Financial markets broadly recognise that CEOs and Managing Directors should allocate 30 per cent of their time marketing their company to potential investors and engaging with existing shareholders, equating to about 1.5 days of any week – a solid chunk of senior management resources.
However, while the allocation of time is one thing, if a CEO, MD or Investor Relations executive has not adequately prepared for this process of engagement, then this can be considerable time wasted or ‘wheel spinning’.
Before embarking upon your company’s investor relations activities for 2015, check you are prepared:
1. Consistent and Simple Messages: An issue repeatedly raised at the annual Australasian Investor Relations Association (AIRA) conference in late 2014, by both senior investor relations executives and fund managers, was the critical need for companies to identify and communicate consistent key messages. Most importantly, a company needs to effectively and simply communicate WHY it is an attractive investment: what is the business model; what are the profit, value and growth drivers; why is the timing right to invest now. Additionally, these messages need to highlight the factors that differentiate the company and make it a preferred investment compared to industry peers. These messages need to be woven into all market and external facing communication, including ASX and media releases, presentations, company website content and other collateral.
Your company is literally one of thousands – there are about 2,400 companies listed on the ASX alone – vying for investors’ capital, so getting your messaging right is critical.
A useful step beyond the development of key messages is to consider potential issues and developments that could arise over the coming year that would require a company’s messages to be amended and nuanced. Addressing these potential events and having management pre-emptively agree on how company messages would change, may prove crucial in circumstances where a well-considered response is promptly required.
2. Proactive Shareholder Engagement: Having a set of key messages is pointless unless you are proactively communicating with your biggest supporters – your shareholders. This was another issue repeatedly raised at the AIRA conference, especially by investors; as one fund manager put it… “There is a continual need for management to proactively contact shareholders and openly discuss issues such as company performance, strategy and outlook.”
Management should arrange face-to-face meetings with as many shareholders as possible at least twice a year. For companies with ‘retail’ investor dominated registers, management should consider holding strategy/information sessions in major capital cities or participating in one of the several seminars or lunches hosted by investor forum organisers.
While not all shareholders may want such levels of engagement (some may be short term holders or event driven investors), at least the offer is there and management cannot be accused of being uncommunicative.
Honest, frank and regular engagement builds credibility and kudos for management. It also assists in facilitating open and trusting lines of communication with shareholders and the market, which can prove especially beneficial when negative developments impact on the company.
3. Targeted Investor Marketing Program: Most of the time, communicating with shareholders is akin to ‘preaching to the converted’. What is more challenging, just as time consuming and what can prove frustratingly repetitive is ‘preaching to the unconverted’ – potential investors.
To make this process more efficient and productive, management needs to identify those potential investors for whom the company could be in the ‘sweet spot’. Different investing styles assess different metrics and company qualities – does your company suit value, growth, GARP (growth at reasonable price), thematic, momentum or event driven investors? Targeting those investors for whom your company is an attractive and viable investment (for example, many have minimum market capitalisation thresholds) makes management efforts more effective and efficient.
And then you need to need to repeat the process of engaging with the same potential investors at least every four to six months (another reason why consistent messaging is critical – refer to point one above). Generally, it will take multiple meetings with the same potential investor before your story is well understood and to have generated sufficient trust so that a genuine investment will be seriously considered.
Companies also need to consider other avenues to communicating their messages in addition to ‘pressing the flesh’. Hosting conference calls, generating informative video content for the company website and compiling thought leadership content (published opinion pieces or presentations at industry seminars) are all various methods through which a company can push out its key messages, raise its profile and, hopefully, convert inquisitive investors into supportive shareholders.
A new calendar year and imminent reporting season provides a natural catalyst to review all investor relations efforts and to ensure they are maximised, especially in light of the presently uncertain and unsettled macroeconomic outlook in Australia.