Roadshows are more accessible to the average investor now than they’ve ever been, and they can be important sources of information. Find out what roadshows tell investors, and how you can find out about them.
Definition and Examples of a Roadshow
Roadshows, also called “dog-and-pony” shows, are an important part of the initial public offering (IPO) process because they help companies see how much demand their offering has and what the proper price should be (“book building”). Roadshows sponsored by investment banks are traditionally face-to-face meetings between the bank’s clients and the company management team. Roadshows are intended to build enthusiasm for the offering, and they’re part of the initial public offering (IPO) price discovery process.
Alternate name: Dog-and-pony show
In July 2021, Robinhood announced a series of live open roadshows accessible on Robinhood.com. The public was invited to participate, and submit questions in advance for the management team to address during the Q&A.
How Roadshows Work
The timing and content of roadshows have to conform to SEC regulations. Roadshows generally can’t begin until a preliminary prospectus that contains an offering price range has been filed with the SEC. Roadshows should present information that’s contained in the preliminary prospectus and is publicly available. Roadshows are planned and thoroughly reviewed by the legal, management, and investment banking team because a misstep can potentially jeopardize the offering. A typical roadshow agenda would include an introduction by the investment bank; presentations by the CEO, CFO and other senior managers; and a question-and-answer session. The presentations cover the details of the offer, an overview of the company’s products, services, competitive landscape, and financial performance. These meetings are important to the success of the IPO because they give potential investors an opportunity to interact directly with management.
Face-to-Face Roadshows
Face-to-face roadshows are usually arranged by the investment bank. Attendees include the bank’s investors and clients. They typically last for a few days to multiple weeks, and they take place across the country and internationally in big cities like New York, Chicago, Los Angeles, and Milan. During face-to-face roadshows, the investment bank solicits indications of interest from prospective investors and clients. Indications of interest are non-binding bids for the offering, including the interest in price and quantity. Indications of interest are an important feature of face-to-face roadshows because the bankers use them as a price discovery tool to gauge the market and make a final price recommendation to the issuer.
Public Roadshows
Some companies target the public for roadshows, livestreaming them, and answering questions submitted by the audience. Public roadshows, like their face-to-face counterparts, are intended to create enthusiasm for the offering, but they aren’t useful as a price discovery mechanism. Indications of interest aren’t solicited at a livestream roadshow.
Types of Roadshows
Deal
“DeaI” roadshows promote an offering. The offering can be an IPO or a follow-on offering. Secondary offerings are additional equity or debt securities provided by a company that is already public. The rules for secondary offering roadshows are more flexible, especially for companies that are classified as well known seasoned issuers, or WKSI.
Non-Deal
Non-deal roadshows are private meetings between management teams and current and potential institutional investors. Non-deal roadshows are typically organized by “sell-side” research analysts as a service to their institutional clients. Sell-side analysts typically work for broker-dealers, advisory firms, or investment banks. As in deal roadshows, investors have an opportunity to interact directly with the management team. However, there is no offering. The SEC regulates non-deal roadshows, and management teams can’t discuss any material nonpublic information about the company. Non-deal roadshows have been criticized as providing an unfair advantage to institutional investors, and a conflict of interest for the sell-side analysts who sponsor them.
What It Means for Individual Investors
Pre-recorded and live-streamed roadshows like the Robinhood webcast can potentially provide valuable information if you are doing your own research. The NYSE and NASDAQ stock exchanges publish calendars of upcoming offerings, and the investor relations page of an issuer’s website will usually have information on any publicly available roadshow events.
