Maintainers and Innovators in IR

24 September 2010

When it comes to investor relations I would say that the vast majority of companies are what I call “maintainers”.

Maintainers plan and execute many IR functions such as earnings releases, earnings calls, road shows, answering investor calls, maintaining a website, and helping executive management when needed.

Then there’s the “innovators”. These are companies and IROs brave enough to take the IR function to a different level – where IR functions actually get noticed and make a difference.

MOSAID Technologies is an innovator. One only needs to take a look at their Investor Channel to see how they are taking their traditional press releases and earning releases to a different level through the use of video. The result is captivating visual message that is targeted directly at the investment community.

Was it easy? No.

Was the rest of the world doing it? No.

Was it tradition (maintainer) IR? Not even close.

Was it compliant from a regulatory standpoint? Absolutely.

Was it effective? You tell me. Do you find the video more compelling than a traditional press release?

So, what are you, an IR maintainer or innovator?

Full Disclosure – MOSAID Technologies is a client of H&K Canada.

We’re Not Ready

24 August 2010

I recently came across an article about an analyst from UBS using satellite images to help in his research of a company. Here’s the article. For the world of equity research, this is pretty mind-blowing stuff.

This got me thinking about the general apprehension of IR professionals when it comes to adopting social media for IR (or for that matter, adopting any technology outside of their basic web presence).

A common phrase I hear when talking to IR professionals about the topic of social media for IR is “Oh, we really are not ready for something like that right now.” In many cases, this is a fair statement.

If you are not ready, that’s fine, no problem. But realize that it is very likely your analysts are ready, your institutional shareholders are ready, your retail shareholders are ready, and the financial media is ready.

There was once a time when companies were “not ready” for live conference calls, not ready for email, not ready for IR websites, not ready for faxing, and not ready for computers. Then one day, they were ready.

Maybe it’s time to become ready for social media within your IR department.

IRO – the jack of all trades

12 August 2010

It’s not easy being an IRO. An IRO needs to be the jack of all trades within an organization.

Finance – being able to walk the walk when it comes to discussing financial metrics and financial analysis with

shareholders and analysts.

Marketing – developing the right strategy for communicating with the Street through events, roadshows, conference, calls, and more.

Sales – convincing the buy-side and the sell-side that your company is better than the competition, can deliver on the promised strategy, has the management team to execute, and can deliver the kind of results that will drive shareholder value.

Human resource management – being able to decide which members of the team (beyond the CEO and CFO) should (and should not) be exposed to the investment community.

Information technology – driving an effective web presence to ensure the right information gets to the public at the right time. Driving innovation through social media deployments and staying on the cutting edge of fair disclosure and communications.

Operations – being able to intelligently discuss the inner workings of the business and providing the depth of knowledge that the Street needs.

It takes someone special to be an IRO. Your company is lucky to have you.

Quiet Periods

21 July 2010

I recently completed a mini research project for a client on quiet periods. This forward thinking client wanted to ensure that their quiet period policy was in line with what other companies were doing and what the regulators were suggesting.

The findings were predictable. Most companies have a quiet period that starts around the end of the quarter and stops when results are released to the public. That makes sense.

The vast majority of companies still authorize discussions between management and the Street during quiet period while “being careful not to disclose information about the pending quarter”.

Only one company actually didn’t allow their management team to speak with the Street during their quiet period. Does that surprise you? It really surprised me.

Quiet periods exist so companies and management teams do not expose themselves to possible selective disclosure between the end of a quarter and when results are announced. Translation: quiet periods exist to protect management from saying something that they shouldn’t be saying yet.

The problem is members of management are human beings. Human beings make mistakes (sometimes big ones, sometimes small ones). When we allow our management to speak (even carefully) during a quiet period we are exposing them to significant risk.

Are your quiet period policies and practices really protecting your company and your management team?

Is there such a thing as too much investor marketing?

09 July 2010

For many IROs, it seems like they are on the road with their management all the time. Be it for non-deal roadshows or institutional conferences, the investor marketing schedule never seems to pause for some.

So, is there such a thing as too much investor marketing?  Tough question.  My answer is – it depends.

No CEO wants to be branded as overly promotional when it comes to his/her IR activities.  However, the CEO wants to be thought of as accessible and open to in-person meetings.  It’s a fine balance.

Ask yourself the following about your investor marketing meetings:

  1. Are you seeing new investors or the same ones over and over again?  New interest in the stock/company is a good sign that your marketing efforts are worthwhile.
  2. Are investors coming to meetings with prepared, well thought out, insightful questions or are they passive and seemingly “going through the motions” when meeting with you?  If they are truly interested, you will be able to tell.
  3. Is sell-side sponsorship of your roadshows subsiding? Sell-siders love taking companies on roadshows, unless they are having trouble filling a day of meetings for you.

Admittedly, many companies find themselves experiencing the opposite problem – not enough marketing.  But for those who market well and market often, keep it up.  Just be cognizant of the Street’s interest level in meeting with you.  Sometimes we need to allow the Street some time on their own to digest the success of your company.

Mr. Website and IR Staff

22 June 2010

Websites are a popular topic of discussion with investor relations officers (IROs).

How do we improve ours?

Do we have the right content?

How much money should we spend on the site?

How much time should we spend worrying about the site?

These are just a few of the strategic questions that are voiced by IROs.  They are tough questions to answer.

Let’s take a step back and not look at our IR websites as tools. Instead, just for the next few minutes, let’s look at our IR website as a member of our team (an IR staff member).

