Initial Public Offerings (IPOs) are the debutante's ball for private companies that want to "go public" and raise capital in the financial markets.  

From the The Wall Street Journal

February 2, 2012

Everything you ever wanted to know about Facebook's public offering in the SEC filing document:

Originally printed as a chapter in Dartnell's Public Relations Handbook, this material provides specific ideas on developing an IR program for a public company.

• Communication is, after all, the primary purpose of an Investor Relations program; effective communication in IR is a two-way street. Communications efforts towards creating understanding and awareness of the company within the investment community should at the same time promote an appreciation of the external expectations and views of the company.
  
  
  Basic Obligations of a Newly Public Company
  
  A YEAR IN THE LIFE
  
  PERIODIC REPORTS: 10Q’s and 10K’s, 8K’s, Earning Releases
  
  Interim or quarterly reports - the 10Q’s - contain unaudited quarterly financial data and information about specific reportable events that may have occurred during the three months covered by the report. They must be filed with the SEC no later than forty-five days after the end of each of the first three quarters of the fiscal year. The 10K, a more comprehensive document containing a description of the company’s businesses, property and financial condition, is filed annually within ninety days after the end of the fiscal year.
  
  Compilation of the material contained in the 10Q’s and 10K is generally and primarily the responsibility of the accounting/finance and legal departments of a company. However, Investor Relations can and should anticipate some degree of involvement with the process of preparing these documents.
  
  As a public disclosure document, the 10K or 10Q is of interest to the general financial community. A regular mailing to the company’s list of analysts and porffolio managers therefore is recommended. The reports also should be available on an as-requested basis; the Annual Report must contain a statement advertising the availability of the 10K.
  
  The 8K is an SEC document required under special circumstances. The list of such circumstances is finite, and includes:
  
  • Changes in control;
  
  • Acquisition or disposition of a significant asset;
  
  • A bankruptcy or receivership filing;
  
  • Changing independent accounting firms;
  
  • Certain resignations of directors;
  
  • Other specific occurrences
  
  The company may in fact file an 8K at its own option even if the event about which it chooses to report is not on the list. The information in the 8K, which is due within fifteen days of the occurrence of the event, is usually of no surprise to the public. Typically, it will have been announced in a press release issued and distributed prior to the 8K filing.
  
  Quarterly Earnings should be scheduled for release as soon as the accuracy of the figures has been checked to the satisfaction of management. A yearly schedule (subject to change
  only under extenuating circumstances) can be set up once it is determined how soon all the figures will be in and verified after the close of a quarter. This is ordinarily well in advance of the last required day to file the 1OQ or 10K. A schedule of these Release Dates may be distributed internally only, or sent to the company’s analyst and financial media lists so that these parties are aware of the date when earnings will be released (and a host of inquiries about the release date each quarter can be avoided).
  
  Outside of the filing of the 10Q’s and 10K, there is no Securities Act line-item statutory obligation to release earnings. The requirement to do so comes from the Exchanges and NASDAQ. Quarterly earnings results are unquestionably material in nature, and as such have the potential of influencing investment decisions of individuals and institutions. And because of the confidential nature of earnings prior to release, they present a potential hazard as insider information so long as they are unreleased. From the time the company collects its quarter-end figures from its internal sources, through to the public announcement, the company should consider itself in a Quiet Period, and subject to the same types of prohibitions on discussing or characterizing earnings with any outside party as in the Registration period.
  
  Because earnings are released on an ongoing and regular basis, it is possible and advisable to set up an internal schedule to follow each quarter starting with the day preliminary figures are available. The schedule can detail the review and discussion process between accounting/finance staff and IR in preparation for writing the release and answering questions once the release is out. This dialogue will help the company spokesperson fully understand what is behind the numbers when he or she discusses the results with the financial community and helps characterize the reasons for changes in revenues or earnings. The actual news release itself then would be drafted, and circulated for approvals within the company and among legal counsel and accounting advisors.
  
  The mechanics of issuing the release, and a method for tracking responses to it (both print and verbal), also would be part of this planning process. Timing is, of course, key. Companies take different approaches, some preferring to release after the market’s close to avoid turmoil in trading; others release early in the morning so that the market will have a full day to register its response. Friday afternoon or weekend releases may send a signal to the investment community that the company has something to hide.
  
  The earnings release is written in a spare, factual style. Once the company establishes the form of its earnings release, it can utilize it as an outline for subsequent releases, with the numbers and explanatory discussion updated each time. A financial summary page is often attached and recommended as a regular practice. Circulation of the earnings release includes not only the wire services and media (local, trade and financial), but also analysts and portfolio managers, market makers and underwriters (including syndicate members). As earnings are considered material news, an evenly timed and wide distribution effort should be standard policy.
  
  PROXY RULES AND SOLICITATION
  
  The proxy system and implementation of the proxy collection process, is an example of an area where Investor Relations has shared, or cross-over, responsibilities with another corporate function, the Corporate Secretarial/Legal Department.
  
  The proxy process is regulated by rules from three sources: the Securities Act of 1934, state law, and the by-laws of the individual company.
  
  
  
  PROXY SOLICITATION OVERVIEW: FLOW OF PROXIES VIA DEPOSITORIES
  
  There are basically two parts to proxy solicitation: distribution of the proxy materials, and then solicitation, or recall of the proxy cards.
  
  The ‘34 Act requires companies soliciting proxies to provide a written description of the matters being submitted to voting (the Proxy statement) as well as some form on which to vote (the proxy card). Proxy materials are subject to review by the SEC before being released to shareholders. These same rules also require that an annual report be distributed to shareholders prior to or along with the proxy statement and card.
  
