Investor Relations Function
Investor Relations Function
Investor relations is a common function found in most publicly held companies, and its main objective is to circulate information about the company among the investment community, in particular, the financial and performance aspects. In addition, this function is also responsible for maintaining close communication with existing investors who may have the potential to increase their investment holding of the company in the near future. In short, investor relations is a communication medium between the company and the investor community. In our opinion, investor relations are not exclusive to publicly held companies. Instead, the investor relation functions contain numerous approaches and values from which private companies could benefit from. The sooner the bridge between private companies and the investor community can be established, the more beneficial it is for the private companies, especially in the aspect of fundraising, business merger and acquisitions, and the molding of a positive corporate image among the investor community. Our team could assist with various aspects of investor relations outlined as follow.
Value Proposition
Every successful company has a set of values that define its success in the marketplace. These values need to be recognized by the investment community, and investor relations maintain close communication with the investment community in the course of ensuring investors are aware of and recognize these values. To achieve this, an investor relations officer must first have a central theme. This central theme is known as value propositions, and this value proposition is the basis of the investors used to assign a value to a company. Therefore, should the company consistently operate its business based on this set of values and coupled with the investor relations officer continuously reinforcing this message among the investment community, the investors will likely develop a strong familiarity with the company and the accompanying set of values. This will largely improve the accuracy in setting the right value for the company. Our team could assist by identifying the full value of a business, how to create these values, and how to communicate these values to the investment community. For instance, intangible assets are the common value of the company which is overlooked by most investors despite these assets could add a tremendous deal to the value of a business. These assets may include patents, branding, copyrights, brandings, research, and development, product pipeline, locations of the stores and the number of stores, real estate value, government licenses, and more.
Message Communication and Guidance
Gathered from the preceding topics, one of the key roles of the investor relations function is to maintain close contact with the investment community. This also means choosing the right choice of communication tool is important, especially in ensuring the messages could reach the right audience. Generally, there is a large number of communication tools available in this respect. For example, the annual report, press release, fact sheet, conference presentation, social media, and more. Although the choice of communication media is entirely the decision of the company, our team could advise the proper ways of establishing relations with the media providers and more importantly, how to deal with negative news. The negative news is news that is detrimental to the well-being of the company, including goodwill, reputation, going concerns, and more. The company needs to understand an extensive amount of pressure coming from the investment community, asking for more information about the business, and whether the actual performance is in alignment with the expected forecast. Therefore, an investor relations officer must manage the expectation of the investment community effectively. Our team could assist the company with formulating guidance on identifying the relevant expectations, how to manage these expectations, and for publicly held companies, whether merely using the basic filing requirement or the company should consider any additional communication media. The relevant guidance and decisions in these aspects can have an impact on whether the company will receive sufficient coverage from analysts and, for publicly held companies, it will affect the variability of its stock price.
Investor Relations Website
Regardless of the types of investors or any possible interested parties, the internet is the primary source for them to obtain information and learn more about a company’s operations, financial results (applicable to publicly held companies), and its related investor relations activities. Certain investors may only obtain information via websites hosted by accredited large financial organizations and/or media companies while others may head straight into companies’ websites. It is important to note that investors or interested parties who rely on accredited and well-known finance-oriented websites could also be redirected to the websites of the companies for more information. In short, it is extremely crucial to ensure an investor relation section (for publicly held companies) or similar sections (for privately-owned companies) is available on the company website. The information presented in this section should also be carefully selected, and with a sufficient amount of information about the company. Our team could assist with advising the relevant contents and functionality of an investor relations website. In addition to that, our advisory also covers special topics encompassing disclosures, hyperlinks, interactive features, and more.
Investing Strategies and Expectation Management
Typically, investors commit their decisions to invest or sell the stocks of a company based on a broad array of various strategic considerations which are driven by different investment goals. Some of these considerations may relate to finances, operations, and/or industry sector of a company that may trigger a company’s events (applicable only to publicly held companies), and some may be based on technical issues or general stock market behavior that may cause a short-term stock price fluctuation. Therefore, executives of the company need to understand and recognize the different groups of investors with different investment goals before proceeding with broadcasting its business values and selecting the choice of communication media. Similar considerations apply to the investment decision in privately owned or non-publicly held companies.
Generally, investors’ strategies comprise the growth strategy, value strategy, income strategy, reasonable growth strategy, high volume trading strategy, and more. In simple terms, each strategy adopted by investors largely varies from one another. Companies could mold themselves towards a specific strategy with the primary consideration of maximizing their value among a specific group of the investor community. Take growth strategy as an example, investors typically acquire shares of a company at an early stage. The investment goal is to hold these shares with the goal of a continuous increase in business value in line with continuous high-rate growth in business size and revenue. However, once the company has reached a certain market share and business growth appears to reach maturity, coupled with slower market growth, the investors will sell the shares and capitalize on the profit. This expected action from the investors will put downward pressure on the share price. This group of investors is particularly interested in the revenue growth rate and earnings per share of a company.
Income Strategy Investors, on the other hand, are more concerned with dividend payments of the company in which they have invested. Companies that issue a steady and continuous series of dividend payment schedules to investors are the main attraction to Income Strategy investors, and they will leave when the dividend distribution has been reduced, deferred, or ceased. In other words, these investors are seeking a company with a solid history of dividends and/or an increase in dividend amount per share, and with the assurance that the fundamentals of the business suggest the dividend payment amount and schedule will remain constant.
Our team could assist with advising executive members and/or management on the general types of strategies that investors typically follow, with a specific group of investors being identified, how the investor relations function provides the relevant support by customizing the value propositions of the company to capture the targeted group of investors and manage their expectations. Furthermore, we also address several techniques for selling small amounts of additional shares, considerations required to be taken into account when companies are declaring dividends and stock buyback plans, and other similar issues, all of which will affect the investment decisions of the investors.
Roadshow
The Roadshow is a necessary activity to promote the values of the company to the investment community. The activity involves scheduling a travel plan to meet with different investors, to present an overview of the company to different investors. Many events can happen in a roadshow, ranging from a mere general discussion of the business to a more in-depth discussion of fundraising pitching and terms negotiations. The party primarily responsible for organizing and executing the roadshow activity is the Investor relations officer, although, in most circumstances, it requires engagement from the CEO, CFO, head of technical units, and senior executives of other related departments. Our team could assist the management with the understanding of different types of roadshows, providing advice on a broad array of events from getting prepared, and creating a presentation, to the logistic aspect of the roadshows and gathering feedback for future follow-up actions.
Share Performance Measurements
Senior executives and management of a company need to recognize and understand investor relations function is an ongoing event once it is executed. Meaning the company needs to maintain constant communication and close contact with the investment community to the investment community abreast of the latest development in the business. Once again, investor relations is the party that is primarily responsible for this activity. The investment community will measure all major aspects of the business, including but not limited to performance, liquidity, cash flow healthiness, risk exposures, and other important aspects of the Company, based on a specific set of measurements, and leading indicators to identify possible changes in the value of their shares (or investment). Conclusions drawn from these analyses will be used to decide whether to sell, hold, or even increase the shares (or investment). Our team shall advise the set of key measurements and indicators which the Company should routinely calculate to be able to respond to investor and analyst questions, which ultimately affect their investment decision.
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