MakovskyTuesday, September 1, 2015
While there is little predictability to gauging the performance of the stock market, there are, however, a number of elements that make for a successful investor relations program regardless of market conditions. The delivery of a consistent message, responsiveness to the needs of investors and transparency remain the hallmarks of a successful investor relations program. The problem is that IR programs become staid and lose their effectiveness at winning new investors and championing the company’s message. The best programs adhere to these principles:
Stay on Message – A carefully-crafted message, one that is delivered consistently through all media, is of key importance. Investors want to understand what drives the business, the company’s competitive advantages, and what management is doing to unlock or enhance shareholder value. Companies need to determine if their messages are resonating and this is accomplished by conducting periodic interviews with investment professionals, particularly after earnings calls or major corporate events.
“The Devil is in the Details” – The informational needs of investors vary. For example, sell-side analysts can never have enough details and tend to seek the most granular of information. By now, incorporating slide presentations into quarterly earnings calls has become an accepted practice. This is particularly important for companies that operate through a number of divisions or have multiple product lines. Pharmaceutical giant Johnson & Johnson is given high marks by investors for the level of detail provided during quarterly conference calls.
Meet “the Street” – While we may live in a world that has become increasingly “virtual,” meetings with investors remain a key component of any investor relations program. Investor Days, scheduled quarterly or annually, afford investors an opportunity to gain critical and detailed insights into a company’s business and strategic plans. Major events such as Investor Days should be supplemented with non-deal road shows to meet with institutional investors in both major and secondary markets as well as international cities.
Responsiveness – Companies are advised to have knowledgeable investor relations pros on hand to answer investor questions quickly and efficiently. They need to possess a thorough understanding of their businesses and have the majority of the information at their immediate disposal.
Utilize Social Media — The creation and exchange of information and ideas though social media has opened up new avenues for reaching wider investor audiences both domestically and internationally. As a result, participation in social media for the dissemination of investor information is expanding rapidly. Companies such as Federal Express and Home Depot have been live tweeting their quarterly financial results in conjunction with their conference calls. By live tweeting results, companies can control the flow of key messages, which are subsequently re-tweeted by the company’s followers thus expanding their reach. At this stage of the game, using Twitter is considered “table stakes” as there is quite a bit more that can be done with social media in communicating with investors.
Good News, Bad News, But No Surprises – Investors hate surprises, particularly negative ones such as earnings misses or crisis situations. Investor relations pros are advised to stay out in front of the news by having a crisis communications program in place. If a crisis develops, the news should be disseminated immediately as soon as all of the facts are known. The announcement should also include detailed plans for how the company plans to remedy the situation.
Dialogue, Not Monologue – By staying in touch with investors, companies can gain invaluable insights into what is on the minds of investors. Such insights can help shape investment messages as well as anticipate questions likely to emerge during meetings and conference calls. Investor questions and conversations should be logged for future use and reference to enable the development of optimal answers.