Posts

What Do Investor Relations Firms Do?

/in , /by

As part of our ongoing “back-to-basics” series on public relations and investor relations (IR), this blog outlines what an IR firm does and how choosing the right one can make a difference.

Investor relations firms primarily assist publicly traded companies in effectively communicating their financial performance and strategic goals to the investment community. Acting as both strategic advisors and tactical operators, IR firms ensure that messaging is clear, compelling and delivered to the appropriate audiences.

Here’s a breakdown of some of an IR firm’s key responsibilities:

Financial reporting and analysis: Preparing quarterly and annual financial materials, such as earnings press releases, conference call scripts, Q&A prep documents and investor presentations. An IR firm’s ability to analyze and interpret financial results ensures that investors fully understand a company’s performance within the broader industry and macroeconomic environment.

Investor and sell-side analyst targeting: Identifying investors and stock analysts whose mandates align with the company’s financial and industry profile. An IR firm organizes non-deal roadshows to connect issuers with potential investors, while recommending relevant conferences for company participation, and helping to foster long-term investor relationships.

Perception audits and key messaging: Conducting qualitative surveys of current and potential investors and other relevant stakeholders. The findings from these studies are crucial for refining key messages that align with investor expectations.

IPOs and follow-on offerings: Guiding companies through the entire initial public offering (IPO) process in conjunction with a company’s investment banking, legal and accounting teams. Activities include strategic counsel, crafting messaging, development of the presentation deck and press materials, and regulatory compliance training, such as with Regulation FD. An IR firm also will assist with secondary and follow-on offerings in much the same way as with an IPO.

Corporate governance: Ensuring that companies follow regulatory requirements and best practices, including environmental, social and governance (ESG) standards, Securities and Exchange Commission (SEC) mandates, and rules and regulations governing IR websites. Maintaining transparency is essential for fostering trust and credibility with investors.

Crisis management: Managing communications with key stakeholders, including investors and media, to mitigate reputational damage and minimize the impact on the company’s stock price during a tumultuous event. Effective crisis management is crucial for maintaining stakeholder confidence and ensuring a swift recovery.

Investor/capital market days: Assisting companies in planning and executing investor or capital market days to directly engage in a meaningful way with investors and analysts. These events showcase the company’s strategic vision, progress, financial performance and growth prospects, strengthening relationships and investor loyalty.

Market intelligence: Provide companies with valuable insights into current investor activity and sentiment, market trends and peer activities, to help management refine key messaging and optimize investor relations strategies.

IR firms are essential partners to public companies. They offer both strategic guidance and tactical support. They play a crucial role in enhancing a company’s reputation and credibility, helping build trust with investors, which can lead to long-term success and enhanced shareholder value.

George Medici, gmedici@pondel.com

Performance Rules, but Perception is Everything: How to Know What Investors Truly Think About Your Company

/in , , /by

This article was originally published by national news wire service BusinessWire, a Berkshire Hathaway company, on its global blog July 9.

If you’re familiar with the British sci-fi fantasy series, Doctor Who, you know that a common plot device is the use of “perception filters,” in which aliens attempt to alter reality to reflect what they want you to see. A favorite episode is with actor/comedian James Corden, who lives on the first floor of what appears to be a normal two-story building – only the building does not have a second floor, just a scary alien machine parked on top of it with a perception filter designed to hide its existence.

Wouldn’t it be nice if we could use perception filters to influence how investors and financial analysts think about public companies? I am sure many management teams would love to use something like a perception filter to ensure that only positive things are said about their companies.

Alas, we all know this isn’t possible. And yet, one of the more interesting things I have observed over the years is how many management teams believe they already know what investors think of their companies – as if they have a perception filter firmly in place.

While many C-suite executives and corporate IR professionals dialogue often with the investment community and glean valuable insights from their conversations, it is a mistake to assume that investors will share everything that is on their minds. As Peter Drucker, the celebrated author, educator and management consultant, once noted, “The most important thing in communication is hearing what isn’t said.”

How, then, can management truly gain insight into what investors think? Enter the perception study, a tool designed to gather unique and candid feedback. It is only through the use of an independent third party that companies can truly get to the heart of what investors think. Third parties are able to create an environment that protects anonymity and are better positioned to share tough feedback with management.

Designing a Perception Study

There are many ways to design a perception study, which at its core, seeks to determine how investors view the company, its strategy, management team and IR program. Perception studies often are particularly useful before and after major events, such as an investor day, or when a company is in the midst of transition.

In most cases, many investor responses are surprising. Also in most cases, a good perception study pays off handsomely by revealing tangible and actionable items, along with nuances, of course, that facilitate communication and potentially valuation improvement.

Perception studies create opportunities to:

  • Streamline business models that have become too complex.
  • Simplify messaging to better resonate with the investment community.
  • Improve an IR program in ways a company might not have seen.
  • Provide benchmarks for future comparison.
  • Let the investment community know that the issuer cares.

Dichotomy of Opinion

In a recent perception study we conducted for one of our clients, we found a fascinating difference of opinion about the company, with views that converged around common themes, but were almost polar opposites of each other. Interestingly, this dichotomy of opinion often was expressed by the same participant in the study.

For example, investors praised the management team’s ability to articulate the company’s investment attributes, but at times felt they could be too “promotional” in doing so. Investors also liked how the company positioned itself to capture emerging trends in its industry; at the same time, however, they believed the actions management took to take advantage of these trends made the business too complicated to grasp.

Perhaps most importantly, investors felt the company altered its strategy too frequently. While many praised management’s ability to pivot when the facts on the ground changed, the rate of transformation left investors and analysts wondering if management had a clear roadmap for the future, which, in turn, made it difficult, if not unnerving, for many of them to invest.

The perception study created an opportunity for our client to:

  • Clearly articulate its business strategy, highlighting its vision for the future.
  • Help investors understand exactly how management perceives the path to value creation.
  • Simplify its story and improve consistency in metrics presented. 
  • Provide a candid discussion of business performance, both positive and negative aspects.

Understanding what investors and analysts truly think is a fundamental responsibility of the management team and board of any public company. Such knowledge provides tangible results and can serve as catalysts for positive change.

Jeff Misakian, jmisakian@pondel.com