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 In today’s climate of economic worries, investors get spooked at the slightest event or comment. During this earnings season what can companies do to ensure that their message is the right one and avoid volatility in their stock price? Here are a few tips to keep in mind, which include what to say (or not) in the press release and earnings call, how to mitigate the “tone” of the message and finally, what to avoid.
Remember the golden rule: it’s all about the future and how the analyst models a company’s growth in order to get a target share price. In terms of the past, all that’s necessary is to communicate results that are in the range of the market consensus, which has been based on company guidance. If they aren’t, stop here because an entirely different strategy is needed.
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Biotechnology and the Capital Market: How to raise money and how to keep your investors happy once you get it |
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.jpg) It’s safe to say that the small to mid size biotechnology industry is alive and, while stressed, it is likely that the market view will recover a positive tone, particularly with pharmaceuticals. This is true if for no other reason than big pharmaceutical companies look to the companies in this market segment for replenishing their product pipelines.
However, a high level of R&D is essential for these companies to stay on top of the latest innovations and this is a costly undertaking. Over the past year and a half, the turbulent financial environment has resulted in strong headwinds in finding fresh capital to fund ongoing research and operations until the end game is achieved. However, many leading economists today are contending that the economy has hit bottom and that we are beginning the long climb back to prosperity. Certainly the stock market has rallied, with the NASDAQ composite leading the way as one of the top gainers with more than a 30% increase over October 2008. Also in that time frame, the NASDAQ biotechnology index has risen 15%. Private equity and venture capital funds seem to be coming back to life with whispers of creating new funds and selling or taking public some of the companies that have been lingering in their portfolios during the downturn. With this as background, how does a biotechnology company that has managed to survive up to now leverage the current market environment? |
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For each company listed on the stock exchanges around the world, there is a large audience of investors who has a set of expectations related to the company’s current and future performance. If these expectations are not met, the company’s stock will be adversely affected; if they are met, the stock price will react positively. Sounds simple. Yet, everybody probably will agree that it is not. So, how can senior management set realistic targets or “guide” the market and then manage these expectations through the ups and downs of running a business?
An analogy of a public company’s management of investor expectations can be found in an economic event in 2007 that marked the beginning of what is now known as the “Financial Crisis” and the resulting stock market volatility around the world.
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