  Complexities of the proxy process have evolved in part due to growth in the institutional sector and growth in this sector’s active participation in the proxy process; an increase in non-routine shareholder proposals; takeover activities; and the difficulty of merely identifying who owns the stock. Ironically, the Investor Relations goal of diversifying the shareholder base often results in greater difficulty in identifying those shareholders. A wide geographical dispersion of shareholders means that relatively fewer will be able to attend the Annual Meeting in person, and more will utilize the proxy as a means of participation. This is an extremely simplified description of the proxy process, which comes complete with a vocabulary and nomenclature all its own: CEDE, KRAY, IECA, Transfer Sheets, NOBO’s, OBO’s and COBO’s being a small sample. A comprehensive review of the proxy rule requirements and tactics used to collect proxies easily could double the page count of this guide. But the subject is one of increasing importance and growing concern to management and shareholders alike, and a fundamental understanding of it is necessary for the IR professional.
  
  Even when voting issues are of a routine nature (i.e. uncontested re-election of directors, ratification of auditors, etc.) the administrative processes of distributing, collecting and tallying proxies can be enormous. And if voting matters are other- than-routine (i.e. contested election of directors, controversial management or shareholder proposals, or any of the elements that constitute a so-called proxy battle) all aspects of proxy solicitation become critical.
  
  There are several important Investor Relations perspectives to the proxy process. Timing issues are involved in coordinating the Annual Report with the distribution of the proxies and the Annual Meeting; the proxy statement itself is a shareholder publication, a disclosure document of interest to other segments of financial audiences as well as the shareholders. Finally, individual shareholders often use the opportunity presented by arrival of the proxy card to voice their opinion on proxy matters or other corporate policies. A personal response is in order, preferably from the Investor Relations officer, or through a letter drafted by Investor Relations for the signature of the CEO so as to be consistent with other statements on these issues.
  
  Systems that have evolved towards expediting trading, simplifying record keeping and protecting owner identity have at the same time made the seemingly straight forward objective of identifying the company’s shareholders a complex process. Increasingly, large percentages of a company’s shareholder population hold their stock in Street Name (i.e. shares registered in the name of a bank nominee account, or held in the name of a bank or broker). Further complicating the identification of shareholders is the evolution of the depository system whereby banks and brokers arrange for shares to be held at one of the principal depositories. These entities, though not the actual share owner, may seemingly own tens or hundreds of thousands of a company’s shares since ownership is recorded in the name of the custodian.
  
  This is all much easier to explain graphically. In the following chart, it is assumed that four million, or 80% of the company’s five million shares outstanding, are held by institutions and investors in Street Name through various banks and brokerage firms. Most of these shares are held by institutions that are required to report their ownership positions on Form 13(F) to the SEC on a quarterly basis. A million shares are held by small custody accounts at banks and retail brokerage firms.
  
  Few companies opt to solicit their proxies without professional assistance. There are compelling reasons for involving Investor Relations in the initial investigation and selection of an outside proxy solicitor. Establishing a long-term relationship is highly desirable in order to build on the strength of previous years of experience, and apply the information gained to related areas and services.
  
  A key cross-over between proxy solicitation and Investor Relations is in the area of shareholder identification. As proxy solicitation involves finding investment advisors and the beneficial owners of the stock, shareholder identification involves determining who has voting authority for those shares (not always one and the same) since an investment advisor or a custodian bank may have full or partial voting authority. It is inevitable that in the course of this process, large positions will be uncovered. Having identified its shareholders in this way, the company is in a position to make sure that it communicates directly and consistently to its shareholders. Knowing the composition of the shareholder base also enables the company to determine if any sizeable stakes are being accumulated, and to identify any potentially unfriendly shareholders. Moreover, this shareholder identification process will reveal the mix of ownership among individuals and institutions which is important information that will enable the company to determine if there is an optimal balance in its shareholder profile. Knowledge of a company’s shareholders and their voting track record can greatly affect the success or failure of proxy campaigns.
  
  The services known as shareholder identification or stock surveillance are options many companies request of their outside IR counsel or proxy solicitor on an ongoing basis, and should be considered for inclusion in the Investor Relations program, either for the present or the future.
  
  
  DISCLOSURE, or Anything You Say or Don’t Say May Be Used Against You
  
  The following are two distinct approaches to disclosure: a minimalist policy (Company A) and a detailed policy excerpt (Company B).
  
  Disclosure Policy, Company A: Securities Analysts and the Press cannot be given any information about the Company which is not publicly available.
  
  Disclosure Policy Excerpt, Company B: The Investor Relations Department is responsible for the coordination, review and control of the release of public information., only the President, Vice President-Finance and Manager of Investor Relations are authorized to speak before securities analysts, brokers, financial writers, institutional investors, etc., or to hold interviews with the financial press. All employees are directed to refer inquiries by any of these groups to the Investor Relations manager...
  
  It is a priority for the newly public company to determine what its policy on disclosure will be, and then to develop a means to implement it.
  
  First, a company’s management must have an understanding of the legal obligations implicit in disclosure. Financial and strategic information which the company may have considered confidential when the company operated in the private sector, such as quarterly earnings, major loan agreements, significant new products or discoveries, labor disputes or management changes, take on a new dimension once the company goes public. Such information has the potential of affecting decisions investors may make about purchasing or selling the company’s securities. It is therefore material. And the company has an obligation to make accurate and timely disclosure of certain material information.
  
  Disclosure is currently a hot topic, in part due to differences of opinion (expressed in legal proceedings) between investors and companies as to what exactly constitutes timely. The courts have ruled that if a legitimate business reason exists, a company may be justified in withholding information of a material nature for a short period. However, the company cannot misrepresent, deny, lie or present incomplete disclosure of information while it prepares for full disclosure.
  
  The line item requirements of the Securities Act of 1934 (which require filing of the 1OQ’s, IOK’s and 8K’s) are but one source of guidance to a company in determining whether it has an obligation to immediately disclose information. The Exchanges and NASD specify disclosure requirements to which the company must conform (or risk being delisted). Prior public statements from the company which have become inconsistent with current circumstance present another instance where a duty to disclose arises. Disclosure must be made when rumors and leaks that can be traced to the company or a third party responsible to the company are discovered. If the company is actively engaged in the buying or selling of its own stock, it must disclose. And, if a corporate decision has been made to disclose in the absence of any immediate disclosure obligation, disclosure must be complete and accurate, and the information disclosed consistently described to all audiences.
  
