Pre-IPO firms may “test the waters” by meeting privately with investors in order to allow access to management and more time to make an investment decision. However, these meetings have the potential to undermine the SEC’s objectives of protecting investors and supporting market efficiency by allowing institutional investors, but not retail investors, private access to management. We find lower retail trading after IPOs of firms that held testing-the-waters meetings, consistent with the meetings reducing retail investor participation. Moreover, retail investors that still participate in the market in the presence of testing-the-waters meetings have inferior investment outcomes. Nonetheless, we find no evidence of lower overall market liquidity or slower price discovery following testing-the-waters meetings. In fact, we observe a reduction in stock return volatility. Overall our evidence suggests that, while testing-the-waters meetings may harm retail investors, there does not appear to be a negative impact on overall market function.

We examine the role of investor relations (IR) in private debt markets. We find that firms with dedicated IR officers (IROs) receive significantly lower loan spreads, particularly when lenders require a better understanding of the borrower’s risk profile. Among firms with IROs, those with longer tenured officers experience lower spreads, especially when IROs also manage financial responsibilities. To address endogeneity concerns, we demonstrate that loan spreads decline when a firm establishes an IR program and rise when the program is discontinued. Furthermore, when a different individual assumes the IRO role, loan spreads increase, even though there are no reductions in firm disclosure. Loans issued to firms with IROs also have shorter syndication duration, attract more nonrelationship, foreign, and nonbank participant lenders, feature more customized covenants, and are less likely to undergo renegotiation. Overall, our study provides robust evidence of the relevance of IR in private debt markets.