Category Archives: Investor Relations
If I had a nickel for every client in my career who wanted to put a quote in a news release about their commitment to creating shareholder value, well, I wouldn’t really need to care about shareholder value. That’s why I found this Q&A with Amazon’s Jeff Bezos in Harvard Business Review’s round up of best performing CEOs fascinating.
From the moment Amazon went public, he was a contrarian, telling investors that he wanted them to put the long term ahead of this quarter and then sticking by that philosophy. Bezos doesn’t chase quarter to quarter results, nor does he cave to the pressure to increase margins if it is contrary to their strategy. As in, we will sell the Kindle at break-even to advance the platform by which we sell our content. Even though we could charge a little more for it and eke out some nice margin dollars.
What does this mean for those of us in the investor relations and financial communications profession?
We have two paths to choose: quarterly news release writer/script developer/order taker; or leadership, strategy and communications “management consultant.” Before you decide I am crazy, hear me out…while it may be somewhat outside of our remit to advise on management strategy, depending on the nature of your client relationships, it is well within our industry’s purview to help clients find the narrative to tell, and more importantly, sell their strategy to key stakeholders. And Bezos wisely points out that over the long term, customer, employee and shareholder interests are aligned – it is the short term that creates the conflict.
Yet another reason to love and admire Jeff Bezos. He gets it. He’s mastered the art of using communications to advance his position. No wonder he is No. 2 in Harvard Business Review’s list of best performing CEOs of all time – measured in creation of shareholder value.
Socializing Investor Relations: Why You Should Be Doing It, and How You Can Get Started
September 13, 2012
The Street doesn’t get our story.
Why don’t we get credit for all of our strengths / accomplishments / ideas / successes / strategies?
We get the same questions, from the same few people, every quarter.
Our roadshow didn’t get us anywhere.
We are undervalued.
How can we differentiate ourselves from our peer group?
If the answer is yes, then you should be thinking about how to “socialize” your IR and financial communications programs. I could tick off all of the reasons why you haven’t done it yet, beginning with concerns about Regulation Fair Disclosure and some recent social mishaps resulting from some ill-conceived CEO commentary.
Those who think that social media is the land of brand promotion, and brand promotion only, should recall the cautionary tales of some other channels that were initially shunned by those tasked with financial communications – like live TV. Once the domain of the consumer brand and shunned by CEOs, live broadcast was too “uncontrolled,” too “scary” and too “dangerous.” Now, CEOs fight to be on CNBC to reach their investor audience. Sounds very similar to the current perception of social media. When used correctly, social media can be a powerful addition to your financial communications. And using it correctly means using it in complete regulatory compliance.
The conversation is going to happen, with or without you…all of the “social buzz” around Apple’s Q3 earnings miss was just one recent example.
Not sure where to start? Here are a few easy steps to get you socially active:
- Listening & Insights: Social media can be a powerful “eavesdropping device” – tune in to hear what your individual shareholders are saying about you, and about your competitors. Twitter recently launched cashtags – clickable stock symbols which include $ + your stock ticker. The conversations are happening – and they can inform your messaging and keep you aware of what is being talked about.
- Earnings 2.0: Your quarterly earnings cycle is one of the most important communications vehicles you have. Similar to a school report card, investors use this time to tell how a company is performing and what the future holds. Social media can serve as an additional layer of distribution to your investors by “live-tweeting” your earnings and providing links to your release, conference call webcast and investor presentation. Social media provides the platform to include and engage individual shareholders, as well as the larger, institutional investors. Some of the more progressive companies like Dell are even taking questions via Twitter to be answered on their calls, which can come from any shareholder, not just an analyst or major investor.
- Start a Dialogue: One of the biggest challenges companies face is continuing the conversation with investors between quarters. Social media provides the platform for you to create an IR “channel” for easily sharing your Company news, releases, reports, presentations and company videos which can serve as the stimulus for true conversation, where you can get feedback in real time. So while pushing content and news is good, engaging in real dialogue is better. Social engagement – from responding to investor inquiries, reacting to online posts, or following the conversation – will give you the ability to respond or react to comments and questions online, gauge the sentiment of the financial community, and assist in building a broad, diversified base of holders by strengthening and building trust among your current and potential investors.
- Lead the Conversation: Research repeatedly shows that a larger portion of your share price than you may think is attributed to intangibles, with quality of leadership, vision and strategy as major factors. Social media platforms like Twitter, Slideshare and YouTube provide forums where you can tell the “softer side” of your company’s story. And unlike a feature story in major media, you have 100 percent editorial authority over the content, the timing and the photos. Use social media to help people get to “know” your leadership team, understand your strategy, and follow your news and developments, because a social CEO is perceived as more relevant. Maintain a blog to share thoughts and comments about industry trends and financial news. Get your content out there, build your company’s reputation and become a voice for your industry.
