Alibaba founder Jack Ma and his management team have embarked on a 10-day, multi-city roadshow before their company’s listing on the New York Stock Exchange, a debut which experts predict will surpass Facebook as the largest ever for a technology company.
Its early success depends on its investor roadshow, which kicked off Monday before nearly 1,000 investors at the Waldorf Astoria in New York.
Despite all kinds of new interactive media tools and seemingly endless amounts of corporate data just a search away, corporate communications experts say the roadshow is a critically important tool during deals and non-deals – and perhaps even more so for Alibaba.
"Given the challenges of distance, language, and culture, the roadshows are clearly even more important for foreign companies such as Alibaba," says Bill Black, president of the Greater Washington China Investment Center, which was designed to help Chinese companies in the US market.
"It is where the buy side gets important information about the quality of the company and its leadership," says Black, who until July co-led the global China practice at FleishmanHillard.
And while Alibaba is well known, "the investment community is often still quite skeptical of non-US companies," says Beth Saunders, chairwoman for the Americas and head of financial communications at FTI Consulting.
"Our advice to clients is the amount of high-touch you can do in roadshows, the better," adds Saunders. "The other thing: Alibaba is going to need to go a little overboard in terms of explaining their operational and financial controls that a US company likely wouldn’t have to do."
She adds that while foreign countries often have regulations that rival that of the US, there is always an "initial skepticism and lack of understanding about foreign companies listing here," says Saunders.
"Alibaba has that hurdle – and so investors want to press the flesh with the management team," she explains. Alibaba also has one distinct advantage during in-person meetings: a very charismatic leader in Ma.
Saunders notes that she has heard predictions of the roadshow’s demise in the last decade due to digital and social media, which could theoretically mean less travel and less stressful time demands for busy executives. Yet she says that hasn’t happened.
"I’ve done this for 20 years – it is so rare that I can convince an investor to meet with a management team via video conference," says Saunders. "It’s incredibly difficult to get that gut feel in anything but a personal one-on-one discussion, where you not only get to hear what they say, but also see mannerisms and hear personal stories."
Steven Klei, CFO at Kabam, a San Francisco-based mobile gaming company in which Alibaba recently bought a 10% stake for $120 million, says that a roadshow is ultimately about selling people, rather than the financials, because investors have already gone over the data.
"The digital age – a net roadshow – lets you disseminate information early, where investors can learn more about the overall market and the company itself," he explains. "But the last part, ultimately the final check-mark almost every investor will want today, is who are the people who will make all this happen?"
"That is the path in which people invest now," explains Klei, who led the IPO for ProBusiness in a previous role and is now preparing Kabam for a possible IPO.
To find an ideal investor for its expansion in Asia, Kabam launched a digital outreach program. It also staged a media tour in China in February to raise awareness of the mobile gaming company among potential prospects. That helped attract the attention of Alibaba, but ultimately it was during later face-to-face meetings that led Kabam and Alibaba to strike a deal.
"It was during those meetings that they could get all of their questions answered, and while you can do that in email, people also look for non-verbal cues – do they trust this person? Is this management team aligned with my vision? Is it a long-term or short-term strategy?" Klei recalls.
"I’ve had many conversations with investors who said, ‘I didn’t invest in something because our visions weren’t aligned,’" he adds.
"They were thinking short term, and how did I know that? I talked to them and listened to how they answered my questions, and that led me to believe they weren’t thinking the way I was,’" explains Klei. "You can’t ascertain that without being face to face."
Digital still has a role in roadshows. Nicky McHugh, EVP and executive director in the New York corporate practice of Ogilvy Public Relations, says digital can boost the effectiveness of roadshows.
"We’re using creative assets such as video and online tools, and of course working with the executive team on communicating confidence," she explains. "With the volume of available information that is easily accessible and the amount of exposure and readiness of disclosure people have, it is critical for management to communicate the investor story cohesively to all audiences. So alignment, consistency, and clarity of message across all communications channels, and especially online is increasingly important."
Greg Jenkins, director of international corporate affairs, strategy and planning at the US headquarters of Alibaba.com in San Francisco, declined to comment about the company’s roadshow strategy, citing its pre-IPO quiet period. The former Brunswick Group director joined the organization in August.
Brunswick Group, which is assisting with the IR strategy, also declined to comment.
The non-deal roadshow, in which meetings take place between potential investors and executives but no investment opportunities are offered, is a different matter. Some IR pros tell PRWeek that the non-deal roadshow has become less relevant in the eyes of their clients in recent years because company information is readily available. Executives also feel like they make enough data available through earnings calls.
However, Ryan Barr, Burson-Marsteller’s senior director of the US corporate and financial practice, suspects some companies may underperform on the financial markets because their IR strategy fails to include the occasional non-deal roadshow.
"Given there is access to information about companies in real time, people’s initial reaction is that the roadshow is not as important as it once was," says Barr. "I disagree."
He says a non-deal roadshow is still an ideal format to demonstrate management credibility and quality, even if a company is well established in the markets.
"You can’t constantly do it from the other end of a conference call or in front of a large group of people at a conference," Barr notes. "Investors still want to meet with senior executives."
He adds that investors "often ask questions that they might not otherwise in a larger format."
Analyst-sponsored roadshows, in particular, have grown in popularity, Barr explains.
"It serves two functions for the company: It builds a relationship with the analyst covering them, and showcase the company to the client base of that analyst."