A small-cap basic materials company undergoing a transformation to diversify its revenue stream was interested in understanding the Street’s perception of its strategic direction and execution. Following its last acquisition, its price performance significantly lagged peers and indices. Separately, the Company had recently announced the appointment of a new CFO.


Opportunity

Corbin Advisors was retained to assist the Company in understanding and helping with:

  • Identifying the factors impacting valuation
  • Uncovering perception of M&A track record and execution given the Company’s appetite for acquisitions
  • Determining the effectiveness of current communication practices
  • Assisting the IR director in delivering difficult messages to management
  • Providing primary research to inform the incoming CFO on current investor perceptions

Key Discoveries

  • Investors agreed with diversification strategy but questioned price, timing and rationale of acquisitions; as well, they did not understand the Company’s end goal
  • Strategy outside of “growing through acquisitions” was largely unknown; investment thesis was unclear
  • Story was perceived as complex; misperceptions about its current business model and economic sensitivities existed
  • Majority of study group considered stock undervalued but not compelling enough to increase, initiate a position
  • Sentiment on management was mixed; key executives largely perceived as inaccessible
  • Management was not receiving full credit for efforts, such as leading market positions, financial strength, business transformation and operational expertise
  • Company could benefit from increased marketing activities with management

Impact

  • Company revamped website, investor presentation and conference call format; communicated a clear long-term strategy and focused messaging on:
    • Margin improvement fueled by technology and innovation
    • Global footprint and focus on expansion
    • Strategy resulting in stable earnings and higher profits
  • Stock outperformed peer average and S&P 500 during the quarter communication changes were implemented
  • Qualified nine prospective investors interested in meeting with the Company
    • Two prospective investors interviewed established new positions within a quarter’s time, one in the top 15
  • Indentified several high-potential sell-side analysts to target based on coverage universe and investment profile
  • Following communication overhaul, stock upgraded by one sell-side analyst due in part to improved investor communication while another maintained Buy rating and noted, “We continue to believe that the Company will keep benefiting from…accretion from acquisitions, improving communication with investors and solid cash flow generation.”