Winning research: CFA competition brings exposure to A10 Networks

Each year CFA Institute holds a global research report competition, where companies present to teams of students from competing universities across dozens of countries. This year, for the first time, the company presenting in New York was a small-cap firm: cloud software company A10 Networks.

The popular narrative around small-cap companies is that it can be hard to get your name out there, with analyst coverage often difficult to generate. For A10, the CFA competition was a ‘worthwhile experience’ that offered multiple benefits.  

‘A10 entered the public markets with a bulge bracket-led IPO that was supported by a high number of middle-market and tier-two investment banks, so we were initially well covered by the sell side,’ Brian Becker, who became CFO of A10 in September 2020, tells IR Magazine. ‘Over time we’ve seen our analyst coverage decrease due to pressures on the sell side and industry consolidation. We’ve had to make up for this by being more proactive and self-directing a lot of our marketing activities.’

Presenting to student analysts

Becker says the company, with FNK IR as external investor relations support, has been increasingly focusing on coverage. ‘That’s one of the reasons we embraced the CFA research competition,’ says Becker. ‘In addition to the more than 120 students who wrote the reports, the competition was a backdoor way to get our story in front of the approximately 20 professional portfolio managers and sell-side analysts who sit on the judging panel, grading the reports and presentations. That’s the equivalent of multiple sell-side events.’

The competition sees the subject company present to student teams as it would to investors (you can watch the presentation by Dhrupad Trivedi, A10’s president and CEO, here). The challenge moves from regional to national to global level.

‘Working in teams, students gain real-world experience as they assume the role of research analysts and are judged on their ability to value a stock, write a research report and present their recommendations,’ notes CFA. For the New York competition, teams were whittled down to a group of four before the winning team for the region was announced: Binghamton University (you can watch the Binghamton University team presentation, and those of the other three finalists here).

The New York charter competition is part of a global research report competition that this year saw 6,400 students from 1,100 universities across more than 150 CFA societies and 98 countries battle it out to win. 

Teams research and analyze a designated publicly traded company, explains CFA. They prepare a written report on that company that supports a buy, sell or hold recommendation, receive advice and support from a faculty adviser and an industry mentor, and present and defend their findings to a panel of industry experts. The global crown ultimately went to a team from the B1 Norwegian Business School in Oslo.

‘We presented the A10 story to the student teams in the same way we would at sell-side conferences, and conducted our meetings as if we were in a one-on-one with a new institutional investor,’ explains Becker, adding that ‘there were moments when we had to remind ourselves that this was a student event.’

Analysts of the future

Being the subject company for the New York competition didn’t just bring exposure. It also gave A10 access to the reports written by the student teams as well as working with the analysts and portfolio managers of the future.

‘Participating in the CFA competition helped us gain valuable feedback on how we’re doing,’ says Becker. ‘It was a huge benefit to have 25 initiation-style reports written on us that we could mine for feedback to improve our IR message. Replicating that with actual Wall Street reports would have taken years [and] normally you would need to conduct a costly and lengthy perception study.

‘For our IR and executive team, it also allowed us to work with students who aspire to be analysts and portfolio managers and provide them with a real-world experience they couldn’t otherwise have achieved.’

Matt Chesler of FNK IR says that when it comes to IR, today’s small-cap companies ‘require proactivity and hustle, creativity and collaboration, and the ability to forge strong relationships with investors’.

‘Small companies must have a proactive plan of engagement,’ he tells IR Magazine. ‘In a Zoom world, there are too many forums for interacting with institutional and retail investors interested in smaller companies: companies should focus on quality over quantity, leveraging management’s time efficiently.

‘Cost represents an important consideration for those without the luxury of sell-side coverage. While current investor interest in smaller stocks seems high, one cannot overlook the fact that smaller-cap IR success is a game of one-on-one interaction. Relationships always matter. The difference between an adequate IR program for smaller-cap companies and a best-in-class one comes down to leveraging deep-seated relationships across the buy side and sell side for smarter targeting and the continuous feedback loop that comes with it.’

Overcoming small-cap IR challenges, such as sell-side support becoming ‘harder to come by, particularly without a banking relationship’, or issues around liquidity, for example, ‘requires a flavor of IR that is specialized, highly proactive and creative,’ Chesler adds.

Having your client become the subject of the CFA New York charter research competition certainly ticks those boxes.