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As a public company CFO, can you ask analysts who follow your company for their models of your company?

I'm about to take on my first public company CFO gig (many time private co. CFO). I've always wondered about this and now it's my turn to deal with it: Can you ask analysts that follow your company for their valuation models and assumptions of your company? I want to know what they are using to create their research and value targets, and without knowing the fundamentals of their models, I will just be guessing. We're not going to be running our company based on their models, but knowledge is power, and I figure this knowledge will help me better communicate our value to them.

Answers

Anonymous
(CFO) |

I do ask - most analysts are happy to share. If fact, one bulge bracket firm that covers us and others in our space regularly sends out their models to those who they distribute their research to.

Cultivating a relationship with the sell-side analyst is important and the time you invest in helping them understand the business and the drivers pays dividends. The better they understand the business the better their coverage.

Greg Melsen
Title: VP - Finance, Treasurer & CFO
Company: Techne Corporation
(VP - Finance, Treasurer & CFO, Techne Corporation) |

You can and should ask sell-side analysts for their financial models. Rarely does a sell-side analyst refuse to share their models with company management.
The analyst can always decline the request if they feel uncomfortable sharing this information.

Such request can be mutually beneficial to both management and analyst. Management can use the models to better understand the views and expectations of an outsider and use this information to construct future investor messaging. Analysts can use the opportunity to enhance their dialog with management and hone future financial models.

Jack Judd
Title: Retired
Company: Retired
(Retired, Retired) |

If I read your question correctly, you are about to go public. The anlaysts on your deal should be very open on their valuation models. That is a critical step in the go public process. While you spend considerable time in the document preparation phase with bankers, in the end having the analyst (especially your book-runner anlayst) understanding the value of the business is critical. You should spend considerable time ensuring this gets done.

After you go public, the valuation models done by the analysts are much less important, as every day the market gives you feedback on your business value as you have a market for the stock. I would say your investor models become much more important but it will be very difficult to monitor these models. You will not have up to the day information on who owns your stock and in my experience most investment funds consider their valuation methodology quite proprietary.

When dealing with analysts, I try and make sure they understand the guidance I have provided, especially quarterly and yearly growth rates, expense levels, target operating model and how economic conditions affect financial performance. When their models are published, I try and read how they explain the company or the recent announcement that triggered the analyst report. I also like to review and compare all the models published and look for "outliers". You really cannot do much if analysts publish forecasts that are different than you like but in does not happen that way too often.

As you go public, I encourage you to keep posting questions. I wish something like this would have been available to me on my first IPO.

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