The 10 Plagues of Investor Relations

Finger-Puppets (002)

 

 

 

 

 

 

You may be asking yourself, what does Passover have to do with investor relations and strategic public relations?  Not much, actually, but in honor of the holiday I thought it might be interesting to name ten things plaguing our industry.  Not so different, I guess, from naming the ten plagues that have become part of the Seder (a feast that marks the beginning of Passover).  But don’t worry my fellow practitioners, while some of things we have to deal with can be pretty disturbing, we generally won’t come in contact with boils, locusts or diseased fowl in our professional lives.

The 10 Investor Relations Plagues

  1. Short selling
  2. Activists/proxy fight
  3. Scheduling
  4. Fake news/bad news
  5. Value gaps
  6. Crises
  7. Market volatility
  8. Short-term mentalities
  9. Guidance
  10. Shareholder litigation

I’m sure there are others we’ve omitted, so drop us a note and let us know what sort of plagues you’ve had to deal with in the IR world.

Laurie Berman, lberman@pondel.com

Beware of Lurking Wolves

Sometimes, I pick up my own phone at the office. Last week, a friendly caller caught me off guard. The conversation went something like this:

Caller: Hello, Roger, how are you?

Roger: Fine, thanks, how ‘bout yourself?

Caller: I am also fine, thank you for asking. I am calling to let you know that our analysts have started recommending the stocks of several conservative, dividend-paying, major oil companies They are very safe investments, and I would like to start a relationship with you.

Roger: Pardon me?

Caller:  I also want you to know that from time to time we come across the stocks of some smaller companies that our analysts research thoroughly. And within the next week or so, there is one that we will be formally recommending, because of some announcements we believe the company will we making in the next two months.

Roger: Who is this?

Caller: I will give you my full contact information in a minute, but please let me finish.

Roger: May I have your name and the name of your company?

Caller: Now Roger, no one can predict what will happen to the price when those announcements start to flow, but I would like to call you at the right time, so that as a client, you may take advantage of our knowledge. Buying a few shares of a major oil company can establish the account, then we can move quickly on the smaller companies at the right time.

I never got the fellow’s name, since I hung up on him. But his pitch was familiar. It was reminiscent of cold calls that came in prior to the 2013 release of The Wolf of Wall Street.

Almost comedic, but perhaps disturbing, the call was the second one I received—with precisely the same script—in the past couple of weeks. Could the wolves be coming back? Have their prison terms ended? Perhaps it’s the perceived frothy Dow. Or maybe the fake news mantra. Or the newswire upstarts that make it ridiculously inexpensive, and often without traditional controls, to transmit press releases from virtually any source.

Most readers of this blog know better and would not fall for such scam calls. But beware, nevertheless. Hopefully, history is not repeating itself.

Roger Pondel, rpondel@pondel.com

IR Movie Titles

The Oscars are upon us, and while the awards have absolutely nothing to do with investor relations, it is uncanny how many movie titles could actually apply to a film about investor relations. Following is a list of old and new movie titles that hit the mark.

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Dances with Wolves
Trading Places
The Good, the Bad and the Ugly
Up in Smoke
Get Out
Hidden Figures
La La Land
St. Elmo’s Fire
The Founder
Revenge of the Nerds
Bonfire of the Vanities
Split
The Salesman
Chasing Amy
Frozen
The Boss Baby
Tequila Sunrise
Million Dollar Baby

Add to the list at #IRmovietitles.

 

Demise of the Sell-Side?

For years now, it has felt as if sell-side analysts were leaving their firms in droves…some moving to the buy-side, others to corporate positions as CFOs or investor relations officers, and still others to destinations unknown. A recent Financial Times (FT) article corroborated this “feeling,” reporting that the number of investment bank research analysts has fallen by one-tenth since 2012.  According to the article, these cuts are expected to continue.  Vontobel Asset Management’s chief investment officer said in the article, “we will have massive cost pressures in an industry that is not ready for it at all…they’ll have to gut things pretty hard.”

Back in the day of the dot.com bubble (when I was director of investor relations for an internet search firm), claims of biased research ran rampant. In fact, an analyst following my company was directly implicated, and I saw first-hand how new rules and regulations were needed to ensure sell-side coverage was not influenced by outside factors.  Next came the financial crisis, when “newly cost-conscious banks started slashing staffing of research departments, because they made little direct contribution to earnings,” said the Financial Times.

Additional changes are underfoot, according to the president and CEO of Westminster Research as told to FlexTrade Systems.  “The emergence of new research products has been largely data driven.”  Whereas in the past, analysts were generally responsible for covering a specific industry and stock, and reporting findings back to its clients, asset managers are now taking the data, “and interpreting it, making their own assumptions and coming up with their own ideas and create alpha.”