  Due to the inherent nature of their work, analysts and the press have an interest in information about a company that might affect an investor’s decision to buy its stock.
  
  
  
  Management must strike an appropriate balance between providing a flow of candid information and providing no one party with material information that has not been disclosed publicly.
  
  The company that seeks to maintain a competitive position in the marketplace may be caught in an awkward position if it is planning a major strategic move, such as an acquisition or divestiture, which it believes should be kept confidential from competitors. The company also may feel it needs more time to prepare for disclosure so that internal operations are not disrupted by the announcement. Disclosure timing for non-routine material information (quarterly earnings are always considered routine) is often a judgment call, but there are some clear signals a company must heed which would indicate necessity for immediate disclosure.
  
  One such signal is unusual market activity, which may result from speculation by investors in response to rumors, true or false, circulating in the marketplace. If the company knows of no reason for the activity, it usually issues a statement to this effect. If the activity is in response to a rumor which is false, it can be denied. Many companies take the position that they will not respond to market rumors at all. If the activity is attributable to leaks of information, however, an immediate release is called for.
  
  Increased risk of violation of insider trading prohibitions is also an important consideration in formulating a disclosure policy. Insider trading occurs when the decision to buy or sell stock is based on information that has not been released to the public. Anyone in possession of information of a material nature may be considered an insider. This includes directors, officers and employees of the company as well as outside counsel, accountants, investment bankers, financial printers, Investor Relations counselors, and even husbands, wives, families and friends of employees. The prohibition on trading a company’s securities based on information of a material, nonpublic nature is found in Rule 1O(B)-5 of the ‘34 Act. A1O(B)-5 Letter, drafted by the company’s legal counsel with assistance from Investor Relations, is recommended to be circulated on an annual basis among company management and employees determined to be privy to such information. Companies also should take positive action to protect sensitive information by establishing tight internal controls and evaluating the security of documents and computer systems.
  
  A disclosure philosophy, once determined, should lead logically to a disclosure policy. The policy, in turn, will form the foundation for disclosure procedures to be followed by the company. A sound procedure includes an established communications network; specific delineation of who is authorized to speak on behalf of the company to its financial audiences; the manner in which the company will deal with reports of rumors and the method by which information will be disclosed (almost always, via release to the wire services and financial press). It also may state the company’s stance on issuing forecasts and projections, and a variety of other matters concerning the company’s association with analysts, such as furnishing requested information, correcting inaccuracies in analyst reports or responding to out-of-line estimates of projected earnings.
  
  Common pitfalls of disclosure can be avoided by having a mechanism for reviewing disclosure decisions which assures a sound balance between the interests of the investment community and the company. Authority to make disclosure decisions should be centralized, to avoid premature or inadvertent announcements or statements that subsequently may have to be corrected. An understanding of disclosure requirements calls for an up-to-date grasp of what constitutes materiality and how timeliness has been interpreted in the courts and by the Exchanges. Finally, the company’s commitment to the practice of Investor Relations which endorses the other three C’s of Investor Relations - compliance, credibility and consistency - should provide clear direction for determining the company’s disclosure philosophy, policy and procedures.
  
  
  
  Discretionary Investor Relations Activities
  RELATIONSHIPS, or The Many Relations of Investor Relations
  
  Investor Relations, by its very nature, is an outreach business. It seeks to go beyond mere obligatory reporting of information to a pro-active approach towards marketing the company’s securities.
  
  The results of Investor Relations programs may be evaluated in many ways, as indicated later in this overview. For example, communications efforts to reach shareholder publics can be tallied up (i.e. This year, we issued four press releases; held seven meetings and answered twenty-two questions from brokers...). Or, more substantively, the program may be considered against some pre-established goal, such as increased coverage of the firm by analysts, or growth in the number of value-oriented investors in the company’s shareholder base.
  
  What is equally important, and far more difficult to measure, is the depth of development of relationships with individuals and groups within the company’s target audience segments, or publics.
  
  Establishing and maintaining these relationships is accomplished via internally generated publications and written materials, exposure of the company through the media, ongoing telephone communication and meetings which present opportunities to communicate face-to-face. Media coverage of the company can serve to spark the interest of new groups, and help maintain visibility and recognition of the company.
  
  Segment First...Then Target and Position
  
  Targeting an IR program is a standard battle cry of Investor Relations professionals. However, targeting is only part - the middle part - of an Investor Relations campaign. It must be preceded by segmentation of the company’s audiences - shareholders and communications conduits to shareholders - and followed with careful selection of the medium and intelligent structuring of the message so as to most effectively reach those chosen targets.
  
  The investment community consists of a number of potentially important components. The most common manner in which a company segments its shareholder base is by determining its actual and ideal individual/institutional breakdown. The overall focus of the IR program should reflect an effort to satisfy proportionately the information needs of each of these groups if the company is satisfied with the breakdown, or to shift the percentages in a desired direction if not.
  
  Within these broad breakdowns there are additional audience segments which must be examined. The segments within the Institutions category include Portfolio Managers, Investment Advisors and Counselors, Pension Funds, Banks and Trusts, Investment Companies, Insurance Companies, Brokerage Firm Analysts (sell-side analysts), Institutional Brokers and Analysts at Institutional Investment Firms (buy-side analysts).
  
  Institutions also can be classified by size of holdings in the company; overall magnitude of funds the institution has under management; investment philosophy; and the nature of the decision-making process (who makes the decision, what factors weigh heaviest and influential sources of information within and outside the company).
  
  Individuals may be high net worth investors, local or regional concentrations of shareholders, employees and management or investment clubs. Each may have unique investment criteria and information needs. The individual, or retail, segment also includes registered representatives, or brokers, who are influential in individual investment decisions.
  
  The key to successful targeting then, is successful segmentation, and a thorough understanding of the interrelationships among, and influences upon, actual and potential shareholder groups. This is put into action by structuring messages that position the company’s favorable attributes in ways that appropriately and productively meet the information needs of each target group.
  
  Targeting is also a far easier task if the company develops an approach that acknowledges current shareholders to be a natural, accessible and preconditioned market for the stock. The next step is to identify and examine the potential shareholder market for the company.
  
