CHAPTER 19 Infrastructure/ Disclosure Check

The last bit of preparation before the delivery stage is quickly reviewing infrastructure

needs and disclosure. With an eye on cost efficiency, IR must

have the right people and the right tools at its disposal to do the job. IR is

also responsible for double-checking all disclosure policies and working

with internal counsel to find the most prudent and commonsense approach.

SUPPORTING IR

First and foremost, IR must have suitable personnel. Staffing the IR function

properly is paramount to its success, and, as we mentioned previously, each

company, depending on its size and characteristics, has different requirements

for the job. We can’t emphasize enough our belief that a person with

senior-level Wall Street experience is most qualified to sit in the IR seat.

These professionals have the understanding it takes to maximize value,

which is, after all, the objective. Therefore, in a very large company, there

may be a team leader, reporting to the CFO, and several professionals underneath,

most likely with finance experience. In smaller companies, the

team may just be the CFO, an administrative person, and an outside agency.

Second is the need to secure relationships with the most proficient and

capable vendors. At the heart of successful IR is information. Doing the job

without it is almost impossible. Therefore, secure the best and most cost-effective

information services around. Bloomberg terminals offer more financial

information than an IRO would ever need in all likelihood. They offer

stock price, historical charts, analyst coverage and ratings, earnings releases

and other announcements, board of director lists, and lists of comparables.

Their functionality also allows the user to create comp lists in Excel and run

relative valuation exercises, a big part of the definition section.

First Call is the second essential service. Although it offers some of the

same information as Bloomberg, First Call posts the analyst estimates that

are widely regarded as the benchmark. First Call is also the source for analyst

research, and access to that research allows IR to scan Wall Street opinions

on every company in the industry, which can be especially valuable

around conference calls to gather intelligence about Wall Street’s perception

in any given quarter. It can also be valuable as an information source for industry

events. For example, First Call may be the fastest source for learning

that a competitor has just launched a new initiative. For a CEO or CFO, the

speed of information is critical, and executives always look good to

Wall Street if they have already heard the information and have a calculated

response.

Big Dough.com is the final essential service, at least on the IR side. It offers

descriptions of the buy-side, identifies portfolio managers and analysts,

and details how much money they manage or what stocks they cover. Finally,

Big Dough.com allows a shareholder comp run that shows the IRO’s

company juxtaposed with five or six other similar companies. The exercise

shows institutional accounts that don’t, but should, own the IRO’s stock.

Other information services that are helpful include Web sites where one

can view all upcoming financial conferences and request transcripts from recent

quarterly conference calls. On the PR side of the house, numerous databases

track reporters, find obscure articles, and target stories.

The cost for all these different services, as well as a full-time, internal IR

staff, can be quite high. For larger companies, this is certainly not a problem,

but for companies with market capitalizations under $1 billion, outsourcing

might be the best way to go. This assumes the agency has these information

services and has a point person who understands Wall Street

enough to interpret the data and plot a cost-efficient and targeted strategy

for management.

Third, IR must also review disclosure policies, which may require signoff

by legal counsel and buy-in from senior management.

The company must decide issues such as who is authorized to talk to

The Street and when. IR should work with senior management to set up internal

policies regarding interacting with The Street and the media. An important

policy is that only one or two executives should ever represent the

company in public, and all other employees on their first day of work should

sign a document that they won’t interact if approached. If the company always

has a systematic way of talking to The Street and a template or system

for discourse, then the company knows and controls everything in the public

domain. This mitigates the instance of leaks to Wall Street or the media

and should make it abundantly clear that talking to analysts could be the equivalent of trafficking in inside information. This framework for dealing

with the outside world must be in place for every interested party.

READY TO GO

With the support services in place and disclosure reviewed, IR is ready for

Delivery.

The last bit of preparation before the delivery stage is quickly reviewing infrastructure

needs and disclosure. With an eye on cost efficiency, IR must

have the right people and the right tools at its disposal to do the job. IR is

also responsible for double-checking all disclosure policies and working

with internal counsel to find the most prudent and commonsense approach.

SUPPORTING IR

First and foremost, IR must have suitable personnel. Staffing the IR function

properly is paramount to its success, and, as we mentioned previously, each

company, depending on its size and characteristics, has different requirements

for the job. We can’t emphasize enough our belief that a person with

senior-level Wall Street experience is most qualified to sit in the IR seat.

These professionals have the understanding it takes to maximize value,

which is, after all, the objective. Therefore, in a very large company, there

may be a team leader, reporting to the CFO, and several professionals underneath,

most likely with finance experience. In smaller companies, the

team may just be the CFO, an administrative person, and an outside agency.

Second is the need to secure relationships with the most proficient and

capable vendors. At the heart of successful IR is information. Doing the job

without it is almost impossible. Therefore, secure the best and most cost-effective

information services around. Bloomberg terminals offer more financial

information than an IRO would ever need in all likelihood. They offer

stock price, historical charts, analyst coverage and ratings, earnings releases

and other announcements, board of director lists, and lists of comparables.

Their functionality also allows the user to create comp lists in Excel and run

relative valuation exercises, a big part of the definition section.

First Call is the second essential service. Although it offers some of the

same information as Bloomberg, First Call posts the analyst estimates that

are widely regarded as the benchmark. First Call is also the source for analyst

research, and access to that research allows IR to scan Wall Street opinions

on every company in the industry, which can be especially valuable

around conference calls to gather intelligence about Wall Street’s perception

in any given quarter. It can also be valuable as an information source for industry

events. For example, First Call may be the fastest source for learning

that a competitor has just launched a new initiative. For a CEO or CFO, the

speed of information is critical, and executives always look good to

Wall Street if they have already heard the information and have a calculated

response.

Big Dough.com is the final essential service, at least on the IR side. It offers

descriptions of the buy-side, identifies portfolio managers and analysts,

and details how much money they manage or what stocks they cover. Finally,

Big Dough.com allows a shareholder comp run that shows the IRO’s

company juxtaposed with five or six other similar companies. The exercise

shows institutional accounts that don’t, but should, own the IRO’s stock.

Other information services that are helpful include Web sites where one

can view all upcoming financial conferences and request transcripts from recent

quarterly conference calls. On the PR side of the house, numerous databases

track reporters, find obscure articles, and target stories.

The cost for all these different services, as well as a full-time, internal IR

staff, can be quite high. For larger companies, this is certainly not a problem,

but for companies with market capitalizations under $1 billion, outsourcing

might be the best way to go. This assumes the agency has these information

services and has a point person who understands Wall Street

enough to interpret the data and plot a cost-efficient and targeted strategy

for management.

Third, IR must also review disclosure policies, which may require signoff

by legal counsel and buy-in from senior management.

The company must decide issues such as who is authorized to talk to

The Street and when. IR should work with senior management to set up internal

policies regarding interacting with The Street and the media. An important

policy is that only one or two executives should ever represent the

company in public, and all other employees on their first day of work should

sign a document that they won’t interact if approached. If the company always

has a systematic way of talking to The Street and a template or system

for discourse, then the company knows and controls everything in the public

domain. This mitigates the instance of leaks to Wall Street or the media

and should make it abundantly clear that talking to analysts could be the equivalent of trafficking in inside information. This framework for dealing

with the outside world must be in place for every interested party.

READY TO GO

With the support services in place and disclosure reviewed, IR is ready for

Delivery.