Sarah Gordon, business editor at FT, said in a recent article that, “most analysts’ research is not very good.”  She goes on to say that, “if greater transparency has not forced analysts to do a better job, other mechanisms must be tried.  Alternatively, the demise of sell-side research should be quietly celebrated.”  On the other hand, Stuart Kirk, a Deutsche Bank analyst, believes we should “expect a renaissance in research now things are heating up again,” according to a recent FT article.  Kirk says his expectation is based on increased research report readership, meeting requests and phone calls.  He claims that demand for research more than “doubles during periods of uncertainty such as Brexit or Donald Trump’s election victory.”

What does all of this mean for investor relations departments?  Certainly, attracting research coverage has never been easy, with no silver bullet to expand the number of analysts covering your company.  While it does not seem likely to get any easier with fewer analysts working with fewer resources, there remains considerable benefit to having sell-side support for your company.

Laurie Berman, lberman@pondel.com

Annals of Communication—Thank you, Dave

I had a breakfast meeting the other day at the Mid-Town Café on 56th between Lex and Third in New York City. It’s not a fancy place, but one of many non-descript diners where the waitresses call you honey as you walk in the door and ask if you want coffee as you are getting seated.

A view shows U.S. postal service mail boxes at a post office in Encinitas

The meeting was arranged by my long-time colleague, Gary Fishman, as a casual introduction to meet the principal of an investor relations advisory firm, similar to PondelWilkinson. For purposes of this blog, I’ll just call him Dave.

No need here to discuss our conversation, which is not the point of this piece, so fast forward to the end of our meal. (I had oatmeal and blueberries, the other two gents had eggs.) The waitress brought our check. All three of us made a move to our wallets. My credit card was out first, and with the total check being $19.95, I volunteered to buy. Then we went on our ways.

Within a couple of hours, I received a thank-you email from Gary for my time and for buying breakfast. I was going to email David to tell him how much I enjoyed meeting him, but thought I would wait a while, for certainly he also would be sending me a thank-you email…or so I thought. Then I forgot about it.

I returned to California, and the following day, I received a letter in the mail. It was from Dave, saying how much he enjoyed our visit and thanking me for playing host. In today’s era of speed, did I need instant thanks via email anyway? Probably not.

Receiving the letter struck a chord. While the message could have been precisely the same in an email, there’s something to be said for taking the time to send a letter through the U.S. Postal Service…it commands attention. Compared with hundreds of email messages that we all receive every day, it was the only personal communication I received via mail all week.

— Roger Pondel, rpondel@pondel.com

 

 

 

 

 

The Write Stuff

I recently taught a writing course at NIRI’s Fundamentals Conference, which is mostly geared toward IROs who are relatively new to the business, as well as more experienced folks who’d like to brush up on the basics.

My presentation focused on the fundamentals of writing earnings news releases, conference call scripts and shareholder letters. The biggest challenge people said they faced is crafting a compelling story in what has become a template-driven world.

Following are some boiled-down writing tips from my presentation to help make that writing resonate:

Know Your Audience

Your written piece should address the following:

  • What Information do they need?
  • Why do they need it?
  • What do they currently believe?
  • What should they believe?

Plan & Organize Your Content

  • Identify your key messages
  • Create and work from an outline
  • Use blocks of content to develop a sequence of thoughts
  • Test your sequence for clarity

Draft Without Judgment

  • Fill in the outline
  • Work quickly – don’t agonize
  • Read it out loud. Is the flow logical?
  • Listen to your own ears
  • Give it a rest and re-read in the morning

Revise for Power

  • Punch up the opening and closing
  • Change passive voice to active voice
  • Strip out excess words, phrases and fluff
  • Make it natural and conversational – should “fit” the company/spokesperson

— Evan Pondel, epondel@pondel.com

Best and Worst

Some CEOs are great and offer stellar business advice. Some CEOs are not so great and fall victim to errors of judgment.  Today’s blog looks at some of the best and worst (of 2016), courtesy of Forbes (via MSN) and Business Insider.

Best: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett

Worst: While defending a significant price increase for an important medication, a healthcare company’s CEO claimed that the product was fairly priced and blamed high-deductible health plans for the increase. In October 2016, the company “agreed to pay a fine of $465 million to settle accusations that it overcharged the government” for its products.

Best: “The biggest risk is not taking any risk…In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” – Mark Zuckerberg

Worst: After last year’s presidential election, the CEO of a cybersecurity startup threatened on Facebook to kill the president-elect. He resigned from the company in November 2016, and later admitted that what he said “was incredibly dumb, perhaps the dumbest thing I have ever said.  I really only have myself to blame for this.”

Best: “My mother always taught me to never look back in regret but to move on to the next thing. The amount of time people waste dwelling on failures rather than putting the energy into another project always amazes me.” – Richard Branson

Worst: When the CEO of a large U.S. bank only shouldered some of the blame for opening new customer accounts without permission in order to meet quotas, and put much of the blame on “the 5,300 low-level employees who had already been fired,” Senator Warren accused him of “gutless leadership.” Later he admitted full responsibility and stepped down from his position.

