Investor communication in the face of Covid-19
With financial markets in free fall amid the ongoing coronavirus crisis, companies are increasingly barraged with one-off calls from analysts and investors seeking information that can be difficult to provide within the confines of Regulation FD.
At the same time, as this is a crisis without a clear playbook, timely information has never been more important to investors than it is right now.
With this in mind, we reviewed some best practices and practical steps companies are taking to keep the lines of communication open with investors and have outlined them below.
We should note that the appropriate communication approach is specific to each company and depends on a number of factors including: the amount of real-time data available to assess the impact of Covid-19 on customers, supply chains, operations, and so on; the speed with which business conditions are changing; and the level of confidence management has in its ability to evaluate and accurately project the impact of the coronavirus on business.
Maintaining credibility is paramount and, in many cases, no communication at all ahead of the next earnings announcement may be the safest approach for some companies.
PRACTICAL STEPS FOR CONSIDERATION
- Monitor peer group and broader sector communications practices in real time: Companies are only able to provide investors with best-in-class disclosure if they are aware of the type of information companies in their sector are offering. Real-time monitoring of industry disclosure practices is critical, with an emphasis on both the content and form of the communications.
- Consider holding a business update call: For executive teams comfortable with analyst and investor Q&As, a business update call is one of the most effective ways of providing information on extremely fluid situations. It allows a company to provide its perspective on recent developments and prepare the market for potential adverse impacts on its near-term financial results. Proactively reaching out to your investors and giving them an opportunity to ask questions helps build real credibility with the Street. One caveat is that we do not recommend holding a business update call that does not include a Q&A session.
- Issue an update through a press release or 8K filing: For companies preferring more control over the message, filing a press release or an 8K that addresses key concerns is an option. Content could include a letter to shareholders or employees, a summary of key updates in the investor presentation or an FAQ.
- Update investor presentation: One of the quickest ways to provide relevant information to investors is to add new disclosures to an existing investor presentation. For example, several banks have recently disclosed updated detail on their lending exposures to stressed sectors like energy, hotels, cruise lines, restaurants, movie theaters and airlines in their investor decks.
- Provide updated guidance and/or pre-announce results: Among the best ways to acclimate the market to near-term earnings pressure is to provide updated guidance and/or pre-announce results. For companies anticipating adverse impacts on their March quarter results, an earnings pre-announcement or intra-quarter guidance update may be appropriate. But guidance updates should be focused on things that are within a company’s control – for example, several retailers issued updated guidance last week that excluded the ultimate and unpredictable impact of the coronavirus on consumer demand.
- Start preparing now for the March earnings season: The one certainty is that the upcoming earnings season is likely to prove extremely challenging. According to a March 11 CNBC article, at least 150 companies have warned of a potential hit to earnings from the coronavirus, with several anticipating missing their March quarter guidance. Companies will never have all the answers surrounding the coronavirus pandemic that is unfolding rapidly. In the middle of a crisis, however, the more information companies can share about their situation and response in the near term, the more favorably investors will view the management team once this crisis has passed.
- Keep the lines of communication open: Be prepared to talk to existing investors that may add to their positions on price weakness, and field inquiries from new prospects that now see the company as an attractive value play.
- Leverage technology: With so many conferences and non-deal roadshows being cancelled, companies should take advantage of conference calls, webcasts, virtual presentations and videoconferencing to interact with existing and potential shareholders. Many investor conferences that shifted from in-person to virtual formats have been very well attended.
Moira Conlon is founder and president and Matthew Keating is a senior vice president of Financial Profiles, a strategic communications firm