  Information Flow
  
  Decision-makers in the investment community receive information about a company from a variety of sources or some call it a "mosaic." The company may itself seek out and directly provide information to current shareholders and potential investors as long as there is a "level playing field" with all parties receiving the same information at the same time. However, the IR function also can reach investors via intermediaries who serve as independent conduits and interpreters of information from the company.
  
  The classic depiction of how information flows through these influencers is pyramid-shaped, with information directed to the sell-side research analysts at the top. They provide information and analytical opinions to buy-side analysts, institutional salespeople and registered representatives, who in turn filter it down through to the institutional decision-makers and individual investors.
  
  For the newly public company, this classic presentation requires some adjustment. First of all, if the company’s securities are traded over-the-counter, the market- makers must be factored in, in a dual role as influencers and facilitators. Secondly, the newly public company may find that coverage by analysts on the sell-side is not immediately viable: the company’s size or float may be too small to warrant in- depth coverage and attention. This does not mean that the analyst community should be ignored; it merely indicates that a newly public company should recognize that it may take some time to earn the full attention it deserves.
  
  Finally, the newly public company must invest more time and effort to securing the loyalty of its present shareholders than the company that has been operating in the public sector for a longer period of time. Investors in a new issue have less at stake and can afford to be more fickle than those who may have witnessed the company’s expertise at managing in a down cycle. This would indicate that a more direct communications approach is called for with present shareholders than might be necessary several years down the road, with a message that clearly emphasizes the competence of management and soundness of the company’s strategic plans.
  
  
  
  AUDIENCES OF AN INVESTOR RELATIONS PROGRAM
  
  DECISION-MAKERS
  
  Institutions
  
  The following chart indicates one approach to segmenting and targeting the universe of actual and potential institutional investors in a company’s stock. Its intent is to identify the kinds of institutions that might be the target of a hypothetical company’s IR marketing program, within the context of the company’s ideal institutional shareholder profile.
  
  IGNORE INITIATE RE-INITIATE MAINTAIN INCREASE
  
  - Index Funds - Institutions with - Institutions which - Medium institutions - Medium institutions
  
  - Yield Players holdings in peer recently sold out with large holdings with rapid asset growth stocks
  
  - Large institutions
  
  - Small institutions with large holdings small holdings
  
  - Local institutions
  
  The primary investment decisions within these institutions are made by portfolio managers and/or management committees, which evaluate research information delivered by internal research departments (buy-side analysts) and other influencers such as sell-side analysts and the financial media.
  
  Institutions with equity holdings in excess of $100 million are required to report their investments on Form 13(F) to the SEC, which is the initial means by which a company can identify the individual institutions holding its stock. A stock surveillance service could be retained to generate even greater positive identification of institutional owners with positions in Street Name. It is a relatively easy matter to then identify the portfolio manager associated with those institutions. Further audience research among institutions can determine their general criteria for investment decisions. In many ways, because of the availability of public information about the major investing institutions, it is far easier to segment and target the institutional segment than the more fragmented individual component of the shareholder base.
  
  Portfolio managers should, by all means, be included on a company’s informational mailing lists to receive published materials (press releases, Annual Reports, etc.) and invitations to investment community meetings. These mailing lists would include not only current investing institutions, but the broader universe of potential investing institutions as well.
  
  Much can be learned from the quarterly 13(F) reports once a company has obtained them over a period of time. Significant shifts in institutional positions in the company’s stock always should be investigated, either through direct contact or a survey conducted by outside IR counsel.
  
  
  
  Individuals
  
  Many companies feel that individual shareholder information needs are satisfied adequately by the Annual Report and Quarterly Reports; the proxy process; the Annual Meeting, and perhaps one or two meetings a year with individuals who have relatively large positions in the stock.
  
  This decision is largely driven by the fragmented nature of the individual side of the shareholder profile, as well as by a cost-benefit analysis which reveals that individual shareholder relations programs get less bang-for-the-buck than institutional programs. However, it ultimately can be quite cost-effective to institute an IR program directed to individuals as a way of securing balance in the company’s shareholder profile. This is an especially significant consideration given the traditional proclivity of individual investors to be long-term holders and supportive of management’s strategies, programs and proposals.
  
  Individual shareholder relations programs tend to be set up to accommodate current shareholding constituencies rather than to explore the potential of untapped segments of retail markets. A notable exception is the company that has not previously encouraged employee ownership and institutes a program toward this end. The typical strategy, however, is to maintain, rather than obtain, individual owners. For the newly public company, an opposite attitude may be more appropriate. The individual segment is an audience which is value-oriented and multifaceted; working through retail brokers to establish an active recruitment program for appropriate individual investor segments will pay off if the company desires a diversified, stable and supportive shareholder base.
  
  FACILITATORS
  
  Brokers
  
  The most practical approach to recruiting new individual shareholders is to work through stockbrokers as intermediaries. This indirect approach to reaching individual investors is a viable, cost-effective means of targeting the individual segment.
  
  In considering a program to reach the broker community, segmentation of this large universe according to key criteria is necessary. This might include, for example, brokers in a company’s home market; brokers in other selected geographical areas; only those brokers affiliated with firms the company is in the process of courting for analyst coverage; or brokers affiliated with the market-making firms for the company.
  
  A variety of methods may be deployed to reach the selected broker audience. These can include direct mail, and advertising and publicity in professional magazines and investment newsletters.
  
  A retail brokerage program makes a lot of sense for the newly public company if it is coordinated with a market-maker program. Backyard or regional brokers with proximity to the company’s home office and/or plants or sales offices are a natural starting point.
  
  In positioning a message to brokers the company must acknowledge that brokers are looking for information that will help them sell the company and its stock to clients. Brokers rarely, if ever, deal with securities of exclusively one industry, which means the company must consider itself competing with a cross-industry universe in presenting itself to brokers, rather than with a narrower peer group. And brokers are flooded with information on a daily basis about investment products, so any information provided by the company must be a standout from the pack.
  
