Mistakes To Avoid

Dec. 21, 2004

Here, according to the pros, are some of the most common mistakes companies make in talking with Wall Street.

  • Using the investor-relations person as a shield for management. Peter Labe, an analyst with Buckingham Research in New York says this is the most common mistake. If the person talking with the financial community cant say where the company is headed, he or she cant help investors determine a fair valuation of the stock.
  • Being less than responsive. A pet peeve of institutional investors and analysts is not being able to get in touch -- quickly -- with someone from the company who can answer questions."Investors sell first and ask questions later," says Rebecca Folliwill, an assistant vice president with Merrill Lynch & Co. Inc. in Houston.
  • Assuming that your competitors for customers also compete with you for capital. Thats often not the case, says Jim Yntema, director of research with the Financial Relations Board, pointing out that companies in a given industry will have different risk characteristics.
  • Thinking that you need (or should have) a stock valuation that is out of the stratosphere. Different industries are valued differently. Michael Rosenbaum of the Financial Relations Board points out that in order to get an edge, you just need a valuation higher than the competition within your industry.
  • Telling investors what they already know. When talking with analysts and fund managers, you dont want to simply parrot the annual report, says Larry Chiagouris of CDB Research & Consulting Inc., New York. Investors are interested in whats coming, and need to know how your companys future will be better than its past.
  • Telling investors what theyre unlikely to understand. Youre best off avoiding jargon or overly complicated explanations. "Think of how you will tell your story to your mother or your next-door neighbor. Lose the engineering-speak," says EMCs Polly Pearson. Focus discussions on the business cases for your products, not their technical features.
  • Forgetting about the tangibles. If you can get a new product into the hands of investors, its often worth the cost. "People dont understand that buy orders are emotional. If you have a new product, send a sample," says Michael Kelly, senior vice president with Ketchum.

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