the quality of their portfolios.
  • In New York City and other major markets, the office outlook is steadily improving. Some technology-driven markets like San Jose and San Francisco have reported strong performance.
  • Despite mixed reports on consumer confidence, retail is performing very well, with exceptional progress among regional malls. Reflecting their renewed confidence in the market, retailers want to expand in good locations and are becoming more receptive to longer-term leases.
  • Lodging conditions continue to improve as lack of new supply has helped the market; recovery to date is modest as most believe we are still in the early stages in this cycle.
  • Investors expressed a certain level of concern about the impact that government legislation and budgets may have on healthcareREITs.

Next year’s REITWeek is taking place in Chicago. If your schedule allows, I highly recommend attending as there’s no substitute for the in-person experience. If you have any interest in the real estate markets, you’re sure to have a very valuable experience.

Scott Eckstein is a Director of Account Services at Financial Relations Board and brings over 15 years of experience in financial communications both in agency and corporate roles. Scott has worked with a number of companies developing integrated communications programs as well as developing targeted institutional and retail branding campaigns. He has also provided advisory services for a variety of small- to large-cap companies.

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A Refresh Needed on Regulation FD?
June 4, 2012

Public companies have lived under a new era of heightened regulatory oversight for more than a decade. Management accountability, enhanced investor communication, greater transparency and improved governance disclosure are just a few of the new expected norms.

Yet over the past several weeks, we have witnessed several corporate “missteps” that have damaged reputations and negatively impacted stock valuations. At the same time, as highlighted in a recent IR Magazine article “Authorities target disclosure leaks,” the Securities and Exchange Commission has become more proactive and “the recent rash of insider trading cases – such as the Galleon affair – highlights the dangers for firms.” Add the backlash surrounding the Facebook IPO over alleged selective disclosure, and Regulation Fair Disclosure is once again on the front page and racking up big fees for lawyers.

As many of you know, Regulation FD was adopted by the SEC in October 2000 to address three issues, including “the selective disclosure by issuers of material nonpublic information.”

Our counsel to clients is to always ensure broad and timely dissemination of any “material” information or news to the investing public. While sometimes the situation is not inherently clear cut, information is generally considered material if it is likely that an investor would consider it important in making an investment decision in your company. Such material information must not be disclosed by anyone other than official company representatives through accepted disclosure channels.

Bottom line – refresh yourself and your executives on the rules and either provide simultaneous access to material news to all interested parties, including investors and the media – or not at all. Otherwise, the result could cost your firm dearly both in reputation and valuation.

Joe Calabrese is a Senior Vice President with approximately 20 years of investor relations experience. Working closely with publicly-traded and private companies, Joe provides strategic counsel, message and collateral materials development and has in-depth experience assisting IPOs, M&A transactions, restructurings, restatements, analyst days and management changes.

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Facebook – Does Reg FD Really Apply?
May 24, 2012

We’ve all seen a plethora of articles and a lot of finger pointing about the recent Facebook IPO. In its nearly 50-year history, FRB has participated in over 300 IPOs. We’d like to offer our perspective on the complaint that Facebook violated Reg FD. Here are our own top three reasons for believing that Reg FD may not apply here:

1) Many are saying that Facebook appears to have violated Reg FD by selectively disclosing material information that led its underwriters to cut their estimates during the IPO roadshow. But remember: Facebook was not yet a publicly traded company when this allegedly took place. This very issue was discussed in The Reformed Broker recently and it appears to fall under an exemption for companies engaged in a securities offering. According to the article and its legal citation, Reg FD does not apply here.

2) Reg FD typically applies to material information that was not shared with the public that would influence trading, but underwriters’ initial estimates are not shared with the general public. They are the result of lengthy discussions between the company and its bankers and are used for the purposes of pricing the deal. So, the general public was not going to see them anyway and certainly was not going to be trading on that information.

3) Regarding analysts changing their estimates, while it’s not common, that doesn’t mean it’s illegal. It’s a matter of public record that Facebook filed a revised S-1 prospectus on May 9th, nine days prior to the IPO. On page 57 of the revised S-1, Facebook said ad sales growth was not keeping up with its user-base expansion. This information was available to the public. If analysts, prompted by this public disclosure, revised their estimates, well, frankly that’s not illegal — it’s actually encouraged by Reg FD. If future investors in Facebook did not see it or simply chose not to read it, that is a risk that a retail investor takes with any decision. It’s up to you to do your homework.

At the end of the day, this IPO had a lot of issues and Facebook’s stock price performance to date has not met expectations. There’s certainly a lot of blame to go around and where it ultimately falls will be the province of the lawyers. We don’t know yet where it will lead, but Facebook may become a pioneer in another area that it didn’t expect to be: legal precedent related to IPOs.

Scott Eckstein is a Director of Account Services at Financial Relations Board and brings over 15 years of experience in financial communications both in agency and corporate roles. Scott has worked with a number of companies developing integrated communications programs as well as developing targeted institutional and retail branding campaigns. He has also provided advisory services for a variety of small- to large-cap companies.

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Will Crowdfunding Make Start-Up Investing Mainstream?
April 18, 2012

We’ve all heard at least a whisper about crowdfunding, the collective cooperation of people that network and pool their money, usually via the Internet, to support efforts of others. Initially, crowdfunding platforms were mostly associated with fundraising for small business ventures and creative projects, in many cases in exchange for incentives or rewards. But budding entrepreneurs with a new idea and solid business plan were unable to offer equity to the general public, thereby limiting the amount of capital they could raise via crowdfunding. Instead, angel investors or venture capitalists were the most likely sources of early money.

Enter the Jumpstart Our Business Startups (JOBS) Act, signed into law by President Obama earlier this month, which now allows start-ups to tap the equity market in a new way by leveraging a crowdfunding platform to find investors. The JOBS Act now exempts crowdfunding under the securities law, making the requirements for offering public equity much less onerous than an IPO, as long as certain rules are followed. The most notable being that you may not raise more than $1 million dollars in a twelve month period, you must disclose certain financial information based on the amount of money you wish to raise and your investors are limited in how much they can invest. There’s even a new crowdfunding association.

But while the passing of the JOBS act may indicate a green light for equity crowdfunding, there is still uncertainty regarding when and how the rules will be implemented. The Securities and Exchange Commission has 270 days from the day the bill was enacted to implement the crowdfunding exemption, meaning it could be 2013 before these rules are solidified. Also, the SEC must determine how to regulate the industry under these new rules and begin qualifying platforms. A lot to do.

So will crowdfunding make start-up investing mainstream? Will it open the floodgates to a Wild West-like funding environment with minimal investor protection? Of course, it’s too early to tell. In the meantime, it’s important to remember that regardless of the scale of the funding platform, from crowdfunding a small start-up to targeting a full-blown IPO, developing and articulating a bullet-proof corporate story to potential investors is absolutely imperative.

Stacy Feit is a Senior Vice President at Financial Relations Board with over 10 years of investor relations and Wall Street experience. She provides strategic financial communications counsel and helps clients increase their visibility within the financial community. She has guided numerous clients through major milestones, including IPOs, spin-offs, acquisitions and restructurings.

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