Investors buy stories, so better tell it well

By | October 7, 2011

Every now and then, it’s good to get out of the office and hear what the experts are saying about the latest trends and then bring them back for the benefit of our clients.

Yesterday, an IPO seminar hosted by Proformative featured plenty of interesting tidbits from the speakers who specialize in bringing companies public. For example, a banker said data shows that about 900 investors buy 90 percent of the deals. And if you miss your first quarter numbers right out of the box, “you’re dead.”

Where should a company list in the U.S., on NYSE or Nasdaq? Experts say it really doesn’t matter, but best to stick with your peer group.

One of my favorite comments was that investors in newly public companies buy stories more than anything. Of course, the numbers are important, but does the story resonate? When it doesn’t, the euphoria and excitement that can come on bell-ringing day can quickly turn sour when share prices plummet.

So what does a good story look like from our point of view? Crisp, compelling and easily understood messages, or as we like to say, the narrative. What the business does, how it makes money, how it will grow, what the risks and opportunities are and how it differs from competitors. Sounds simple, right?

It is and it isn’t. Often these key concepts get buried in a slew of financial data and turned into cumbersome, corporate-speak sentences after dozens of people have weighed in from management to bankers to lawyers and often last, the communications and investor relations professionals.

Similarly, sometimes presentations are just too long or not well-crafted in terms of keeping that overarching story prominent throughout. How many slides do you need, according to the experts? 30 for 30 minutes. How many of us have sat through a 50-page or more deck? I know I have.

And finally, another bit of advice was for all of the finance professionals to remember that the all-important road show – when management travels to see investors around the country or world – is really “a big selling exercise.” So make sure the people who are doing the selling are prepared and yes, interesting to hear.

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