Social media isn’t going to pass. The conversations are happening, with or without you. You can use it as a strategic tool to build trust, relevance and long term shareholder value. Or not. Competition for investment dollars is just that, competition. And the savviest companies will be using every tool at their disposal to attract your investors.
Get social. Or get left behind.
Stepping into the Spotlight: How your CEO’s Reputation Translates into Shareholder Value
September 11, 2012
Change in leadership is inevitable. And all too often, it is associated with something negative: illness, a legal issue, shareholder discontent, or the Board’s lack of confidence in a leader. Often, as communicators, we are tasked with minimizing the disruption a leadership change causes. Just look when Tim Cook assumed leadership roles from Steve Jobs at Apple – investors reacted by pushing down company shares 5 percent, or nearly $20. It’s not always the case though. Sometimes, a change in leadership can add shareholder value and boost investor confidence.
But what are these stock moves really telling us?
That a company’s “intangible” assets – like a CEO’s reputation – have a major impact on its market value and impacts investors’ buying decisions. Just how valuable is it? One study put a $3 trillion dollar price tag on corporate reputation in S&P 500 companies alone. Just recently, when now ex-CEO of WellPoint, Angela Braly, stepped down, investors applauded and saw company shares gain 7.7 percent, worth almost $150 million in market value.
When I started in this business, there was a “rock star” CEO phenomenon that has fallen out of favor – and for good reason. But for many companies, the pendulum has swung too far the other way – CEOs, in a desire to appear humble, shy away from the spotlight and as a result are doing their shareholders a disservice.
CEO reputation translates into shareholder value. Could there be any greater reason to be proactive about cultivating and leveraging the profile of your CEO and leadership team?
Nasdaq not Liked After Facebook IPO
May 21, 2012
An IPO is an important event to build a company’s brand and reputation, but it can also be a critical event to burnish the reputation of the listing exchange. Hence, there is an ever increasing battle between the NYSE and Nasdaq for IPOs and a full scale war for the large, high profile IPOs. Facebook, the IPO of the decade (or century if you like), generated breathless 24/7 media coverage (including breaking news fashion reviews) from start to finish. For the Nasdaq, it was fabulous listing win, seemingly solidifying its place as the destination for hot and tech oriented companies to go public.
Unfortunately, for many in the financial markets, the story has now pivoted from talk of Facebook billionaires, underwriter support and a lackluster close to the significant glitches Nasdaq encountered in handling the first day of trading. Nasdaq head Robert Greifeld, who even jettisoned a suit for Facebook wear for the IPO festivities at the Company’s HQ, tried valiantly to put the issue in perspective stating that the day was “quite successful but clearly we’re not happy with our performance” and that there was not impact on share prices.
Nasdaq has been scrambling to reassure investors and Wall Street pros that all is well and that they should not be concerned, with Greifeld out front with the media and this morning offering a play-by-play breakdown of what happened. As David Benoit of The Wall Street Journal calls out in his blog, Nasdaq is even affirmatively stating that there were no screw ups with the Zynga IPO in its effort to try to restore trust.
This is certainly not the publicity Nasdaq wanted in regard to the Facebook IPO and it comes on the heels of BATS Global Markets fiasco with its own IPO (though there are now reports that BATS may even be looking toward Nasdaq for a do over). What should have been a shining day for the exchange has now turned into a reputational nightmare amid questions about technology and Nasdaq procedures as well as the obligatory regulatory/legislative inquiries. Investors are already voting with their feet, smacking Nasdaq shares down.
Nasdaq has rightly tried to get in front of this story, issuing mea culpas (though hedging a bit on some) and pledging that its systems and processes are up to snuff. The integrity and smooth operation of financial exchanges are paramount to their reputations. Nasdaq has been damaged and this story will likely be linked to the share performance of Facebook for some time to come. It must stay out front and continue to be transparent and forthcoming about what happened, why it happened and how it is fixing things. Nasdaq could even take a page from JP Morgan and have a resignation/firing or two to show it means business. This could help it ensure that going forward the news is only focused on the listing companies.
Investor relations used to be about telling a company’s value story and managing the flow of information to shareholders. But like all communications over the last decade, what used to be one-way disclosure has turned into a two-way conversation. Lately, it has escalated into more of a screaming match.
Those tasked with shepherding the reputation of a public company have often argued that rich executive pay packages were necessary and appropriate to assure performance and protect investors – essentially paying for quality. Lately, shareholders are voicing a different opinion.
The new say on pay provisions have empowered shareholders to issue their own wake up call to Boards and Chief Executives. Last year, shareholders only rejected 2 percent of compensation packages. In the U.K., at least three CEOs have been ousted in the last month over executive pay. In the U.S., Citigroup shareholders held a non-binding vote rejecting an executive compensation package that totaled $15 million, in the wake of the bank’s poor stock price performance and a lackluster recovery from the crisis.