Laurie Berman, lberman@pondel.com

Is LinkedIn the New Facebook?

LinkedIn these days seems to be less about posting “business” content and more around publishing selfies, memes and math puzzles.

Ironically, these Facebook-like posts generally get more traction. But all engagement is not always good engagement, just like all publicity is not always good publicity.

Interestingly enough, the Pew Research Center found that more workers ages 18-49 have discovered information on social media that lowered their professional opinion of a colleague, compared to those who garnered an improved estimation of a co-worker from online platforms. So, be careful what you post.

LinkedIn prides itself on “connecting the world’s professionals to make them more productive and successful.” What’s happened, however, is the line between “work” and “consumer” content has been blurred, causing LinkedIn professionals to lambast what they see as irrelevant posts, stating: “This is not Facebook!”

A recent post on LinkedIn.

A graphic that accompanied a post on LinkedIn.

The reality is that LinkedIn is competing with Facebook. Late last year, Mark Zuckerberg’s social network announced it was testing a feature that would let page administrators create job postings and receive applications from candidates. This undoubtedly will put pressure on LinkedIn’s Talent Solutions business, which comprised 65 percent of the company’s 3Q 2016 revenues.

With 467 million members in over 200 countries and territories, LinkedIn, now owned by Microsoft, is growing at a rate of more than two new members per second. This quails in comparison to Facebook’s 1.79 billion monthly active users, but the company’s growth shows more professionals see value in the platform.

So what does the future look like for LinkedIn? Consider the following:

  • LinkedIn will become an even more valuable business networking tool among business professionals, surpassing Pew’s estimate of the 14 percent of professionals who use the online platform for work-related purposes.
  • “Irrelevant” posts will continue, at least in the short term, but will have an adverse effect on those who publish non-related content.
  • Thoughtful, engaging and pertinent posts that resonate with key audiences will generate positive engagement.
  • Business organizations and individuals will learn how to leverage this network beyond recruitment and job searches.

Much can be said by the old adage “all work and no play …,” so it’s refreshing to see some brevity in our daily work lives. But these matters may be best suited for Facebook and not LinkedIn.

— George Medici, gmedici@pondel.com

 

PondelWilkinson Takes Home Three Awards

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PondelWilkinson received three awards last week at the Public Relations Society of America, Los Angeles Chapter’s PRISM awards.  The awards recognize outstanding programs and materials created by public relations professionals.

The firm won three awards for the following categories:  Media Relations; Editorials and Op-Ed Columns; and Annual Reports. Pictured above is George Medici and Evan Pondel.

Trump’s Effect on IR

There has been a heap of stories written about President-elect Donald J. Trump’s effect on trade relations and health care, but nary a peep about how his presidency is going to affect our world, meaning investor relations.

Granted, it would be unusual for media to report on how our country’s new chief executive officer will influence investor relations because, um, IR isn’t necessarily something bandied about in the Oval Office.

But consider this: The American people are like investors, and how you treat them in good times and bad will affect the valuation of the country. And depending on how Trump executes his policies, many publicly traded companies and their investors will have to adapt to changing market conditions.

Following is a prognosticator of sorts on how Trump will affect the world of investor relations from an industry perspective. The analysis is based on discussions with the Street and analyst notes.

  • Consumer – Investor relations executives in this sector may experience an increase in inbound calls based on exposure to manufacturing overseas, particularly in China. Trade issues may thwart valuations and likely raise a lot of questions if a company has manufacturing exposure in foreign countries.
  • Construction – Generally, investors should have optimism regarding this sector’s near-term future.  At the same time, more dollars flowing to infrastructure could prompt greater scrutiny of infrastructure companies that aren’t performing.
  • Renewables – This sector has received bipartisan support in recent years, and there is no reason to expect otherwise during the next presidential term. The biggest conundrum for IROs in this space is selling the value proposition of renewable technologies and how soon they can be realized under the incoming administration.
  • Healthcare – With a lot of questions surrounding the future of the Affordable Care Act, many investors and investor relations professionals are likely unsure of where certain business models will stand under the new administration.
  • Technology/media – Hard to say what challenges may surface in this sector. Social media companies may come under fire for alleged fake news practices, as well as influencing the presidential outcome, which could certainly keep IR pros on their toes.
  • Banking – Investors are expecting interest rates to rise, which could bode well for the bottom line in this sector. Loosening up on regulations could also help move more financial services stocks into the black. IR executives will likely have to speak to how banks will enhance their net interest margins once the new administration is in full swing.
  • Aerospace/Defense – With a lot of suppliers in foreign countries, there could be a backlash with respect to manufacturing costs. Even though a Republican administration generally bodes well for this sector, optimism may soon fade if trade relations continue to slide.

— Evan Pondel, epondel@pondel.com