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.

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.

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.

What makes a good IR department or good IR program??
I have heard those who say “Oh, their stock is down X% so their IR program must be poor”.  The truth is that the stock is probably not down because of a poor IR program.  Chances are very good that the stock is down because of poor company results.

 So how do you judge if an IR program is good or not?
There are many metrics that one can look at beyond absolute stock price performance:
• Stock performance versus peers/competitors.
• Stock performance versus industry indexes.
• Long-term investment returns (5 years or more).
• Revenue multiples.
• Earnings multiples.
• Short positions.
• Beta factors (volatility).
• Market capitalization versus peers.
• Average daily trading volumes (share liquidity).
• Ownership profiles.
• Turnover among top shareholders.
• Quantity and quality of analyst coverage.
• Analyst recommendation breakdown.
• Investor marketing activity.
• Size and quality of IR database.

This list of fancy terms can go on and on.  These are great for IR junkies, like me.
However, there is an easier way to breakdown weather an IR program is good or not, and here it is:

If a company is performing well, has been meeting or exceeding expectations, and is in good financial position, then shareholders should be rewarded by a higher moving stock price.  If not, then we need to look at the IR program to see what is going wrong.

If a company is not performing well then the stock will get hit (in some cases, quite badly) no matter how great the IR program is.  However, in this scenario, if the reputation of the management team and the company remains in tact, and investors and analysts see optimism in the future of the company then the IR program has succeeded.

In the end – you should not always judge an IR program by the company’s stock chart.

Barack Obama announced today that he wants shareholders to be heard when it comes to executive compensation.

During periods of economic turmoil and downward moving stock prices we always see executive compensation come to the forefront as a topic.

When a company’s stock goes up, nobody complains about executive compensation.  When a stock goes down, everything is up for scrutiny (executive compensation, company strategy, financial discipline, product/service offering, etc.).

So, is it fair to pick on the CEO and the size of his/her compensation package during tough times?  Perhaps the better question is – who decides the CEO’s compensation? 

The answer is clearly the Board of Directors.  In my opinion there are two levels of accountability when it comes to executive compensation:
1) The CEO - being a CEO is high risk, high reward proposition.  If you do well, you do very well.  If you do poorly, you’re out (few questions asked).
2) The Board of Directors (more specifically the Compensation Committee) - it is the Board’s responsibility to represent the shareholders, ensure that a CEO is held accountable, and ensure that a CEO is compensated appropriately.

As opposed to getting all shareholders involved in a debate on executive compensation let’s look towards the Board of Directors to be more accountable in managing the CEO.

After all, if shareholders don’t like the job that the Board is doing, the mechanisms are already in place to vote them out.

Lately I have been asked (more than a few times) if the appetite for mergers and acquisitions among companies is diminishing.

In general, I don’t think it is.

Because of the recent worldwide credit crunch, those companies that are required to take on significant debt to fund an acquisition will have difficulty.  It is difficult to find lenders these days.  However, those companies with strong balance sheets, and/or the ability to use their stock price as currency, have the capacity to continue making deals.  Microsoft’s recent offer for Yahoo! is just one (very large) example.

For many of these cash rich companies, M&A is the most important vehicle for growth.  Growth is often the most important catalyst for increasing shareholder value.  Therefore, the M&A environment isn’t likely to slow down any time soon.

So, let’s make a deal!

It has been an interesting start to 2008.  The Dow Jones Industrial Average is down 4.6% since the start of the year, the US Federal Reserve has dramatically cut interest rates in an attempt to stop the bleeding, the US dollar continues to be beaten down, and the US seems headed for a recession.

At the same time, China, India, and other significant emerging markets continue to predict robust growth for 2008.

As IR departments look to develop communication strategies going into Q2 of 2008 the focus needs to be on two elements:

1) How is our company able to handle the volatile economic environment in the US for the remainder of 2008?
2) To what extent have we hedged the effect of a weak US economy with diversified revenue from other areas of the world?

Analysts and shareholders will undoubtedly be focusing on “macro economic factors” when commenting on individual stocks.  It is IR’s job to show the Street that “macro” means more than just the United States when it comes to their individual company.