Over the years, investor relations (IR) has become more strategic and complex, leaving IR professionals increasingly overwhelmed. The demands from stakeholders are high, with a constant stream of information coming from every direction. New regulatory, legal, proxy and compliance issues seem to pop up regularly. On top of that, IR professionals are faced with a host of communication challenges—from addressing value gaps and conveying strategic changes, to disclosing bad news.
Below are six best practices that can be used to more effectively deliver your company’s investment proposition to key stakeholders:
1. Make a Strong First Impression with Your Website
A company’s IR website is often the first place that potential investors and financial analysts will go when making an initial judgment call on the company as a potential investment. With the power to influence their perceptions of your company, it can serve as an indispensable marketing tool and means of information delivery.
For an IR website to be effective, any information needed by investors and financial analysts in their decision making should be readily available. The investment community values a high level of transparency—so the more information you can provide, the better. Ultimately, this can help save your IR team valuable time, as investors will be less likely to call in search of information when it is easily accessible online.
As a best practice, your investment thesis should be outlined on the opening page of the IR website. This will highlight your company’s strategic vision, current initiatives and any key performance indicators that demonstrate its strong track record. Interactive graphs are a great way to communicate your financial performance. Other important elements include current and archived annual reports, press releases, regulatory filings, webcasts, corporate governance and contact information.
Keep in mind that, in our digital age, how this data is provided is nearly as important as the content itself. Consider adding technology features, such as information download managers, email alerts and even podcasts. The site should also be easy to navigate, mobile friendly and organized in a way that allows investors and financial analysts to find information quickly.
2. Develop Effective Investor Presentations
It can be challenging to create a presentation that clearly articulates why your company is a worthwhile investment. Although investors appreciate information, too much can end up clouding your investment thesis.
Focus on providing enough detail to secure the interest of potential investors, prompting them to research and eventually invest in your company. Market intelligence can be used to determine which information is most critical to investors in their decision making.
Within the first few minutes, your presentation should provide a quick snapshot of the investment opportunity. Be sure to communicate opportunities that exist in your markets, how your company is positioned within those markets, and its strategy for growing revenue, earnings and cash flow over the mid- to long-term. The presentation should end by reiterating your key investment messages.
One such example of this is Encompass Health’s recent investor presentation, which clearly conveys an overview of its investment thesis with accompanying graphics.
As a best practice, any information on past results should be limited to key financial and operating measures, which can help to establish a solid track record. In total, the presentation should run no longer than 20-25 minutes.
3. Create a High-Quality Annual Report
One of the most important forms of IR communication is the annual report. Beyond fulfilling regulatory reporting requirements, it plays a vital role in conveying a company’s performance and progress during the previous fiscal year to key stakeholders. It can also be used as a marketing tool to attract new investors.
An effective annual report should strike a balance between being comprehensive and concise. Aside from what is required by regulators, key sections of an annual report typically include:
- Key financial highlights and strategic initiatives
- Letter to shareholders
- Management’s Discussion and Analysis (MD&A)
- Financial statements
- Auditor’s report
- Corporate governance
The letter to shareholders and MD&A are considered the most important aspects of an annual report. The former gives a CEO and/or chairman the opportunity to present an overview of the company’s performance, key contributing factors and operating environment, as well as what this all means for its competitive position, financial condition and strategic outlook. The MD&A then provides a detailed explanation of key factors accounting for the company’s performance. In addition to operating results, this can cover key industry trends, market risks, major acquisitions (or divestitures), R&D, competing products and services, and more.
Any management insights and investor feedback can be used to develop a core theme and key messages that will be incorporated throughout the annual report. This theme should be introduced in the front cover and letter to shareholders, and then reiterated on subsequent pages by providing supporting information.
For example, the theme of RPM International’s recent annual report is “The Best Home for Entrepreneurial Companies,” which depicts how RPM’s culture of collaboration among its operating businesses has resulted in increased market penetration and improved efficiencies in manufacturing and distribution.
