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The Case for Including Investors on Conference Calls


Xconomy National — 

We are in the middle of a busy earnings season on Wall Street, which for an independent investor like me means listening to a lot of company conference calls. While that admittedly is not always the most exciting way to spend your days and evenings, I would like to relate a story about a novel thing that practically made me jump out of my seat as I was viewing a live videocast of Roche’s call last week. I hope that by telling it other biotechnology and pharma companies (or really anyone), and their respective investor relations firms, can see how this practice can be improved in a big way simply by doing a small thing. In the process, I can guarantee that you will at a minimum earn a nice piece of investor goodwill while also helping to improve the overall system.

As I was listening to analysts ask questions during Roche’s videocast from my home in Lenexa, KS, I clicked on a link entitled “submit question” and typed out one that I had about a particular clinical program I am interested in. Almost one minute later at their headquarters in Basel, Switzerland, a piece of paper was handed to CEO Severin Schwan, a man who runs one of the largest companies in the entire world, who proceeded to read my question out loud and kick it off to his chief of pharmaceuticals to answer. Now that might not sound very exciting to everyone, but to me it was amazing. I’m not talking about the technological aspect, though as someone who started investing nearly 20 years ago, I am amazed at how much things have changed. No, as an individual investor who doesn’t work for a big Wall Street firm, I think it is amazing and wonderful that someone even valued my participation enough to take the question at all. I hope more companies will follow the lead they and others are setting.

First, I think it is important to establish, as most surely agree, that quarterly earnings conference calls should be viewed as being very important to you. I am a big believer in the idea that how it communicates can make or break a company, and calls are sometimes ground zero for this. I cannot tell you how many times I have seen companies with otherwise great potential become doomed largely because they lose investors’ confidence through ineffectual communications and a resulting loss of trust. This is particularly the case in biotech and pharma where, due to the confidential nature of R&D and the regulatory process, investors are especially at the mercy of management to be telling you the truth. The things I am looking for most in a call are managers who are in command of the subject, speak clearly and concisely, and seem to express mutual respect for investors. Terms like “shareholder value” are good, while evasiveness or reading from a legalistic script might make investors run for the hills and never come back.

With that being established, I would like to make the case that including investors on calls, like Roche and others are now doing, will not only help investors, but also act as a nice benefit to your company specifically and the system as a whole. Doing so is incredibly rare these days, which is a shame because I believe that is working to the detriment of all three of these things. It is time for a change.

Why including investors will directly benefit your company

First, one of the biggest complaints I hear from management teams about running a public company, particularly from those in the life sciences industry, is how Wall Street pressures them to think or act too much in a short-term manner. If that is the case, I do not see how it is ideal to only invite Wall Street analysts, whose job by definition is to obsess about short-term details, to participate on a call. While I am not saying there aren’t also a lot of short-term thinking investors out there (or great analysts), I bet you would be surprised by how many long-term investors there are and how their views and concerns differ considerably from the Wall Street community. In my view, you should always manage a public company with the micro-level thought that real people have placed their hard-earned money with you.

Second, inviting investors to participate will improve the overall discussion and robustness of your call. While I have a lot of respect and admiration for my analyst friends, one thing I am certain of is that they do not have a monopoly on good questions or ideas. Not only are there a lot of smart individual investors around too, but I am also a big believer in a phrase that is batted around a lot lately: that there is wisdom in crowds. Why not use that notion to your advantage? If you do so, I think you might see many questions and ideas arise that you had not even thought of. This will only work to your benefit and should allow you to catch any misunderstandings or confusion there might be in the market about your company.

Lastly, doing this will earn you some valuable confidence and goodwill capital from investors. That is very important because it will improve your reputation and help your company out in the future. For example, I cannot express enough how my opinion of Roche was solidified last week and there is no doubt I’ll be telling people for a while what a great company it is in my opinion, partially because they took thirty seconds out of their time to personally answer a quick question of mine. In this business, small things go a long way. In fact, I have been investing long enough to know that I can somewhat disregard the minutia of the rest of that call because I’m confident investor money is in good hands there over the long-term, in part because they had the regard and respect to do a small thing like that. Trust me, it sends a strong message.

Why including investors will directly benefit them and the system

The benefit to investors and the overall system is relatively straightforward. Simply put, this will make investors feel like they matter, which will increase their confidence in the overall system. This helps everyone. As I am sure you know, confidence in the markets could not be worse lately. Trading volumes are at multi-year lows (imagine how bleak that picture must really be when you consider how much high frequency trading goes on these days) and investors have been taking money out of equities in record numbers and putting it into bonds. Certainly part of the reason for this is the nature of our overall economy right now, but I assure you another big reason is because investors don’t feel like their money is safe, valued, or even welcomed in parts of Wall Street and Corporate America these days.

Frankly, I have heard a few corporate managers say if it were up to them, they would prefer not to even have much of an individual investor following at their company. While I understand how legitimate downside comes along with it at times, I can assure you that our country’s capital markets will not be in for a very bright future if this becomes the prevailing attitude at companies. Our markets are only as strong as their smallest participants, and the picture there is not good. Allowing investors to participate on calls will be just one small way of making the environment more welcoming. Furthermore, due to the boom and bust nature of biotech and pharma in particular, I also believe that it is up to those industries to go the extra mile to make the general investor comfortable. If you have a healthier system at the company level, this will lift all boats and improve the difficulties currently being experienced in the IPO market.


I’d like to conclude by pointing out that the best part of this idea is that it is very simple to implement and, in my opinion, has little downside for you. There are many ways you can do it: by using a private webcast button like Roche does, through a Twitter application, or any other communication method of your choice. Obviously it is not practical for the masses to be on the actual voice-end of the call, but a tool like this should be painless, and in this day and age any size company should be able to do it. We recognize that you will not have time to answer all questions, but at the very least you will be able to show investors that you value them by choosing a few good questions or perhaps one or two that are coming up a lot.

If one of the biggest companies like Roche thinks that allowing investors to participate on their calls is important, then I hope many others out there will also see wisdom in the idea too. It will help you the company, we the investors, and therefore the system as a whole. This is a small thing, but one that will go a long way. I would love to hear your thoughts.

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3 responses to “The Case for Including Investors on Conference Calls”

  1. Joan Bar says:

    Good Points, but the reason this hardly will become a norm is because Companies lie or hide things, so management prefer to have questions from their buddy bankers whom they raised money thru secondary offerings trow them soft balls in the Q&A session, also need to be aware of crappy companies that because no analyst follow them will open the call to retail investors making it appear like they care when in truth they just opened because no analyst was going to make a question to them, actual case was in my experience DDSS Labopharm, they head faked with one of their last call opening their call to retail..

  2. Helena Smith says:

    Are there examples of quarterly earnings conference calls that are not open to individual investors? When ever I join calls I am asked my name and affiliation (to which I reply ‘None’) and the Q&A at the end of prepared presentations are open to all. I’ve even heard company employees ask questions.

    • Thank you very much for the comment/question. That is interesting to hear. My experience, especially in biotech and pharma, has been exactly the opposite. Signing in as “none” or “individual investor” usually allows you to join in a listen only mode, but you are essentially blocked out of participating in Q&A. I would say that has been the case nearly 95% of the time for me unfortunately.