Non-deal roadshows (NDRs) have become an increasingly popular tool for public companies seeking to engage with investors outside of the formal earnings cycle. By providing management teams an opportunity to connect directly with current and prospective shareholders, NDRs can strengthen relationships, enhance transparency, and support valuation.
In this blog post, we’ll explore what non-deal roadshows are, why companies hold them, and how to maximize their impact. Gaining insight into how to effectively utilize NDRs can equip your business to derive meaningful value from these shareholder engagement activities.
Non-Deal Roadshow - Exploring the Concept
A non-deal roadshow is an investor relations event where company executives, often the CEO and CFO, meet with institutional investors in a series of one-on-one or small group meetings. In contrast to a traditional roadshow conducted during an IPO or secondary offering, non-deal roadshows specifically do not involve raising capital.
Instead, the focus is on providing shareholders an in-depth look at the company’s operations, strategy, and growth prospects. NDRs give management a platform to articulate their vision directly to the investment community in an intimate setting conducive to constructive dialogue.
Understanding NDRs: Definition and Purpose
The primary objectives of a non-deal roadshow are to:
1. Strengthen relationships between management and investors
2. Clearly communicate business strategies and goals
3. Provide transparency into financial performance and outlook
4. Gather feedback and insights from shareholders
5. Address misconceptions or information gaps
By fulfilling these goals, NDRs aim to align management and investor perspectives, ultimately enhancing confidence in leadership and improving valuation.
The Difference Between Deal and Non-Deal Roadshows
Capital raising roadshows are transaction-oriented events arranged by investment banks where company executives market upcoming security offerings to potential investors. The focus is on persuading institutional investors to purchase the securities being issued.
In contrast, non-deal roadshows are ongoing shareholder engagement initiatives not tied to specific transactions. They provide a forum for dialogue divorced from fundraising demands. NDRs enable management to educate owners and articulate long-term vision.
They are still typically arranged by sell-side firms, but the focus is to educate and update investors, rather than to promote the sale of a security.
Why Companies Opt for Non-Deal Roadshows
There are several key reasons companies make NDRs part of their investor relations strategy:
1. Supplement formal reporting - NDRs offer additional touchpoints between earnings releases to update owners. This avoids information voids and keeps investors engaged.
2. Enhance transparency - The intimate NDR setting facilitates candid discussion regarding business performance and outlook. This transparency is valued by shareholders.
3. Gather feedback - Investors' perspectives shared during NDR meetings provide management with valuable insights to incorporate into strategy.
4. Target new investors - NDRs enable companies to connect with shareholders not met through conferences or calls. Expanding the investor base diversifies ownership.
5. Address misconceptions - NDRs present opportunities to directly correct inaccurate investor assumptions revealed through engagement.
6. Support valuation - By fulfilling the above objectives, NDRs strengthen investor confidence, which can improve valuation multiples.
The Benefits of Non-Deal Roadshows
When thoughtfully arranged and executed, non-deal roadshows offer a number of advantages that make them an impactful investor relations practice.
Strengthening Investor Relations and Communication
NDRs provide invaluable face time between company executives and shareholders outside of structured environments like earnings calls. This facilitates an open exchange of ideas and insights beyond what a scripted call allows. Investors appreciate the transparency and access.
Direct NDR communication also builds familiarity and trust between management and shareholders, strengthening relationships on both sides. Investors gain confidence in leadership through candid in-person interactions.
Showcasing Growth Potential and Business Strategies
The intimate NDR setting allows company executives to elaborate on long-term vision and strategic growth drivers not easily conveyed during abbreviated calls. Shareholders gain a deeper understanding of corporate strategy and management thought process.
NDRs also enable discussion of market dynamics, competitive advantages, product roadmaps, and other topics relevant to future performance. They allow management to "pull back the curtain" on business operations.
Generating Interest and Attracting New Investors
While NDRs aim to inform current owners, they also provide exposure to prospective new investors. Meeting influential institutional shareholders interested in the company's story can expand and diversify the ownership base.
NDRs enable targeting of shareholders whose investing approach aligns with the company's identity and strategy. This gravitates suitable investors to the stock.
Nailing the Non-Deal Roadshow Presentation
Crafting an impactful NDR presentation requires thoughtful planning and preparation. The use of an investor relations consultant can be helpful here and it can be especially helpful when using a consultant that has previously been an investor. Think like an investor and follow these tips for maximizing effectiveness:
Creating a Compelling Story and Narrative
1. Clearly articulate long-term vision and strategy
2. Share relevant insights into industry dynamics and competitive advantages
3. Provide proper context regarding past performance
4. Outline specific growth drivers and strategic objectives
5. Weave all of this into a nice “story” rather than simply a series of bullets and accomplishments
Utilizing Visuals and Data to Enhance Impact
1. Incorporate slides, videos, demos, etc. to reinforce key messages
2. Utilize charts/graphs to illustrate historical performance and trends
3. Leverage relevant benchmarks and market data for comparison
4. Creatively display critical statistical information
Handling Q&A Sessions with Confidence
1. Anticipate likely shareholder questions and concerns
2. Practice and role-play Q&A with your IR consultant or internal IR team
3. Come prepared with quantitative support for responses
4. Remain poised and thoughtful; avoid defensive posturing
5. If unsure of an answer, commit to following up post-meeting
Measuring Success: Evaluating the Outcome of Non-Deal Roadshows
Determining NDR effectiveness requires monitoring of key metrics and investor feedback:
Key Metrics and Indicators for Assessment
1. Investor meeting requests following the NDR
2. Number of new investors initiating positions
3. Changes in shareholder composition and concentration
4. Trading volume trends for the stock
5. Movement in valuation multiples
Learning from Feedback and Making Improvements
1. Gather investor perceptions of management's performance
2. Note shareholder sentiment regarding strategies conveyed
3. Identify gaps in information provided or topics requiring clarification
4. Refine presentation content, style, and execution accordingly
Integrating Roadshow Insights into Future Strategies
1. Incorporate investor perspectives into strategic planning
2. Allow NDR feedback to shape messaging and communication
3. Follow up on unresolved investor questions
4. Continuously monitor effectiveness and make enhancements
Conclusion
Non-deal roadshows provide an invaluable forum for management teams seeking to extend investor outreach beyond earnings calls and presentations. By facilitating transparent communication and showcasing strategy, NDRs can strengthen shareholder confidence and support valuation.
Companies that thoughtfully structure their NDR approach and remain open to investor perspectives stand to derive meaningful benefits from these initiatives. As markets grow more turbulent, active engagement and education of shareholders become increasingly vital.