  Market Makers
  
  A market maker program is a priority for the newly public company which is listed in the over-the-counter (OTC) market through the NASDAQ (National Association of Securities Dealers Automated Quotations) system. NASDAQ is the market of choice of the majority of IPO’s, and its trading operations are quite different than those of the Exchanges. The NASDAQ system is dealer-driven, with competitive trading activity conducted by computer; the Exchanges operate via an open-auction, monopolistic, specialist-driven system.
  
  A dealer, or market maker, represents a securities firm which stands ready to buy or sell a company’s stock from inventory. By developing and maintaining relationships with a number of market makers (the average is eight), the company helps ensure that investors will be provided with a liquid market. The market maker provides active capital, accepts a risk position and acts as a salesperson to the investment community on behalf of the company. In exchange, the market maker stands to gain new customers, profit from the trading activity and benefit from arbitrage opportunities.
  
  For OTC companies, identifying, attracting and maintaining market makers involves an understanding of the different types and functions of market making firms. National market makers (e.g. Merrill Lynch or Shearson) have a country wide presence and can handle substantial numbers of companies - as many as 2500. Their sales forces are geographically dispersed. Regional firms may specialize by industry or geography or both. Local market makers tend to be more willing to invest in small cap (capitalized) companies with direct ties to their local economy. Wholesalers deal as intermediaries to other broker-dealer firms or those without market making capabilities. Finally, there are the specialty investment banking firms, which provide a market making service to support their underwriting activities.
  
  A newly public company’s first and strongest support should come from its investment banker.
  
  For many companies in the first stages of developing an investment community following, it is not realistic to expect immediate and broad analyst coverage. However, a company can grow an analyst following over time through its market maker program. The fundamental principles of such a program mimic those of dealing with analysts: research and analysis of the universe of market makers; contacting or arranging for introductions to the market maker; and selling the qualities and advantages of dealing the company’s stock to them.
  
  A step by step approach would include:
  
  1. Identifying local and regional firms,
  
  2. Investigating peer company market makers (NASD has this information),
  
  3. Consulting with and utilizing the resources of the company’s investment banker,
  
  4. Cross checking analyst lists with market making firms, and
  
  5. Investigating market makers by SIC code breakdowns.
  
  
  
  Institutional Salespersons
  
  Institutional brokers facilitate investment decisions of institutions, executing buy and sell orders at their instruction. For investing institutions that are too small to have their own research departments in-house, institutional salespersons may go beyond this facilitator role to provide research on companies to these investors. It is therefore necessary to consider this group as a possible target for either a broad familiarization program, or for personal, targeted relationships with key institutional salespeople.
  
  Information about possible investments is provided by the institutional salesperson’s own research department within the brokerage firm. But, like the data base of the portfolio manager, the institutional broker’s information may be combined with research from other, outside sources including that provided through media coverage. The institutional salesperson, like the registered representative, is primarily interested in the selling points of a company’s stock. For the newly public company that seeks a diverse group of institutional investors, investigating means of developing relationships with institutional salespeople may be one way to achieve this goal.
  
  INFLUENCERS
  
  Analysts
  
  Securities analysts come in two varieties: sell-side and buy-side.
  
  Sell-side analysts work for brokerage houses and specialize by industry. A notable exception of importance to the newly public company is the Special Situations analyst on the sell-side, an analytical catch-all category for emerging growth, low-price or small cap companies. A company may receive initial coverage as a special situation company, and gradually be promoted to industry coverage when it has outgrown the special situation criteria.
  
  Original research is the primary output of the sell-side analyst, in the form of reports which summarize the performance and current situation of the company, provide qualitative analysis of the direction of the company, and offer an investment conclusion. These reports are widely disseminated directly to buy-side analysts and portfolio managers as well as to the institutional sales force of the analyst’s firm.
  
  The sell-side analyst community is tight. Because of the expertise developed from intense study of a single industry, analysts tend not to switch industry specialties. When sell-side analysts change jobs, it typically is to accept an analyst position covering the same industry at another brokerage firm.
  
  Buy-side analysts are employed directly by investing institutions, and may cover four to six industries and follow anywhere from 25-40 or more companies at a time (about double the number followed by sell-side analysts). While buy-side analysts do conduct original research, they commonly rely significantly on sell-side research to form a basis for their recommendations.
  
  The power of analysts cannot be underestimated. Indeed, most Investor Relations programs primarily and directly are targeted to this segment. The following sections on meetings and publications make note of many of the specific activities which a newly public company may undertake to interest analysts. Maintaining relationships with analysts, however, is an ongoing, sometimes daily activity for the Investor Relations professional, via telephone contact. Reasonable and legitimate inquiries from analysts (or, for that matter, any member of the financial community) should be responded to promptly and accurately. Care should be exercised not to create overly optimistic expectations, for maintaining credibility among members of the analyst community is essential.
  
  Financial Press/Media
  
  Third-party, independent endorsement of a company and its activities is one of the key results of a financial media relations program. It is most effective when achieved through favorable press commentary and acclaim.
  
  The extent to which financial publicity and media relations for the newly public company are developed will depend upon previously existing programs, the CEO’s attitude toward the press, and the newsworthiness of the company’s strategic, financial and product information in general.
  
  Properly handled, financial media relations can yield significant benefits to the company in cultivating a positive image, generating new interest, and serving an information distribution function with potentially broader reach than any other vehicle available. An ongoing, targeted and strategic media relations program serves to reinforce in-person financial community presentations and also is an essential aspect of a crisis communications plan.
  
  Improperly handled, or ignored altogether, media relations can cause extensive damage to a company’s image. Calls to the company were not returned, or Company officials refused to comment statements in newspaper articles send an immediate negative signal to investors.
  
  Financial media relations requires both specialized skills and a dedicated effort in cultivating press contacts. The theme and message that the company wishes to project to the financial media are necessarily coordinated with those it seeks to project to the financial community. Therefore, the individual responsible for IR in the newly public company also should be responsible for the company’s contacts with the press. Often the first assistance brought in once the Investor Relations function is established is a media relations professional to help with handling responsibilities in this area. Outside Investor Relations or Public Relations services often are called upon to support the effort as well.
  
