Mercantiles Virtual Road

November 4, 2005
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GRAND RAPIDS — Mercantile Bank Corp. may be riding the wave of a new trend. The bank has upped its exposure with a “virtual road show,” a 30-minute presentation on its Web site that covers all the content of the company’s standard analyst presentation.

Chairman and CEO Jerry Johnson Jr., President Mike Price and CFO Chuck Christmas appear in the virtual flesh, talking directly to viewers about Mercantile’s business model, its background, products, markets and financial performance.

For the investor, it’s like having a private audience with the head honchos. For the management team, it’s like having a one-on-one conversation with the world.

The show, billed as The Mercantile Bank Virtual Management Presentation, debuted Sept. 30 and has since received something akin to rave reviews.

“It’s a relatively new concept and we thought we’d give it a try,” Johnson said. “We’re very pleased with the results and we’ve had a number of our investment bankers and customers call to say they like it. The response has been 100 percent positive. Hopefully, it gives people a better flavor of the company — what we do and what we’re all about.”

Johnson said the idea was to introduce investors to Mercantile’s senior management group, making them “accessible” to existing and potential investors around the world.

When the bank raises capital it has to conduct a number of one-on-one meetings with institutional investors, brokerages and so forth, Johnson pointed out. With the road show, the management team doesn’t necessarily have to repeat the presentation at every meeting with every investor.

The virtual presentation allows viewers to click around as they please through different sections of the presentation.

“We’re hopeful we can ask people with whom we’re going to have appointments to take a half hour and look at the presentation before we get there. Then our presentation doesn’t have to be about the specifics of the bank and its strategy — we could deal more with various questions they might have regarding parts of that strategy.”

The Mercantile road show is the handiwork of a startup company called PDB Connect. PDB had done a similar Web presentation for Spartan Motors Inc., a Charlotte-based manufacturer of custom motor home and fire truck chassis and emergency-rescue vehicles. PDB uses innovative design to create a forum in which executive management can communicate key investment merits and business fundamentals of their company.

Spartan Motors’ road show went online last November. James Knapp, CFO of Spartan Motors, said his company has had a lot of “very positive” feedback on the road show. Furthermore, he said, it has reduced the number of general questions investors have, so it saves both him and CEO John Sztykiel a fair amount of time. Greater visibility for the company has probably been the biggest benefit, he said.

Bob Dentzman, co-founder and principal of PDB Connect, said the virtual road show is a cost-effective way for companies that have very little research coverage to communicate their investment story to the investment community. He noted that companies have been losing securities analysts over the last couple of years, so there’s dwindling research.

“About 35 percent of publicly traded companies don’t have a research analyst, so you’re public but nobody is writing about you,” Dentzman said. “So how do you get your story out?”

PBD is targeting the road show product initially to small to medium-sized companies that maybe only have one or two research analysts following them. Mercantile actually has good coverage; eight research analysts follow the company. Two analysts follow Spartan Motors.

“We have research analysts that follow us, but for a small cap company it’s really hard to market yourself out there,” Knapp acknowledged. “This (road show) really gives us an opportunity to get our word out.”

There’s plenty of quantitative data out there, so anybody can get all kinds of numbers on Mercantile or Spartan Motors, he said.

“But you can’t see management articulate their strategy, you can’t see the passion they have for the business and you can’t see them describe their business fundamentals. So we’ve taken existing technology and applied it to what has not been used in the investment arena before.”

Dentzman said his company has marketed the road show concept to BetterInvesting, a group of investment clubs formerly known as NAIC. BetterInvesting controls about $17 billion in assets. Within the next 30 days BetterInvesting will put the Mercantile and Spartan Motors virtual road tours on its Web site, which will expose the two companies to 35,000 investment club leaders and 200,000 retail investors. Historically, those presentations had only been available to institutional investors, Dentzman pointed out.

“What we’re trying to do is provide that format so the smaller investors can see that same presentation, and institutional investors who could not attend the conference can also see it.

“We’re looking at another source of distribution that will push this out to journalists, FirstCall Research, Capital IQ, FactSet Research Systems and some other sources of financial information, and we’re working with someone on Wall Street to form a relationship to do that. The objective is that once we get the presentations done, to then provide the companies with broad access to a couple hundred thousand retail investors and maybe 3,000 securities analysts.”

Mercantile had just redesigned its Web site and was going to add to it the PowerPoint presentation that senior management gives at investment banking conferences for institutional investors and brokerages. After seeing Spartan Motors’ virtual road show, management decided to go with the virtual presentation instead, Johnson said.

“We took a look at what they had done for Spartan Motors and it looked pretty good,” Johnson said. He, Price and Christmas spent several days going over and editing the script and each of them spent two hours taping the show.

“It was a first for all of us as far as putting something like this together, and we think the end product really came out pretty well.”    

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