Investor Relations

Investor Relations (IR) is a strategic management responsibility that is capable of integrating finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation. (Adopted by the NIRI Board of Directors, March 2003.) The term describes the department of a company devoted to handling inquiries from shareholders and investors, as well as others who might be interested in a company's stock or financial stability.

Investor relations, when conducted effectively, will also preserve and enhance a company’s credibility in both the investment community and the public arena.

Formulating an IR Plan:

·         Set broad IR goals and objectives

·         Determine basic IR activities

·         Identify key internal and external relationships

·         Identify key calendar-driven, tactic-driven and strategy driven elements

·         Establish shorter-term and longer-term goals

·         Plan the department’s initial three months

·         Establish an annual budget

·         Measure your success

The Primary Goals of Investor Relations

·         Ensure that financial markets accurately value the company’s assets, expectations of future earnings and cash flows

·         Maintain favorable access to capital markets

·         Maintain market liquidity under all conditions

·         Inform management and BOD about developments in financial markets and perceptions of investors

·         Enhance management’s understanding of peers’ performance, strengths and strategies

·         Maintain open communications and credibility with investors, employees, customers, suppliers and communities in which the company operates

·         Ensure consistency of communications with related constituencies and the trade, financial and general media

Setting IR Objectives

·         Advise management on shareholder value creation and market behavior

·         Establish a leadership role in defining and executing strategies

·         Provide ongoing education to management

·         Maintain a meaningful investor feedback system

·         Successfully target and create a strong base of longer-term institutional shareholders

·         Manage the disclosure process

·         Improve the information of communications’ materials

·         Attract individual investors

·         Keep the BOD informed on market perceptions and status of the IR program

Basic IR Activities

·         Administrative

·         Annual Meeting

·         Communications Channels

·         Conference Calls

·         Contact/Relationship Program

·         Disclosure

·         Individual Investors

·         Market Intelligence/Peer Analysis

·         Program Development

·         Proxy Process

·         Shareholder Relations

Key Elements of an IR Plan – Tactic-Driven

1. Analyst Contact/Analyst Meetings

2. Budget

3. Crisis Communications Plan

4. Fact Sheet/Fact Book

5. Investor Contact (ongoing)

6. Investor Relations Kit

7. Media Lists

8. Photo Archives

9. Press Releases (as needed)

10. Relationship with Specialist Firm/Market Makers

11. Relationships with Outside Vendors and Consultants

12. Website

Key Elements of an IR Plan – Strategy-Driven

1. Analyst Day

2. Benchmarking

3. Broker Contact

4. Competitive/Industry Analysis

5. Corporate Governance

6. Disclosure Policies

7. Employee Communications

8. Individual Investor Program

9. Industry/Investor Conferences

10. Market Intelligence

11. Sell-side Outreach

12. Targeting

Shorter-Term Goals

·         Profile shareholder base; make introductory phone calls to major shareholders

·         Compile extended sell-side analyst target list

·         Review/modify investor presentations

·         Compile list of industry media contacts in the industry; make introductory phone calls

·         Compile peer group ownership data

·         Compile and analyze peer group performance data

·         Prepare detailed department budget

·         Meet with all corporate executives

·         Increase retail shareholder awareness

·         Develop formal disclosure policies

·         Disseminate company-wide policy/procedures concerning external communications

·         Meet with HR to set internal communications strategy

·         Update photos and bios of all board members and senior executives

·         Establish IR calendar

Longer-Term Goals

·         Analyze industry sell-side analyst coverage

·         Analyze shareholder base and determine best mix

·         Increase daily trading volume

·         Establish plan for continual contact with analysts and major shareholders

·         Increase exposure at conferences/presentations

·         Expand knowledge and understanding of your industry

·         Prepare IR presentation for BOD meetings

·         Create corporate capabilities book

·         Visit subsidiaries/field offices and build relationships with division heads

·         Set global investor relations strategies

·         Educate employees about investing

·         Work with outside consultants where appropriate

Measuring Success – Quantitative

·         Increased market capitalization/higher stock price

·         Increased sell-side coverage

·         Increased daily trading volume

·         Increased number of market makers

·         Enhanced shareholder mix

·         Expanded positions of current institutional shareholders

Measuring Success – Qualitative

·         Attracted highly compatible, long-term institutional shareholders and individual investors

·         Gathered feedback from the investment community

·         Increased quality of information about the company that is available to the market

·         Improved market knowledge of non-financial factors driving valuation

·         Strengthened quality and support of shareholder base

·         Improved IR performance against peers

·         Improved quality of research

·         Improved qualitative mix of sell-side analysts

·         Tracked results of institutional targeting programs

Sources:

·         Casparie, J. How to find investors for your start-up. 2005. (http://www.entrepreneur.com/article/81124)

·         Wilkins, S. Blueprint for success: Developing your investor relations plan. Journal communications, Inc. 2006