  In the same spirit as the segmenting and targeting approach to reach investors, the financial media relations effort should be focused and directional. The universe of publications in the business, financial and trade press should be identified and efforts made to establish working relationships with the specific editor or reporter responsible for covering the company or its industry. Television programming oriented to the financial markets and the overall business arena is on an upswing; specific programs and interview possibilities can be factored into the plan.
  
  Financial publicity can be bought (as in advertising), or free (as in editorial or reporting coverage). While the latter often is considered the preferred option, paid placement of a company’s financial results and corporate image advertising should not be overlooked.
  
  The press is of initial and crucial importance to the newly public company as the recipient of disclosure releases. Competition for publication of these, and other spot news of a financial nature is intense, and simultaneous delivery of earnings and other releases to the wire services, newspapers, trade publications and other media is advised.
  
  The opportunities for media exposure beyond spot news are open-ended. Speeches by company officials can be submitted to reporters as background information on industry topics; media information kits produced; background briefings arranged between management and selected editors or reporters; interviews arranged and press conferences held.
  
  An aggressive media relations program requires development of a press kit with up- to-date materials such as an Annual Report, recent Quarterly Reports, copies or summaries of recent analysts’ research reports, a press backgrounder, or fact sheet developed specifically for this audience, and the most recent press releases issued by the company.
  
  THE INTERNATIONAL INVESTOR RELATIONS AUDIENCE
  
  The company seeking a wide geographical dispersion of its securities and additional sources of capital can look beyond the boundaries of the United States markets. Developing an international Investor Relations program requires communicating to investors with a distinctly different profile than those that characterize the domestic institutional and retail markets. While it may seem impractical for a newly public company to attempt to generate investor attention internationally, there are substantial potential advantages to be considered.
  
  An international Investor Relations program, under most circumstance, falls in that category of Future - To Do activities; unless the initial public offering purposefully attracted a significant number of overseas investors, newly public companies must concentrate their efforts on first establishing a solid IR program at home. However, once the domestic program is up and running and on firm ground, European and Far East markets can be explored.
  
  Overseas programs present opportunities for the company to market itself to investors with different attitudes toward investing. European institutional investors, for example, tend to be longer term holders than their counterparts in the United States. A company may consider an international Jnvestor Relations program valuable particularly if it has other business or financial goals or prospects in foreign markets. For instance, a company that sells a significant portion of its products outside the United States may find international institutional investors a logical audience for its IR marketing program. Should the company contemplate the possibility of raising additional capital abroad sometime down the road, an in-place IR program may be effective in sensitizing the market to the company’s story and establishing productive and beneficial relationships.
  
  Beginning an international IR program requires the same considerable research and planning effort that starting a domestic program needs, and a similar on-going commitment to maintain that program in the future. Audiences must be investigated, segmented and targeted. Cultural conventions, too, must be researched, adding a new twist to the IR program planning requirements. A thorough program will require regular annual trips plus consistent interim mailings and other communications to provide an even level of contact over time.
  
  Listing a company on a foreign exchange is another option for the company to consider. Additional listings may provide increased visibility and ease of access to international capital markets as well as some potential convenience of trading for local investors. Foreign listings, however, is an expensive process that should be considered for its contribution to an overall profile-raising goal rather than as an end in itself.
  
  
  
  FINANCIAL COMMUNITY MEETINGS
  
  The fundamental difference between the Annual Meeting and the meetings with the financial community discussed in this section is that the Annual Meeting is a legal obligation.
  
  The Annual Meeting is run as a formal meeting, with motions made and minutes taken. Although time is allocated at the Annual Meeting to explaining long-term strategic plans and near-term activities that are being conducted or will be implemented, the Annual Meeting usually has a more historical focus. Its purpose is to review the past year and articulate the company’s interpretation of financial results rather than present a view of the company as an investment opportunity.
  
  An Analysts Meeting or a Portfolio Managers Luncheon, structured either as a presentation to a group or as a one-on-one (which may, in reality, end up being a five-on-one, or a three-on-two, as explained below) differ from the Annual Meeting both in form and content. Scheduling is under the control of the company. If, when, where and how frequently these meetings will be held are matters to be decided at the company’s discretion. The purpose of the meetings, and the information needs of the audiences, are quite different than those of the Annual Meeting.
  
  The overall purpose of these meetings is to acknowledge and meet the diverse information needs of the company’s publics, which may include current owners, potential owners or those constituencies which influence these groups. Agendas are not dictated by corporate by-laws, and approval of company procedures and activities is not actively sought as in the Annual Meeting. Approval is gained far more subtly through the favorable research report, or purchase of stock.
  
  As the newly public company grows its Investor Relations program, time will increasingly be devoted to planning meetings with members of the investment community. In well-established Investor Relations programs, over one-third of IR professional time may be spent planning executing meetings. On average, according to responses to a National Investor Relations Institute membership survey, companies held thirty-two one-on-one analyst contact meetings; eight small group meetings (two to ten people); five large group meetings (eleven attendees or more) a year; plus presentations to analyst societies and splinter groups; field trips and tours. This totals close to 50 meetings on an annual basis!
  
  The average number of meetings per year sponsored by companies trading over the counter was 19, compared with an average of 40 for New York Stock Exchange listed companies and 22 for American Stock Exchange listed companies.
  
  
  
  The survey also broke out responses by industry type:
  
  --Over 40 meetings a year: Petroleum, Building Materials, Telecommunications
  
  --30 to 40 meetings: Diversified Companies, Food Processors, Chemicals, Aerospace, Computers, Oil Field Drilling, Health Care, Electronics
  
  --20 to 30 meetings: Banks, Electric Utilities, Services, Insurance
  
  --Fewer than 20 meetings: Natural Gas, Retailing, Electrical Equipment, Consumer Products, Financial Services
  
  Thus the number of meetings a newly public company will arrange its first year will depend not only on its internal resources (financial and human) but also on whatever the demand is for holding meetings - as influenced by industry norms.
  
