Case Study - Nano Dimension Ltd.
(symbol NNDM)
Numerous companies that focus on lesser known fields of activity are liable to suffer from low investor exposure due to lack of knowledge about the particular sector among other factors.
Amit Dror, CEO of Nano Dimension, talks about his experience with investing in IR.
Quite a few companies undergo significant processes in connection with their business activity, or they operate in lesser known fields. Such cases justify investing in investor relations in order to stimulate exposure to company activity, demand, and ultimately bring about a share price that faithfully reflects the company's activity.
"Nano Dimension was established out of the shared vision of four partners: Dagi Ben-Noon, Simon Fried, Sharon Fima and myself," says Amit Dror, company CEO. "With a business focus in the field of 3D Printing, it's necessary to raise considerable capital in order to finance activity; therefore, for us, turning to the stock exchange was a natural move. We were the first company in the domain of 3D Printing to enter TASE. We estimated that through the process, we'd be able to present the company's milestones on the way to fulfilling its vision, in a clear and transparent manner so as to involve the public as much as possible," says Dror.
Nano Dimension is a dual-listed company that engages in R&D of a 3D printer that prints electronic circuits and develops ink products based on nanotechnology. In August 2014, the company issued its shares in Israel; two years later it was also listed on the NASDAQ. Although only recently did Nano Dimension begin selling its products, its shares enjoy high-volume trading of hundreds of thousands to millions of ILS per day.
Nano Dimension profile on the TASE website
"Pursuant to our strategy to turn to the public market," says Dror, "when you choose to operate in an environment that has certain rules, you can expect that by working in accordance with these rules, you'll get rewarded. In the case of a public company, that reward is the trust of investors, who will purchase the company's shares. The most important rule in the stock exchange is that in order to raise money you need to build relationships with your investors, setup the expectations and match them. We always have our shareholders in mind and try to maintain a good and continuous connection with them. If a company is not in contact with its shareholders, liquidity decreases, demand is reduced, and the stock price would react accordingly."
Investors are customers, too
As Dror sees it, for public companies investors are just as important as customers. Therefore, it is important to treat investors in the same way as customers and target them with in-depth marketing activity while marketing the products the company produces. "A company is not measured solely by its results but also according to its vision, the manner in which it fulfills it, and by achieving the milestones it sets. Demand for company shares is influenced by the company's ability to exhibit its development to investors in a transparent and clear manner."
As for regularly cultivating investor relations, Dror says: "Many companies, and certainly hi-tech companies, need to raise capital more than once. A main factor in fundraising ability is the volume of trading in company shares on the stock exchange. If the general public doesn't participate in the trading and if there's no media buzz revolving around the company's activity, there won't be interest in the company and the trading volume will be low. On the other hand, with large trading volumes it's highly likely that the company will be able to raise funds. At Nano Dimension, for example, there were investors who participated in all rounds of our fundraising. In each round of investment, we sought to expand the circle of investors by including additional investors to our current ones." Expanding the investor circle increases exposure to the company and its stock and thus encourages increased trading volumes.
A further challenge in the capital market consists of institutional investors, who typically invest in 'heavy' stocks because, among other reasons, the minor stocks do not enjoy research analyst coverage. A portfolio manager who wishes to promote investment in a younger stock needs to base himself on professional analysis; and when no such analysis exists, he needs to assume greater personal responsibility for the investment. "Many investors talk with analysts, and if you see to it that analysts become familiar with you, you'll receive investments not only from retail or day traders but also from institutional investors, who will help stabilize the stock and strengthen the company in the long term."
Keeping investor relations overseas in addition to Israel
About a year and a half ago, Nano Dimension began working with an investor relations firm in the U.S. prior to commencing trading on NASDAQ. Dror describes how each month company management visited the U.S. and arranged, with assistant of the IR manager, "Non-deal" meetings with investors and banks. "In reward to that preparation work, within several weeks of Nano Dimension's listing on NASDAQ, analysts at U.S. banks began coverage review on Nano Dimension at their own initiative, even prior to the public stock issuance and fundraising. Suddenly we became a company with a research analyst coverage and a stock forecast. This benefited the company also in Israel, because investors in Israel and all over the world could gain an impression of the company based on the review of U.S. banks and could contact their analysts."
From your experience, are there differences in the attitude of companies to investor relations between Israel and the U.S.?
"Our main insight from the NASDAQ and from working with American investors is that in the U.S., the dynamics of interaction with investors are intensive and constitutes a large portion of the work of CEOs and CFOs. IR activity is virtually mandatory in the U.S. and part of standard dealings in the capital market. In Israel, this isn't necessarily so and it's a problem, because it impacts the level of ongoing updating of investors and makes numerous investments speculative in nature."
What's the most effective move you've made as part of your activity?
"Firstly, we declared our future milestones immediately after we were listed on TASE. Several months after the TASE stock issuance we arrived at our first significant milestone and held an event for investors and senior industry figures, which was attended by some 200 participants. The event was held during the course of the trading day and was broadcast live on relevant media channels. Thanks to this exposure there wasn't a single person in the capital market who hadn't heard of Nano Dimension - thereafter the company became visible on the radar of numerous investors in the capital market. The results of this activity surprised us for the good."
To summarize, Dror says that the cost of setting up IR activity is relatively low compared to other public company expenses, and it's important that senior management makes sure to assign it a central role. "We are assisted by external IR services in Israel and abroad. Like everything else, it's important that there would be good chemistry with service providers. I think that at minimum, IR activity should consist of basic media activity and an IR website. Our website includes an Investor Relations page, which helps us manage separate lists for investors and for potential customers. We also work through other means, which increase the frequency of exposure for investors, including through social networks, publishing a company presentation that is updated quarterly, participating in conferences, sending direct mails to designated mailing list recipients and more. Thanks to such activities, investors understand what's happening and feel a stronger connection to the company."
To Nano Dimension's IR website