Keep in mind that producing an annual report is a challenging, time-consuming process that involves many individuals. As a best practice, it’s important to start the development process as early as possible. Develop a timeline that sets deadlines for each stage of development and production, clearly identifies who is responsible, and provides sufficient time for review and approval by senior management, the board, legal counsel and any others.
4. Conduct an Informative Earnings Conference Call
To be effective, an earnings conference call should be informative and thorough. It elaborates on information contained within the earnings release to help investors and financial analysts forecast your company’s earning potential. The CEO and/or CFO can then expand on this information through prepared remarks and during the Q&A period.
The earnings call is held on a quarterly basis, typically on the same day as your earnings release is distributed to the investment community. The core objective is to explain your company’s financial and operating results, linking them back to its long-term strategy and key business initiatives. This can help prevent investors and financial analysts from overreacting to recent issues that senior management expects to be short lived.
Developing a script for the call will help ensure your explanation of financial results is clear and reduces the likelihood that a remark will be misinterpreted. Generally, the structure and flow should be consistent with the earnings release. It should run 45 minutes to an hour, with prepared remarks lasting no more than 20 minutes.
Webcasting a presentation as part of the call can help facilitate your explanation of performance results. The recording, along with any presentation slides, should be made available on your IR website. Be sure to consult with legal counsel to determine how long the call should be archived to comply with applicable regulations.
In addition, it’s important to take time to thoroughly prepare. This includes rehearsing your delivery and anticipating answers to potential questions that could be asked during the Q&A period. Gathering feedback from investors and financial analysts both prior to and after the call can also help enhance your preparation and improve future calls.
5. Incorporate Media Relations into Your IR Strategy
The use of media relations is a highly efficient way to enhance your investment story and effectively deliver it to large numbers of investors across any capital market. Leveraging business and financial press can help raise your company’s visibility among investors and potentially drive demand for shares over the long run. It can also serve as a credible, third-party endorser of your company’s investment proposition.
In order to secure media coverage, you must develop relationships with targeted reporters and editors by identifying and providing compelling story ideas on a consistent basis. You can also become a go-to source for reporters by providing subject-matter expertise on a particular industry, trend or topic.
An example of a company that has done a great job of incorporating media relations into its IR strategy is Apple. A 2015 Fortune article, for example, talks about the growth and new strategic direction of Apple under Tim Cook’s leadership as CEO.
Begin with reaching out to smaller media outlets, such as trade publications, local media and newswires like Bloomberg, Dow Jones and Reuters. Once you’ve gotten a good handle on your investment story, you can expand to mainstream business and financial press – but keep in mind there will be fierce competition.
Thorough planning and preparation is essential to ensuring a clear, consistent delivery of your investment story and its key messages. Media training and rehearsals can provide your spokespeople with the skills and best practices for a successful media interview.
6. Use Social Media as an Alternative Information Source
In recent years, social media is increasingly being used by investors and financial analysts as a means to gather information and drive investment action. Social networking sites like Facebook and Twitter, as well as blogs and message boards, can provide an information advantage, as market-moving news and corporate developments often emerge sooner than with traditional communication channels.
However, even the well-intended use of social media can backfire. In order to avoid any mishaps, it’s critical to have the proper training, publishing protocols and regulation-compliant approval procedures in place. Because disclosure regulations vary by country and stock exchange, legal counsel should also be consulted to determine if and how social media can be used as part of your IR communications.
One potential use of social media is to supplement legally compliant disclosure channels once the information has cleared the market and is in the public domain. Another is to augment your marketing efforts – for instance, using investor blogs to enhance your market position by demonstrating thought leadership in a given sector.
A great example of this is eBay, which used a GIF to deliver important IR information from a recent earnings call to investors via its Twitter page.
— eBay for Business (@eBayForBusiness) January 28, 2017
Be sure to monitor any conversations about your company on social media, especially by those who can influence your stock price. Software tools and monitoring services such as StockTwits and Sysomes can help to streamline this process.
No matter the form of IR communication, it’s important to set the appropriate expectations for investors and financial analysts. This means not just presenting opportunities, but also being candid about any challenges your company may face. When paired with thorough and easily accessible information, this will help build credibility for your company, ultimately earning you the trust and confidence of the investment community.