Gaining sell-side analyst coverage increases the exposure of a company to capital markets with the potential benefits of attracting new investors, increasing trading liquidity, and improving stock price performance. We know analysts have influence, and they can even be an outside advocate for your company with institutional investors and traders. So how do you get started with pursuing coverage by analysts?
Know Your Peer Universe
Reaching out to analysts begins with understanding the universe of direct peers, those companies that are close competitors in your product markets or specific market sector. In addition, a set of indirect comparable companies should be considered. A variety of profiling techniques can be used to identify companies that have similar business models, growth or market capitalization profiles, similar industry characteristics, or that operate in adjacent markets. Once you have this list compiled, the next step in the process is identifying the analysts that cover these companies, noting that some analysts are sector specialists, and some are generalists.
We apply strategic thought and conduct extensive research at the outset of our client onboarding into finding companies that are similar to our clients to identify the largest universe of potential analysts. Then we craft communication for each analyst based on fit with their existing coverage mandate.
Craft the Story and Prepare the Details
Analysts want to hear a compelling story, so it is important that messaging is organized and communicated in a way that is strategic and stays on point. Analysts need to understand your key investment highlights, the market opportunity, and your value proposition, especially in comparison to peers that may already be covered by analysts. It is essential to clearly convey your company’s corporate strategy and be prepared to answer detailed questions as analysts look for insights and data points to understand your business, how it makes money, the risks and challenges involved, and the quality of management.
Make information sharing easier for analysts by providing good data in easily digestible formats, such as Excel supplements summarizing relevant and critical financial data, and by providing publicly available operational and financial guidance.
Alliance Advisors IR effectively manages the crafting of a company story, interpreting and shaping business strategy and performance into a concise and impactful message. We also provide guidance around disclosure, helping the company prepare for analyst conversations with leadership.
Take the Time to Build Relationships
Earning analyst coverage requires some TLC. Industry analysts cover companies that their firm has relationships with or expects to have a relationship with down the road. Analysts are looking at whether broader relationship opportunities exist for the financial institution, whether the company has upside potential, and if there is institutional interest in investing or trading in the stock.
By reaching out to analysts and institutional asset managers, you can share your story, provide continuous updates, and build relationships over time. Take the time to educate analysts, which may require calls with management, helping to provide inputs, providing site visits and technical overviews of your products and operations, and answering questions related to your financial model and industry. Your company representatives should be helpful, responsive, transparent, and follow up and follow through.
It’s also critical to keep expectations realistic. Time in and timing are both factors. For micro-cap companies, analysts providing research coverage are few and far between, and small-cap companies are usually not going to be covered by the large broker-dealer banks. As an alternative, micro-cap and small-cap companies should consider issuer-paid equity research, which also comes with distribution to the research firm’s proprietary investor network and circulation over the major financial platforms.
Nurturing analyst relationships is key, and Alliance Advisors IR can effectively manage these outreach efforts for you. We can reach out to analysts to share your story and build relationships in a consistent and timely way. We want them to know you’re “out there” by raising awareness with the investment community to generate interest in your company.
Building strong relationships with analysts and media
A strong investor relations plan starts with effective communication. When it comes to investor relations, analysts and media hold incredible power, and their involvement in effectively communicating your value proposition may boost your business. Building strong relationships with analysts and media can be a beneficial part of any investor relations strategy, helping your company attract new investors and maintain credibility along the way.
Investor relations analysts utilize their financial expertise and understanding of economics, data analysis, and customer relations to help investors identify opportunities and build confidence. On the other hand, media can be leveraged by both businesses and investors to get a better understanding of value, market share, success, and impact. In tandem, strong relationships with analysts and media offer irreplicable advantages to businesses actively seeking investment.
When looking for new investors or keeping your current ones updated, analyst and media connections can become touchpoints for communicating your value to those who need it. Nurturing of these relationships will return value to your business through:
Increasing your company’s visibility and exposure
When your brand and business are in the media, you’re exposed to a large, targeted audience. To put it simply, the more people that know about you, the better. Media coverage can also be leveraged as testimonials. “As seen in [Insert well-known media outlet here]” has a lot of influence on reputation.
Providing accurate and positive media representation
Keeping analysts and media in your good books can ensure that your company has accurate and positive media representation. When you have strong professional relationships with media, you are more likely to have input into the details of what’s being said about you and your company.
Offering networking relationships
These contacts serve as advocates for your company when the opportunity presents itself. Making genuine relationships with anyone in your network is always important, which we broke down in our blog, How to effectively network in Investor Relations. When these folks are in a room without you, your previous favourable interaction(s) and connection might encourage them to share your story, tell a friend, or connect you with someone who can make a difference.
Investing in these relationships will ensure that your company is well-positioned for long-term gr
owth. When it comes to building credibility and attracting new investors or other key partnerships, having the right people in your corner will give you an advantage.
Knowing and trusting the analysts and media professionals in your space will also help you gain valuable insights into your industry and competitors. This helps you stay ahead of the curve, using insights to be more strategic in your overall decision-making. You can gain a better understanding of the concerns and priorities of key stakeholders by staying in the know. In turn, you can leverage these insights to develop more effective communications strategies, and that cycle can continue as you grow.
Building a successful business requires a nuanced set of skills and a prominent sense of initiative, but most of all, it requires connection to get off the ground. As you focus on your investor relations strategies, keep industry experts in mind as touchpoints to leverage, community members to lean on, and connections to consider along the way.