How I Fired a Sell-Side Analyst
When a public company management team wants to fire an analyst or enact a coverage change, it is often because of some sort of disagreement in viewpoint.
The best course of action in these situations is to remain calm, develop a plan, and execute that plan overtime to refute the negative analyst.
Nevertheless, there are countless management teams that actively chose to die on the mountain of taking the situation personally.
A public company executive should always resist the temptation to enter a disputation with an analyst or investor. Only action and execution can refute a steadfast negatively inclined investor.
Likely disappointing to most, when I fired an analyst, the situation had nothing to do with his actual research. More importantly, I would never have a problem working with him in the future.
The key in my scenario was the analyst made multiple mistakes, breaking multiple rules, which allowed me to re-evaluate the perceived value-add of the associated research effort:
1. Activist Investor to a Site Visit
2. Lack of Meetings at a Conference
In this scenario, the analyst actually broke two rules. He wasted management’s time and brought a perceived ambush meeting.
What Caused Change to Occur? No Further Support on Two Fronts:
1. No Conference Participation
2. No NDR / Site Visit Access
In my particular situation, enacting change was quite simple. For two major reasons:
1. Analyst Depended Upon Corporate Access
2. M&A Rumors
The analyst needed the corporate access in order to make continued coverage worth his time. Corporate access represents one of the primary monetization levers for an analyst. Multibillion dollar companies can ill afford to attend investor conferences and only receive one or two meetings.
Secondly, the continued rumor of a deal in the background made it a natural time for the analyst to drop coverage. The high probability of M&A coupled with no corporate access signaled that monetization of research coverage would be nearly impossible.
Remember, if a public company management team is so heavily focused on firing an analyst, the executive team is actually signaling that investor negativity is valid!
A public company management team that sets and executes upon a long-term plan over quarters and years, will always diffuse negative investors! Any other response represents a hazard to your health.
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