Paul Holmes 19 Apr 2001 // 11:00PM GMT
To improve the Exchange’s profile, keep existing clients serviced and attract new clients, we segmented their 689 listed companies into four strata—
Tier I: $750 million market cap and above
Tier II: $250 - $750 million market cap
Tier III: $50 - $250 million market cap
Tier IV: $50 million market cap and below
—and recommended different strategies for each client tier. Specifically, we focused our meeting efforts on companies in Tier III (or $50 million market cap range) and above. By increasing the visibility of AMEX's issuers, it was our goal to increase the AMEX's median market cap and help it become recognized as providing a fairer, more supportive market environment for issuers and attract more clients in higher market caps.
Given the narrowing audience for small cap issues, we had to contend with the challenge of getting issuers the attention they deserved from the investment community. Using our base of more than 50,000 professional investors, we segmented our audience in two categories: (1) institutional and (2) retail. On the institutional side, our target audience comprised of small cap portfolio managers and independent money managers. On the retail side, we targeted brokers and sell-side analysts. We defined our program by the parameters our target audience expressed to us in seeing, i.e. a market cap greater than $50 million, a stock price above $5 and a float large enough for players to make a market in the stock. To ensure AMEX's credibility with investors, we tried to stay within those bounds when introducing issuers to the investment community.
Prior to conducting meetings, FRB ran a quantitative screen on each issuer to determine the most appropriate audience for its market cap, float, stock price and shareholder composition. We reviewed the issuer's recent announcements to identify potential barriers to marketing with a financial audience. To gauge whether the timing was suitable for visibility, we also took into consideration whether the issuer's industry was in- or out-of-favor. Once the primary audience (retail versus institutional) was determined, we researched the most appropriate cities for the issuer to visit. These recommendations were based on monthly interviews conducted by our market intelligence teams in nationwide field trips, on queries run on our proprietary database and on the experience of our industry specialists. We then provided AMEX with brief descriptions of the investment communities, in which the issuer should hold group meetings. After the issuer approved the cities, we worked closely with AMEX to research venues and timing of meetings, avoiding conflicting industry conference and company reporting dates.
The strategy was to improve the AMEX's reputation among professional investors. By strengthening these relationships, we would attract more investors to group luncheons, thereby increasing both meeting efficacy and issuer's visibility. We did this by raising the bar for issuer companies desiring face-to-face meetings with the investment community. To make the best use of time for all concerned, we pushed for more preparation from companies by examining message points and by helping AMEX evaluate whether anticipated events would be noteworthy enough to attract investors' attention. By adhering to these parameters, we wanted investors and analysts to begin associating AMEX more with its "stars" (or 'up and coming' prospects) than its laggards. For those companies that fell below the market cap minimum, we worked closely with AMEX to suggest ways to increase market information available on the Internet and identify other visibility opportunities, prior to executing a meeting on their behalf. In some cases, we recommended webcasting to individual investors, an audience receptive to investing in micro-cap issues and unburdened by chartered investment restrictions, instead of group meetings. By directing issuers to the best vehicle to reach their most appropriate audience, we sought to improve the executable results for both them and AMEX.
EXECUTION / TACTICS:
Once the issuer has approved of the program, we issue a formal AMEX invitation on their behalf to a target list. Simultaneously, FRB researches and writes the pitch for the issuer. Two to three days afterwards, we proactively market the company by phone to those on the target list. Financial information kits are sent to expected attendees (and prospects) so that they have an opportunity to do their investment research before the meeting. By keeping track of cancellation rates by city, we are able to help our clients keep costs low and minimize extra effort by providing an attritioned participants list, which we provide 3-5 days prior to the event. On the day of the event, to ensure maximal attendance we conduct a round of reminder calls the morning of. We prepare nametags and survey forms are prepared to facilitate issuers' interaction with investors and garner feedback from them. After the meeting, FRB collects the surveys and prepares a follow-up report, which includes a summary of the issuer's investment attractiveness, perceived strengths, weaknesses, investment obstacles and recommendations on improving the presentation and information provided.
EVALUATION OR MEASUREMENT OF SUCCESS:
We thus far have experienced success in our meeting strategy. In our August review, we executed over 32 meetings for 22 AMEX-listed companies (see Table I, Appendix) to 622 participants in 8 major U.S. cities. Slightly more than half of the companies we conducted meetings for improved their stock prices. While there was no correlation between turnout and stock price improvement, 5 out of the 7 companies that conducted multiple meetings saw gains in their stock price. Although market perception continues to ride against those companies below $50 million in market cap, we were successful 75% of the time in increasing the stock prices of the eight companies in this category. We found that meetings were only as effective in improving share prices as the accompanying financials and growth prospects are sound and the targeted audience is appropriate. Therefore, we attribute most of our success to the careful screening we conduct on behalf of AMEX to ensure that the timing was appropriate to market the story. This strategy not only worked out well for the AMEX, it also helped their issuers make better use of the Visibility Program for themselves. Based on these initial findings, we have been invited to offer product offerings specific to each client tier, such as institutional targeting, webcast conferences and media outreach. With an expanded budget to train AMEX's directors in basic investor relations for microcap companies, we hope to raise utilization rates, improve implementation and continue to obtain results for AMEX and its issuers in our second program year with AMEX.