The interview covers a range of subjects including the changing e-commerce landscape and of course, the challenges of setting up an independent company. According to Ms. Sheehan, Cars.com already had ‘many of the IT and financial systems already in place, separate from Tegna’ which gave them ‘a step forward in not having to create and build that kind of infrastructure’ Even with that advantage there were numerous other corporate functions, including treasury management, which needed to be set up. The entire interview is worth reading, but one interesting question was related to the challenges of setting up a new company:
WSJ: What challenges did you face in your previous spinoff that you’re better prepared for now?
I think it will be really important for us to make sure that our investor messaging, as we become our own public company, is very specific to the digital automotive industry. It is going to be very different from how Tegna communicates with its investors about what’s happening in the media landscape. That was one of the clear challenges we had in my last experience as well, because our e-commerce flowers and gifting business was quite different from our parent company, United Online [which provides marketing solutions and internet-access services].
WSJ: How did you deal with that challenge at FTD, and how do you think that experience will help you handle this challenge?
MS. SHEEHAN: The main difference was the investor base we had with our parent company pre-spinoff and the investors we believed would be interested in holding FTD post-spinoff stock. We anticipated some turnover in the investor base beginning right after the spinoff, so we traveled and met with various possible investors to tell the company’s story. The meetings included one-on-ones and larger group lunches in cities such as New York, San Francisco, Milwaukee, Chicago and Denver, and were coupled with a significant amount of phone calls as well. I think this experience has provided me with significant knowledge and capabilities in investor communications that will certainly apply to Cars.com.
Investor messaging isn’t a surprising answer because nearly every spinoff uses the idea of attracting different investors as part of the transaction rationale. I have to believe this might change in the future though as the pool of passively managed assets gets increasingly larger. Join an index, get bought. For large cap names, the ‘big shareholders’ are basically uniform. For smaller names such as FTD and the soon to be free Cars.com, this is probably a very important function, especially because they don’t receive much coverage. Now we know a little bit more about what top management is thinking about.
(h/t Special Situations Investing Facebook group)
Disclosure: Author holds no position in any stock mentioned
❤️