What Public Companies Should Do in a Volatile Market
Posted on March 9th, 2016. Posted by Mark Klausner
Let’s be honest: Market conditions have been hostile to most industries this year, and the healthcare sectors have been victimized along with all the rest. These are not easy days to be the chief executive or chief financial officer of a public company, and you may be feeling pressure to take action to drive your share price up despite the headwinds.
It’s been several years since Wall Street last saw a period of sustained bearishness — long enough that some of today’s public companies have actually never been through such a difficult time. A lot of companies are hitting the panic button. We recommend the opposite.
So what should you do? We put that question to our team of IR experts. Read on:
Tom McDonald Managing Director
After 20-plus years working on Wall Street, my biggest recommendation for what companies can do during volatile equity markets is to stay focused on running your business. No one likes seeing their stock price whipsawed by volatile markets but the truth is there is nothing you can do about it. To focus on the gyrations or to try and convince investors to buy your stock while the market is under pressure is wasted energy and effort. Refocus all of your time onto your company’s operations and allow the fundamentals of your investment story to ultimately win over investors.
Mike Piccinino Managing Director
Proactive outreach is the best strategy…. a simple email or short call to your top shareholders during periods of higher stock market volatility can be very effective.
This is an opportunity to remind your shareholders of the “elevator pitch” on your company:
- “We recently introduced FY2016 guidance for revenue growth of XX% and earnings growth of YY%.”
- “We expect this growth to be driven primarily by these strategic initiatives….” Keep this short and sweet, focusing on the one or two most important contributors to growth.
- “Here are the non-financial milestones (development, regulatory, clinical, commercial) that you should expect to hear about in the next three to six months.”
- “We look forward to meeting with investors during (insert healthcare / investor conferences) and we welcome you to stop by our booth during (industry conference) to see our new products, meet more of the team, etc.”
Robert Uhl Managing Director
Don’t panic and stay visible! Yes, your stock is down and you are feeling the heat from investors, employees, and maybe even your board. But your fundamentals most likely have not changed. Continue to execute on your business and development plans, attend strategically selected investor conferences and non-deal road shows, and continue the conversation about your goals and progress with investors. When the irrational market turns around, sentiment improves, and investors decide to up their investment in your sector, you want them to think of you.
Chris Brinzey Managing Director
In these volatile markets it can be difficult to get your story in front of new investors. But volatility doesn’t last forever and it is a great time to get some important things done. For example, take the time to re-evaluate and refresh your current investor deck. Maybe there are some recurring questions you have received or you feel there are a few things that investors just aren’t fully appreciating. A good investor deck refresh gives you an opportunity to makes some changes that better capture the key themes, catalysts, and direction your company is going in in 2016.
Patti Bank Managing Director
Remain visible. While it’s human nature to hide during a volatile market, we think it’s important to stay on investors’ radar screens. Even though markets may suggest otherwise, at some point investor sentiment will swing more positively, possibly just as quickly as the small-to-mid cap life science sector fell out of favor. With that in mind, continue to execute and communicate your message. Having the buy side familiar with your story when the momentum shifts should be an advantage.
Leverage your board’s diverse backgrounds and knowledge. With many CEOs experiencing the market volatility for the first time, many board members have lived through this phenomenon before. Whether it be communications strategy, financing tactics or operations planning, don’t overlook your Board’s familiarity with such issues as a potential valuable resource.
John Woolford Managing Director
Stick to your strategy — despite the urge to react to volatile markets (especially when your stock price is down), stick to the IR strategy you developed at the beginning of the year. Focus on messaging, meeting the right institutional investors and analysts, and keep to a non-deal road show/conference schedule that maximizes management time and visibility.
So, there you have it. What should you do in a market like this one? Don’t overreact. Focus on the fundamentals. Stay positive, visible and continue to refine and communicate your story.
That’s what our more than 200 years of combined Wall Street experience tells us, and it’s what we tell our clients. For a conversation about your own specific situation, fee free to reach out.