Anil Dilawri

First Wall St. and then Main St.

2008-11-10T21:40:00Z

The stock market tends to be a leading indicator for what happens out there in the real world a few months down the road. The financial crisis hit a few months ago and people went along on their merry way, curious and concerned about what was happening but maintaining the status quo in their lives. Now, things on Main St. are starting to happen.

Just today, here are the business headlines:

Corrective corporate actions are being taken. How is your IR department conveying the message?

Have We Hit the Bottom?

2008-11-03T20:28:00Z

A couple of weeks ago, I took a quick poll of 15 financial analysts who cover various sectors in North America. The main question asked of them was – “Has the Dow Jones Industrial Average hit a bottom?

Every single analyst answered “NO, this is not the bottom.”

The analysts were evenly split on where they saw the bottom being. Half saying in the 8000’s on the Dow, the other half saying in the 7000’s.

While it seems that the market has paused over the last week (some may even say the market has slightly rebounded) it’s interesting to note the overwhelming thoughts of the so-called experts.

I bring this up because the fourth quarter tends to be when investor relations professionals start (and in some cases conclude) their planning for next year.

Calling the direction of the market in 2009 will be challenging. Calling the direction of your IR department in 2009 shouldn’t be challenging. Don’t sacrifice the ever important planning phase of the IR cycle because of market uncertainty.

Financial Crisis – Assuming the Fetal Position

2008-10-10T14:52:00Z

As Alan Greenspan, former Chairman of the US Federal Reserve put it “we are in a once-in-a-century financial crisis”.

Investors and owners are asking – is the company stable, and is my investment in long term danger?
Employees are asking – is my job safe? What can I do to help?
Suppliers are asking – will you continue to be a customer of mine?
The media are asking – is there a story to tell about this company today?

Ask yourself – is our organization effectively communicating with these stakeholders during this financial crisis?

Now is not the time to assume the fetal position and wait for the dust to settle. Now is the time to communicate with your stakeholders. That includes investors, analysts, employees, media, governments, suppliers, and others. I can almost guarantee that they will want to hear from you.

Just Pay Me

2008-10-03T15:05:00Z

These are tough markets to stomach for buy-side shareholders, management teams, IR departments, investment advisors, sell-side analysts, investment bankers, and retail investors.

During these turbulent markets we often hear of investors flocking to safety. One safety mechanism is an attractive dividend yield. These dividends reward investors by paying them monthly or quarterly dividend payments while they wait for some semblance of recovery in the equity markets.

IR teams play an important role in marketing a company’s dividend and informing the Street that their company is a potential safe haven during these difficult times.

Volume Friend or Foe?

2008-09-26T15:11:00Z

Many small and mid cap companies complain about how they have low average daily trading volumes and therefore have difficulties marketing their company to large institutional investors. Institutional investors often like high trading volumes (otherwise known as good liquidity) so that they can easily get in and out of a particular stock.

During the recent financial crisis I heard a few institutional shareholders mention that during the most volatile times of the past two weeks they focused on “liquidating their most liquid holdings”. In other words, if it was easy to get out of a stock then they got out.

While a low average daily trading volume can sometimes be frustrating for companies as they try to market their business to larger institutional shareholders, the past week shows that sometimes low trading volumes can be a blessing and protect company valuation.

The Insanity of it All

2008-09-23T14:49:00Z

Not much has happened in the financial markets over the past 10 days (he said sarcastically):

- Lehman Brothers, the 158 year old investment banking powerhouse, filed for bankruptcy protection. It is the largest bankruptcy in US history.

- Bank of America acquired Merrill Lynch, thus removing another major investment bank from the scene.

- AIG, one of the world’s largest insurance companies, announces that it is looking to raise $20 billion (with a B) in capital and sell $20 billion in assets to help its liquidity situation.

- Upon failure to raise capital and sell assets, AIG asks the Federal Reserve for financial assistance to meet its liquidity obligations.

- The Federal Reserve bails out AIG to the tune of $85 billion (with a B) in capital.

- Washington Mutual, one of the largest savings and loan companies in the US, puts itself up for sale.

- The US government announces a $700 billion bailout package to help stabilize the US financial system. Rumors are that the bailout may eventually go higher than $1 trillion (with a T).

- The Chinese Sovereign Wealth Fund is asked to invest in Morgan Stanley. The Chinese take a pass on the “opportunity”.

- Mitsubishi Financial Bank, Japan’s largest bank, buys a 20% stake in Morgan Stanley.

- Goldman Sachs and Morgan Stanley announce that they will exit the traditional investment banking business and become bank holding companies.

These are significant and “once in a lifetime” events. While the actions of the US government may have temporarily stabilized the situation, the tickle down effect on people and companies will likely last for months (and perhaps years). Fasten your seatbelts!

Over the next couple of weeks I will be writing about the impact of the financial crisis on the investor relations functions for publicly traded companies.

Not Your Father’s IR Department

2008-09-03T19:19:00Z

Last week I spoke to the fine people at iMiners in California. They have put together an intriguing, out-of-the-box, Web 2.0 offering for IR departments throughout North America (and the world for that matter).

Communication methods with shareholders certainly are changing. Remember the days when companies would scoff at the idea of “needing” an IR presence on the corporate website? Remember the days when companies even questioned the need for a corporate website at all?

Leaders in the IR space are already blazing trails when it comes to evolving their investor communications practices to include meaningful and innovative digital communications. The followers are bound to follow.

What is IR Success?

2008-08-22T15:10:00Z

Lots of hits on your IR website does not equate to IR success. It may just be your webmaster and employees hitting the site and inflating your stats.

Putting together an impressive IR presentation with lots of cool graphics does not equate to IR success. Cool graphics are no substitute for good performance and direct communication of your strategy.

