The Art of Financial Guidance – Catalyst Pathways
For public companies, financial guidance can be more than just numbers that are plugged into a spreadsheet to build a financial model.
Not every public company can be valued appropriately through the high science of business school finance.
How does a pre-revenue public company generate interest and valuation?
A well-developed catalyst pathway.
The best example are development stage biotech companies.
These companies rely not on financial results, but on identifying a series of binary events that drive valuation and interest from investors.
Development stage biotech companies must develop a catalyst pathway that consist of clinical trial milestones across different indications being developed.
The financial model only drives valuation once a product launches post PDUFA date.
Even post product launch, valuation and engagement remains a combination of catalyst pathway for development and financial model for the launched product(s).
Other industries can benefit from utilizing a well-defined catalyst pathway.
They way a pre-revenue company drives interest and valuation is through a well-defined catalyst pathway.
The company must outline all of the major events over a given period that could represent an inflection point for valuation.
The more data, and longer the timeline of catalyst points, means the higher engagement and interest from investors.
A pre-revenue company must be willing to trade some stability in valuation for greater volatility in order to garner interest from investors.
The easiest way for a sub $5 company to unlock value and drive renewed interest revolves around delivering an analyst day.
As a rule of thumb, a sub $5 stock management team holding an analyst day represents a clear indication and signal that better times are ahead for the company and investors need to start buying.
The key to success revolves around not only financial performance, but providing a detailed catalyst pathway.
Success is then sustained by updating that catalyst pathway each quarter and extending the overall catalyst pathway timeline to retain investor interest.
Remember, a well-defined and regularly updated catalyst pathway of valuation inflection points will always unlock investor interest and engagement.
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