This Blog was written by David Calusdian, Executive Vice President and Partner at Sharon Merrill, a Boston-based investor relations strategic consultancy.
A special thank you to Dennis Walsh at Sharon Merrill for co-ordinating this valuable piece for CFOs on an important topic.
As the new
1) Understand your shareholder base. Research the investment styles of your shareholders to determine why they may have bought shares– and what might cause them to sell. See what type of investor concentration you have in your shareholder base. Identifying whether your shareholders are weighted toward a growth, value or income investment style, for example, can offer insight as to what they are expecting the company to achieve near or long term. Also investigate whether there are known “activist” firms among your shareholders, and what catalysts usually cause them to initiate a proxy fight. Make it a priority to speak with your shareholders by phone as soon as possible, and then meet them in person within your first few quarters as CFO. Also consider an investor perception audit to understand the sentiments of your shareholder base — and identify any misperceptions about the company — to most effectively build your IR program.
2) Review (or create) a disclosure policy. A comprehensive disclosure policy guides a company’s communications with the investment community. Make sure that as the new CFO, you are comfortable with the disclosure philosophies outlined in the document. For example, maybe it is time to revisit the company’s guidance policy or disclosure committee processes. Ensure that the corporate spokespeople listed in the disclosure policy are still appropriate. Make certain that you understand all of the communications channels at your company. For example, is the company tweeting, hosting its own Facebook page or maintaining a corporate blog? You want to know every disclosure outlet that may be supplying investors with information directly from the company.
3) Develop your IR Plan. Conducting investor relations without a plan is akin to venturing out on a journey without a destination or a compass. The first step is to determine your plan’s goals, which should directly correlate to the company’s IR needs (e.g., a more diverse shareholder base, greater sell-side coverage or even enhanced credibility). Then, to achieve those goals, develop a strategy that takes into consideration your company’s messaging, investor targeting and outreach.
In scheduling your investor meeting calendar for the year, determine which covering investment bank would be most appropriate to introduce you to investors in a particular geography. Then layer in a couple company-sponsored roadshows where you can introduce the company to potential new sell-side analysts as well as additional targeted investors. Dovetail your roadshow schedule with your conference calendar. Determine which conferences would be the most effective for you to attend, and then proactively solicit invitations.
4) Develop investor positioning. At the foundation of your IR plan should be the company’s IR message, and the mortar that holds it all together is an investment thesis that aligns with your long-term business model. The key messages within all of your communications to the investment community should answer the question, “Why should investors buy the company’s stock?” Develop an investment thesis that is specific, financially focused and conveys the company’s value drivers. Stay away from general statements like “strong
5) Establish or review the IR website. Your company’s IR website is one of the most important destinations for investors seeking information. Without consistent oversight, it can oftentimes become outdated or contain inaccuracies. Make sure that your site has all of the features and content investors have come to expect on IR sites, such as “push” notifications, robust Frequently asked Questions, investor presentations and a quarterly results tab complete with conference call transcripts. Some companies also are now complementing their IR website with social media tools, like Twitter and SlideShare, to broaden their communications.
6) Establish a news release pipeline. Investors buy stocks on information. So it’s important to have a regular stream of news about your company to build awareness, enhance credibility and create buying opportunities for potential shareholders. There is no “right answer” as to how often you should issue releases, but a substantive (i.e., not fluffy) release every few weeks usually keeps companies on investors’ radar screens. If you have an IR, PR or
A public company’s valuation is dependent upon its financial performance as well as the communication of those results to investors through good investor relations. As the CFO, it’s your responsibility to make sure that the IR program is well executed. By completing these six steps, you should have a solid foundation in place from which to build an effective IR program for your new company.