Investor Build Program
As part of its Investor Relations Advisory practice, GCA encourages its clients to take the initiative to broaden their existing investor relationships. Having a broad base of knowledgeable investors will insure that issuers do not become overly dependent on a few large investors. As valuable as such large investors be, issuers are, generally, advised to create a broad investor base comprising both large and smaller investors who can grow with the company over time and take on incremental debt with each new transaction.
Outside the context of a new issue, placement agents cannot reasonably be expected to actively assist issuers in building new investor relationships. GCA can and does provide this service.
GCA can and does provide this service.
GCA works with existing issuers to analyze the results of their last private placement. The objective is to identify the following:
- Why did investors turn the deal down?
- Were there investors who were not approached that should have been approached?
Placement Agents are often reluctant to share with issuers the knowledge they gain as to investor perceptions/issues that arise during the marketing process.
Unfortunately, this deprives issuers from gaining valuable insights as to why their transaction failed to attract certain investors; i.e. was it pricing, covenants, structure, company-specific issuers, industry-specific issues, or perhaps even something related to the distribution/allocation process?
With our longstanding personal ties to the investor community, GCA is uniquely positioned to retrieve this information and make it available to the issuer. With such market intelligence, GCA works with the issuer to devise strategies to re-engage these investors in between issues. This can take the form of one-on-one conversations to clarify any misperceptions that might have existed, and/or by arranging special briefings for groups of investors on the company and/or industry with a view to getting them more comfortable.
Alternatively, if the issue(s) relate(s) to covenants or structure, the issuer can gain important understanding as to what underlying risks the investor had been focused on. This would, at least, enable them to explore for future transactions if alternative covenants might mitigate these perceived risks, while not interfering in the company's ability to run its business.
GCA also assists issuers in identifying investors who, for whatever reason, may not have been approached during the last transaction. It is a fact that placement agents exercise discretion as to whom they show new transactions. Whom they approach may have as much to do about their own investor relationship objectives then it has to any well-thought out issuer-based strategy. Placement agents who are understaffed versus their deal flow volume may prefer to go only to enough investors to get the deal "circled" without weighing how an over-reliance on a few large investors might inhibit future financings.
GCA's Investor Build program empowers clients to take more control over future capital raisings by offering issuers pro-active initiatives that can be taken to uncover the reasons investors declined the last transaction and/or identifying investors who may not even have been approached. Through this process, issuers will gain a deeper understanding of investor needs and constraints, enabling them to gain a better market position in the next transaction.