  Using as a base the figure of 20 meetings for the first year, the following represents a hypothetical meeting plan. It should be emphasized that this number of meetings is not necessarily a recommended standard, but is presented for illustrative purposes. The number of meetings the company chooses to hold will be a unique function of the individual company’s goals and circumstances.
  
  
  GENERAL GUIDELINES FOR SUCCESSFUL MEETINGS
  
  These apply to all the presentations outlined in the following pages.
  
  • Thorough research, planning, follow-through and follow-up: have a clear impression of who the audience should be, what should be said, the vehicle for saying it and how aggressive the message should be;
  
  • Strong CEO and management presence;
  
  • Balance audience needs with company’s agenda;
  
  • Keep a future focus and demonstrate a big picture perspective: companies complain incessantly about the Street’s short-term focus and then cater to it by making last quarter’s earnings the focus of the presentation;
  
  • Update key aspects and then build on what the audience knows; follow a theme but don’t be repetitive;
  
  • Know critical issues and vulnerabilities: rehearse, and know the key selling points of the stock and the company; don’t gloss over problem areas;
  
  • Make an impression and be impressive - provide speaker training to key members of management;
  
  • Review and critique the performance; learn from experience.
  
  
  
  ANALYST MEETINGS
  
  VARIATIONS: Also Known As Investment Community Meeting, Quarterly Results Meeting, or Interim Meeting; these meetings may be held at any time of year, or in conjunction with announcement of quarterly results. The same general format is used if the company has recently made a significant material disclosure (i.e. a major acquisition or divestiture) and feels a group presentation to the general investment community is the most efficient manner in which to explain the strategic implications of the action.
  
  INSTIGATOR: Company.
  
  HOW LONG: Two hours max; may be held as a luncheon meeting; ideally, a 30 to 45 minute presentation followed by open-ended Q&A.
  
  FREQUENCY AND TIMING: Schedule established on a yearly basis. May be held up to four times a year to immediately follow quarterly earnings release or scheduled according to industry cycle - in which case it conceivably might precede release of earnings. The timing is crucial and should be well thought out.
  
  May be held at company headquarters or on the road - either consistently at one place with geographical proximity to a key audience concentration or rotated from financial center to financial center. Establishing a yearly schedule and location in advance - and circulating this information - can aid greatly in audience attendance.
  
  PURPOSE: To establish a habit of providing a consistent flow of relevant information; to present quarterly earnings results; to allow members of the investment community to question management publicly on those results and other issues of importance. Inherently a financial presentation.
  
  COMPANY PARTICIPANTS: CEO, CFO, IR..Senior Management Team and lieutenants as warranted. If it is held at the home office, make sure the number of internal people attending does not outnumber the invitees! Internal assistance for planning the meeting comes from Finance/Accounting (for help with preparing and double-checking figures); Legal (to confirm that nothing of a material nature is being disclosed or help prepare disclosure release if it is); outside IR counsel may be helpful for guidance and assistance with details and fine-tuning.
  
  AUDIENCE: Analysts, buy and sell side; Portfolio Managers; Company’s investment banker and primary market makers; interested brokers; significant shareholders. Press is generally not included.
  
  MANNER OF INVITATION: Broad notice via direct mail (e.g. letter or memo to mailing list) and targeted follow-up.
  
  GENERAL FORMAT: Presentation, with Q&A.
  
  SPECIFIC FORMAT: CEO presents quarterly and year-to-date figures in a brief review (especially if earnings already have been announced) and presents information in context of company strategy and plans, industry conditions and market viewpoints. A brief topical presentation may be made by a divisional head or a burning issue discussed in depth.
  
  
  
  Questions are taken from the floor at the end of the presentation, to be answered directly by the CEO or fielded to appropriate members of management team.
  
  PRESENTATION PREPARATION: Slides are helpful so long as they clarify and don’t confound the material. The CEO’s commentary should be scripted and rehearsed (and, of course reviewed by legal counsel) and possible questions from the audience anticipated and answers prepared. Handouts might include hard copy of the slides, depending on the information. Input is provided by Investor Relations in the forms of general review of telephone inquiries and discussions during the quarter, and a pre-meeting briefing to management about the invited constituencies.
  
  FOLLOW-UP: The meeting should be taped, and transcripts made and edited for readability both for the purpose of maintaining permanent records and possible distribution to those who couldn’t attend. Immediately after the meeting is a good time to follow-up on the effectiveness of the timing, format and content of the meeting. Was the right message communicated? Should the audience be narrowed or broadened?
  
  TIPS: Careful consideration should be given to almost all aspects of the first few analyst meetings. Check out the timing of competitors’ meetings and other conflicts that might present competition for the audience. Gear the timing, i.e. time of day, to the largest segment’s schedule - and likelihood of availability. Mid-morning or mid-afternoon may be good or bad for analysts; stockbrokers as a rule don’t like to be out of the office while the market is open which would restrict the hour to either breakfast time, a short luncheon or an after-trading-hours meeting. This presents less of a challenge if the meeting is held in a western time zone. Have a solid and accurate idea of who your audience is, especially on a basis of present vs. potential stockholders and present vs. potential influencers. Always have a sign-in book, and provide name tags for company representatives as well as attendees.
  
  
  
  GROUP PRESENTATIONS (5-20 Invitees)
  
  VARIATIONS: Road Show, ‘Press Briefing, Analyst Luncheon.
  
  INSTIGATOR: Company or, less frequently, as requested by an interested party. May be arranged by the Investment Banker or outside IR firm or both.
  
  FREQUENCY AND TIMING: At the convenience of the company and group. Conventionally arranged around a meal - breakfast, lunch or dinner - with consideration for the specific lifestyles of the audience, and regional custom.
  
  PURPOSE: As a newly public company, the initial purpose may be to establish an orientation to the company and its management; afterwards, the purpose if to further cultivate and keep specific groups of interested parties informed or explore and initiate new relationships within a targeted group.
  
  COMPANY PARTICIPANTS: May vary. The CEO or highest ranking officer is best, but it depends on who the audience is and what the specific purpose of the gathering is in determining who else attends. A high ranking marketing officer, for example, may be brought along to explain marketing strategy if the company is touting a new product or market; the CFO often is appropriate in providing backup and depth to the CEO.
  
