HOW TO ESTABLISH AND MAINTAIN ANALYST COVERAGE

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.

At irlabs, 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.

irlabs 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. For more on the value of issuer-paid equity research, see our article here: FILLING THE GAP: WHAT TO KNOW ABOUT PAYING FOR EQUITY RESEARCH

Nurturing analyst relationships is key, and irlabs 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. If you want to learn more about irlabs and how we can help you establish and maintain analyst coverage, reach out to us by clicking the button below.