Now, let’s ask ourselves the following:

Are we happy with what our staff member is saying to the audience?

Are they credible?

Are they conveying up-to-date information?

From the audiences’ point of view, is there value in what the IR staff member is saying?

Am I comfortable with this staff member talking directly to the Street?

Will the audience want to continue talking to this staff member on a regular basis?

Whether we like it or not, our IR website is a virtual staff member.  They represent the company in the same way a member of our IR team does.

My point here is that IR websites matter.  They are important.  They deserve your time, your attention, and your resources.

Perspective point #1: When is the last time you personally invested in a stock without visiting the company’s website?  I hope, for your sake, it wasn’t recent.  Think about every new investor (institutional or retail) who is considering investing in your company this year and what impression they will be left with after visiting your website.

Perspective point #2: How many face-to-face institutional investor meetings has your CEO conducted over the past year?  Probably a lot.  Now, how many institutional investors do you think visited your website this past year?  Probably more than the number that met with your CEO.  Conclusion: your IR website probably gets more face time then your CEO.

Innovation Equality and Investor Relations

21 May 2010

Admittedly, I’m a Tom Peters fan.  He has become a legendary management consultant and he has done it by spreading his common sense ideas in a very engaging way.

Here he talks about Innovation Equality, and I think it is extremely relevant for IROs and anyone associated with IR.

What is your IR R&D budget?  More simply, does your IR department spend any time thinking about innovation?  By innovation I don’t mean using new adjectives in your press releases.  I mean doing new, and dare I say “different”, things that ensure your IR goals are met on a regular basis.

Bench Strength

13 May 2010

I was recently reminded about leading an investor perception audit for a company a while ago.  The Street had great things to say about the company and its management team.  A significant take away from the audit was the Street wanted exposure to the bench strength of the management team (i.e. managers other than the CEO and CFO).

Maybe the Street thinks the CEO is great and they know him well.  Maybe they think the CFO is very competent and meet with him regularly. But what about everyone else?

How about introducing the investment community to others on your management team?

The Senior VP of Innovation

The Chief Information Officer

The VP of Drilling and Exploration

The Senior VP of Sales and Marketing

The Head of Human Resources

The VP of Business Development

The Head of Product Management

Or others that you know will impress an analyst or dazzle a buy-sider.

I’m not saying you should make these managers your IR front men.  I mean have them present at an investor conference every now and then (or co-present with your CEO), have them talk during corporate visits, even inviting them to speak at the occasional quarterly earnings call.

Don’t get me wrong, CEOs, CFOs, and COOs are all important and the Street wants to hear from them.  However, the Street is well aware that a CEO is often only as good as the team that surrounds him/her.

Show off your management bench strength. The Street will appreciate it.

Momentum and Future Prospects

29 April 2010

A lot of people were making a big deal about Apple’s market capitalization eclipsing Microsoft’s market cap last week (Important note – Apple’s market cap surpassed Microsoft on a float adjusted basis. Yahoo Finance and Google Finance still show Microsoft with the higher market cap.)

I’m not a card carrying member of the Apple tribe or Microsoft tribe, I just find the market cap comparison interesting from an investor relations perspective.

Both companies have a market cap in and around $250 billion, give or take $10 billion. Microsoft’s trailing twelve month revenue and EBITDA is approximately $58 billion and $23 billion respectively.  Apple’s trailing twelve month revenue and EBITDA is approximately $29 billion and $6 billion respectively.

$250 billion market caps.

Revenue: $58B vs $23B.

EBITDA: $29B vs $6B.

Not to mention Microsoft’s commanding lead in overall market share.

What gives?

How can the smaller Apple be valued at the same level as Microsoft (or higher)?

Enter the ever-important factor of momentum and future prospects.

Apple is on a role, has a hot new product suite, and has a cult like following.

Microsoft is a strong, steady performer that is trying to innovate and has a relatively apathetic user base.

Put simply, Apple is hot and Microsoft is….well….not cold, but more like room temperature.

The Street sees exciting things in Apple’s future and the possibility of becoming the new king of personal computing.  They have rewarded the company by valuing it at the same level as its giant peer.

Bottom line, from an IR perspective: You too can reach the valuations of your largest peers by effectively (and carefully) demonstrating momentum and future prospects. I’m exaggerating, but you get my point.

Momentum and future prospects matter.

Execs Who Love to Talk

07 April 2010

I recently came across a junior mining company that has been the subject of acquisition rumors for quite some time.  Senior executives with the company have always been careful with their public comments surrounding acquisition questions from analysts, investors, and financial media.

Then one of their operational executives slipped, and slipped badly.

While at a mining conference the operational executive informed a Reuters writer that the company is engaged in talks with a number of senior metals and mining companies and that an acquisition is imminent. He didn’t stop there.  He also made comments about his company’s stock price being too low and that it would by 2 to 3 times higher once an acquisition is announced.

Operational executives are great, aren’t they?  They play a very important role in advancing the business and ensuring that the company runs smoothly.  But sometimes they talk too much.

Small mining companies don’t have a monopoly on operational executives who talk too much.  Such executives are in most industries and with companies of varying sizes.

While it is easy to blame the executive for saying too much, I blame the IR and legal departments.  IR and legal play an important internal communications role.  They need to develop solid strategies for communicating their internal company rules around fair and timely disclosure.

Fair disclosure is a tough concept to grasp, even for bright superstar executives who are excited about their company’s future prospects.  Navigating through the fine lines and large grey areas of fair disclosure is not easy.

What’s your strategy for communicating fair disclosure rules with your company’s staff?