Hosting an event and having lots of analysts and investors in the room does not equate to IR success – I hate to tell you this, but many of those guys in the room are probably there for the free lunch.

Meaningful and engaging communication with analysts, investors, and prospective investors - now that’s IR success.

This meaningful and engaging communication happens via telephone, email, one on one meeting, group meeting, quarterly earnings call, or blog interaction.

For some reason, many companies (especially small caps) don’t get this.

Intrinsic Investors

2008-08-15T14:03:00Z

McKinsey and Company recently defined intrinsic investors as those institutions that base their decisions on a deep understanding of a company’s strategy, its current performance, and its potential to create long-term value. Furthermore, they are also more likely than other investors to support management through short-term volatility.

Sounds too good to be true….but they do exist.

These are the kinds of investors IR departments want to meet with, attract, retain, and serve.

Is it an IR Blog or a Corporate Blog?

2008-08-12T19:01:00Z

Is an IR blog really that different from a corporate blog? I don't think so.

Why would an investor (institutional or otherwise) read an IR blog created by a company?

Most likely, it would be for the exact same reason why that investor would call the company, meet with management, speak to a sell-side analyst about the company, or visit the company’s website - they want to obtain more information about that company. In turn, that information leads to an investment decision on the company (buy, sell, or hold).

Bottom line – Even though it’s not called an “IR blog”, a corporate blog that provides insight into a company’s business will very much serve the information needs of an investor.

The Power of an Analyst

2008-07-11T19:10:00Z

Financial analysts are powerful stakeholders in a corporation - and they know it. When financial analysts initiate coverage on a company, upgrade a rating, downgrade a rating, or make significant statements in their research, then investors listen. Stocks can swing from 1% to 20% based on what an analyst says or does.

So why do too few companies (especially at the small and mid cap level) not continuously engage financial analysts? At H&K, we use the term “stakeholder engagement” a lot. It’s a fancy term for “talking to and informing people who are important to your business”.

I believe effective financial analyst engagement is the most important (and scalable) ingredient to a high quality investor relations program.

Have you talked to a financial analyst today?

The Commodities (Ka)Boom

2008-07-04T19:25:00Z

Have you ever heard of Potash Corporation?
The ticker symbol is POT on the New York Stock Exchange and Toronto Stock Exchange.
Potash Corporation is a fertilizer producer that is just one example of how crazy the commodities market has become. Potash’s stock price is up 1495% over the past 5 years. To put that into perspective, the market capitalization of Potash Corporation is currently higher than that of the Royal Bank of Canada.

Some may compare this commodities boom to the technology bubble that was created in the late 1990’s and early 2000's. But is it the same?

A population explosion among the middle class throughout the developing world along with continued infrastructure growth in developing countries is legitimately fueling demand for these commodities.

During the go-go days of the technology bubble, companies had difficulty justifying their valuations. There was very little concrete data available that could validate the lofty valuations of companies that were low on revenue and high on dreams. That’s not exactly the case in the commodities game these days. Like Potash, many companies are spinning off tons of free cash flow and the growth data is there.

From an IR perspective, it is critical for commodities driven companies to provide data, and help interpret data, that justifies their relatively high stock prices.

The Art of the Earnings Call

2008-06-25T19:37:00Z

Coordinating an earnings call is like conducting an orchestra. There are many moving parts, some strong players, and some weak links. One thing is for certain with respect to an earnings call, the stakes are high.

Perhaps the most anticipated and entertaining portion of an earnings call is the question and answer session. Financial analysts are given an opportunity to fire whatever unscripted question they want at an exposed management team.

You would think that most management teams would want to appropriately prepare for these Q&A sessions, but far too often that is not the case. CEOs edit away on their prepared remarks, making sure to get every word right. CFOs pour over the financial statements, ensuring that every number is accurate and financial highlights are ready to be disclosed.

But how much time is spent on preparing for the Q&A?

Are the CEO, CFO, and Investor Relations Officer thinking the same way? Would they answer each question in the same way? Bottom line – are they prepared for what the Street has to throw at them?

A well crafted and rehearsed call script means nothing if a management team gets slaughtered during the Q&A.

The Value of Tone

2008-06-13T14:39:00Z

Yesterday, following the announcement of quarterly results, I witnessed a company’s stock price rise 17% during the day. You might be thinking to yourself that the results were quite good. As a matter of fact, they weren’t. The results were merely in line with a negative pre-announcement that the company made a few weeks earlier. Nor was there any new information/data that came to light on the company’s conference call.

So what gives? Why the 17% pop in company value?

The answer is “Tone”

While the financial results were not surprising, management’s “tone” on the conference call was deemed to be very positive when it came to topics such as deal pipeline and future profitability.

There’s a reason why analysts and investors listen to quarterly conference calls, even when the numbers are not so rosy. The audience not only wants to hear what management says, but how they say it.

Quarterly financial calls are more than just prepared remarks and answering questions. Members of management need to show confidence, strength, and optimism when presenting to analysts and shareholders.

So here’s a call to all executives to be aware of your tone when you are center stage. It could be worth millions in market capitalization.

Investor Marketing – The Wrong Way

2008-06-11T14:52:00Z

Raise your hand if you respond to spam emails.

Ok – now raise your hand if you think those who send spam hurt their overall reputation by doing so.

I received a spam email from a junior gold company in Canada today. Sigh…
Did they honestly believe that I, or an institutional investor, would become interested in their company/stock because of this unsolicited email?

Actions like this scream desperation. In reality, the company is likely not desperate at all. They probably just don’t have a clue what to do from an investor relations perspective. Unfortunately, their feeble tactics end up hurting their reputation as opposed to improving their company valuation.

There are numerous ways of effectively marketing your company to the investment community. Spam is the worst choice a company could possibly make.