Thread by @smallcapinst

Small-cap executives often walk away from investor meetings, thinking they went well. Investors commonly leave feeling quite the opposite. Why? Some thoughts....

Investors rarely divulge their post-meeting sentiment to IR professionals or company management. There is no incentive in doing so; at best they're providing valuable feedback, at worst they are creating unnecessary turbulence.

What are some of the makings of an unsuccessful investor meeting?

......

Right out of the gate, physical dress and appearance do matter; greatly. When investors meet with CEOs and CFOs who aren’t appropriately dressed, are disheveled in some way, or otherwise have poor personal hygiene, they are going to walk away having taken notice.

Not enough small-cap executives and service providers understand that investors of all walks routinely rule out making investments within a moment of meeting management.

And the company management keeps in the form of IR professionals, bankers, and other service providers, is subject to the same rule.

Executives who don't already know about, or attempt to learn about the investors they are meeting with, and tailor their conversation appropriately. Information is not always readily available, though asking for a quick intro can go a long way.

An investor meeting is likely going to go poorly when a CEO effectively reads the slides to investors. Connections with other people can’t be made when you’re ostensibly reading to them (never mind the fact that investors are capable of reading the very same slides).

Savvy investors will often tell CEOs who are reading slides to simply close their laptops, so they can speak conversationally about the company; those investors learn more about the CEO in the next minute or two than they would have in 2 hours of watching them read slides.

While there are certainly domain experts in the small-cap buy-side realm, many investors are generalists. The overwhelming majority of technology and life science CEOs speak miles over the heads of the average investor.

CEOs should aim their prepared remarks to a considerably more basic level of understanding, and utilize investor questions to better gauge domain expertise, and then respond accordingly.

As a fund manager once mentioned to SCI: “Do people seated at conference room tables honestly think that when they text under the table, everyone else in the room doesn’t know what they are doing?”

There is only one best policy regarding non-essential electronic devices in investor meetings: turn all of them off, and put them away for the duration of the meeting.

When the Q&A portion of small-cap investor meetings begins, poor speaking skills become evident. Speaking “crutches” like “you know’s,” “uhm’s,” and “ah’s” are often so repetitive that investors lose focus on what is being said.

Investors stop listening, and start wondering how management could be so poor at telling the story of the company they oversee on behalf of shareholders.

Investors often purposely ask CEOs and CFOs questions that call for speculative answers, just to see how they respond. Experienced public company management teams respectfully decline to speculate.

This is something many investors do, which often elicits "uhm's" and "ah's" as mentioned above, with the same result.

Naked short selling is real. Disingenuous short-biased hatchet jobs happen. So does lousy market making. For every company that is legitimately affected by these issues, there are many more that waste incredibly valuable time and energy, ...

.... publicly attributing their company’s poor stock performance to illusory or conspiratorial fact patterns.

Investors typically start to back away when they hear these notions.

Shares vs. options: At some point during nearly every investor meeting, a CEO will be asked how many shares they own and/or when is the last time they bought stock in the open market. Why?

Investors have learned over time that when CEOs take money out of their pocket and buy stock, they are more committed to success. Investors want CEOs and board members to have “skin in the game.”

Stock options or restricted stock are not considered “skin in the game” by any investor. Few things will engender more bad will with the buy-side than CEOs who characterize “skin in the game” as anything other than purchasing stock with cash.

One of our editorial advisors, .@iancassel, wrote about this topic here: microcapclub.com/2018/05/invest…

Executives and board members don't need to buy stock in large quantities. Investors want to see insiders buying stock, and understand that all insiders (including officers and directors of public companies) cannot necessarily afford to make large purchases often.

END.

What other common foibles come to mind to investors out there?