  AUDIENCE: Usually homogeneous: analysts or portfolio managers or market makers or potential institutional shareholders. Sometimes it can be arranged to gather a group of brokers and institutional salespersons from a single large firm after market close.
  
  MANNER OF INVITATION: Personal written invitation with RSVP cards or telephone number; follow-up with acknowledgement note and day-before telephone call. Especially necessary if planning a meal! Often the arrangements for these meetings are handled by outside IR counsel, who would assist in establishing the list, format of the invitation, follow-up, and other details.
  
  GENERAL FORMAT: Informal discussion before and during meal; opportunity to personally meet and greet attendees; presentation and Q&A.
  
  SPECIFIC FORMAT: Socializing over a brief cocktail period prior to lunch or dinner, brief presentation at dessert time with handouts; Q&A.
  
  PRESENTATION FOCUS: May be general or specific, but always keep in mind the information needs of the audience.
  
  FOLLOW-UP: Thank-you notes to attendees; follow-up on further information requests and inclusion in the next round of meetings.
  
  TIPS: Presentations to rating agencies fall in this category, although they are more likely to take place at the company’s offices or at the agency rather than at an off site luncheon; they usually are coordinated by the company’s treasurer or CFO.
  
  
  
  ONE- ON-ONES
  
  VARIATIONS: Infinite. One (analyst, portfolio manager, individual) visits sequentially for half an hour with the CEO, CFO, a division head (or two); or one (analyst, etc.) visits with a group comprised of members of the above; or two (or more) analysts visit with the CEO (and/or others) and so on.
  
  INSTIGATOR: Either by outside request, or at the invitation of the company.
  
  FREQUENCY AND TIMING: As requested - but keep an eye out for trends and patterns: if several meetings have been arranged for interested parties all covering the same issues, it may be a signal that something more formal should be instigated by the company to deal with the questions or topic. Also, some analysts or portfolio managers may seek a yearly on-site update which can, and should, be anticipated.
  
  PURPOSE: In direct response to whatever the requesting party asks for: an overview or personal exploration of certain topics. It is essential that whatever the reason, it be articulated dearly to those who will be meeting with the individual or group!
  
  COMPANY PARTICIPANTS: As appropriate. A well-versed IR officer should be able to adequately and satisfyingly present a thorough company overview (and put to more efficient use the CEO’s time with the individual).
  
  AUDIENCE: Buy-side, sell-side analysts, portfolio managers, individual shareholders with significant ownership.
  
  MANNER OF INVITATION: By company invitation or in response to a request for a meeting. Once a schedule is established it should be documented in a letter detailing where to meet, the agenda (and titles of the people who will be met), transportation arrangements; copies should be distributed to all involved on the company side.
  
  GENERAL FORMAT: Casual discussion.
  
  SPECIFIC FORMAT: Determined by the purpose. An orientation packet or other materials which help explain the topics to be discussed might be appropriate. Certainly good note-taking (by the IR professional or some other participant) is called for, perhaps formally documented in a summary memo routed internally or simply developed as a memo-to-file.
  
  PRESENTATION FOCUS: Situational.
  
  FOLLOW-UP: A brief summary/thank you note to the visitor is in good form; feedback (verbal); follow-up to any questions not answered or promises to get back with that information.
  
  SOCIETY OR GROUP INVITATIONAL MEETINGS
  
  VARIATIONS: NYSSA (New York Society of Security Analysts); Regional Analyst Societies; Splinter Groups (by industry specialty); Broker Groups; Investment Clubs (NAIC).
  
  
  
  INSTIGATOR: The Group or Society, based upon their knowledge of the company and its interest to the group, or by company communication to the Group or Society.
  
  FREQUENCY AND TIMING: Usually restricted by the Group or Society to once a year or every other year.
  
  PURPOSE: To showcase the company and management before a group that represents similar interests and is broader than what the company itself typically can gather.
  
  COMPANY PARTICIPANTS: Command performance by CEO with backup and support provided by IR.
  
  AUDIENCE: Membership of the group. Sometimes press is also invited - find out beforehand!
  
  MANNER OF INVITATION: The meeting sponsors take care of it. Request an invitation list to cross check, and for future use.
  
  GENERAL FORMAT: Presentation accompanied by slide show or video followed by Q&A session.
  
  SPECIFIC FORMAT: A straight-forward presentation of operations, plans, outlook, with appropriate literature distributed.
  
  PRESENTATION FOCUS: Tailored to information needs of group.
  
  FOLLOW-UP: Stay in touch with contact person for future scheduling; add attendees to company mailing list; consider developing a printed summary or report of the presentation for distribution to other investment community audiences.
  
  
  
  MISCELLANEOUS MEETINGS
  
  VARIATIONS: Field Trips, Outings, Open Houses, Investor Fairs, Trade Shows...
  
  INSTIGATOR: Company.
  
  FREQUENCY AND TIMING: Thoughtfully timed, i.e. not too often.
  
  PURPOSE: To showcase the company and its operations or to provide a relaxed environment for management interaction with members of the investment community. To highlight divisional activities or focus on areas of special interest; to introduce new members of a management team or just to start (or keep up) a tradition.
  
  COMPANY PARTICIPANTS: Many, or at least a wide sample of, members of management usually are invited to mingle with invitees.
  
  AUDIENCE: Varies - but again, not fewer than the number of company representatives in attendance.
  
  MANNER OF INVITATION: Selective and personalized.
  
  GENERAL FORMAT: Meaningful combinations of work and social interaction are to be strived for. It really depends on the company, its industry, the industry norms for such activities, and the company’s own objectives, desires and creativity in mounting a presentation.
  
  SPECIFIC FORMAT: Up to the creative imagination of the organizers.
  
  PRESENTATION FOCUS: Varies.
  
  FOLLOW-UP: Cost-benefit analysis; post-meeting survey of attendees.
  
  TIPS: Who pays is an issue to consider when long distance travel is required.