Shareholder activism hasn’t been confined to rejecting remuneration. A Yahoo! shareholder has demanded the documents involved in the hire of CEO Scott Thompson after it was revealed pieces of the CEO’s professional bio may have been fabricated. Investors of Indian tech company Infosys are clamoring for changes to the corporate culture to return the company to profitability.
It’s not just shareholder activists, but activists turned shareholders, in some cases buying single shares of companies to gain admittance, participate in votes, and cause disruptions at shareholder meetings around the country. What used to be a perfunctory event has turned into blog fodder and backdrops for the nightly news.
Politicians are taking a more active role in influencing and empowering shareholders. At the beginning of this month, a UK parliamentary committee declared Rupert Murdoch to be “unfit” to lead NewsCorp. While this backfired in the short term (stock prices went up since the report was released), it continues to blur the lines between investor, politician, and concerned citizen.
All indications suggest this is only the beginning of a global movement of shareholder unrest. Frustrations will continue to rise, fueled by income disparity, political pressures, and the Occupy movement.
These trends pose some interesting questions: will revolts die down as the economy picks up? Or does this mark a fundamental change in how companies communicate with shareholders? Will they need to campaign just like anyone else to shore up shareholder support of new proposals, executive pay increases, even CSR and sustainability programs? Will CEOs approach shareholder meetings like a Presidential candidate approaches Super Tuesday – counting votes, and crossing fingers?
It’s hard to argue that giving shareholders a greater voice in the process is a bad thing. But the current trend seems to pose more questions than answers. Is “say on pay” effective or disruptive? Or is it yet another example of a proposal’s intent being diluted or altered when it comes to practical implementation? Will we see CEOs “campaigning” for their jobs, and their pay? Or will executive compensation be restructured to fall just below the “friction point” for shareholder approval?
What are your views?
Shareholder Value Begins at Home
October 14, 2011
Recently one of my colleagues posted here about the importance of narratives to be successful in investor communications. This piece makes a great case for employee engagement as a driver of shareholder value.
Whether talking to investors, or customers, for the narrative to be relevant and authentic, it must match the stakeholders’ own experience with the Company…it is at the heart of the distinction between brand and reputation.
From an investor perspective, delivering on the promise requires operational and financial performance…which ultimately boils down to every employee understanding the mission and their individual roles in making it happen.
I often remind clients that Citizenship begins at home (for CSR clients) and that turnarounds begin at home. Let’s add shareholder value to that list.
Investors buy stories, so better tell it well
October 7, 2011
Yesterday, an IPO seminar hosted by Proformative featured plenty of interesting tidbits from the speakers who specialize in bringing companies public. For example, a banker said data shows that about 900 investors buy 90 percent of the deals. And if you miss your first quarter numbers right out of the box, “you’re dead.”
Where should a company list in the U.S., on NYSE or Nasdaq? Experts say it really doesn’t matter, but best to stick with your peer group.
One of my favorite comments was that investors in newly public companies buy stories more than anything. Of course, the numbers are important, but does the story resonate? When it doesn’t, the euphoria and excitement that can come on bell-ringing day can quickly turn sour when share prices plummet.
So what does a good story look like from our point of view? Crisp, compelling and easily understood messages, or as we like to say, the narrative. What the business does, how it makes money, how it will grow, what the risks and opportunities are and how it differs from competitors. Sounds simple, right?
It is and it isn’t. Often these key concepts get buried in a slew of financial data and turned into cumbersome, corporate-speak sentences after dozens of people have weighed in from management to bankers to lawyers and often last, the communications and investor relations professionals.
Similarly, sometimes presentations are just too long or not well-crafted in terms of keeping that overarching story prominent throughout. How many slides do you need, according to the experts? 30 for 30 minutes. How many of us have sat through a 50-page or more deck? I know I have.
And finally, another bit of advice was for all of the finance professionals to remember that the all-important road show – when management travels to see investors around the country or world – is really “a big selling exercise.” So make sure the people who are doing the selling are prepared and yes, interesting to hear.
Why You Should Be Investing More in Investor Relations
August 2, 2011
I’ve always been amazed that brand managers and others have thousands and even millions of dollars at their disposal to properly position a product or service, like a cup of coffee or an insurance plan. But when it comes to the “product” of the company itself, its management and its financial valuation, the devoted resources can be less than plentiful.
But now there’s concrete evidence showing that spending money to promote the firm among Wall Street buy-side analysts and institutional investors makes a lot of sense. That’s something that our clients at the Financial Relations Board already know well, and it’s nice to see it backed up in academia.
A study by professors at Wharton and the University of Michigan provides strong evidence backed up by data showing that adopting IR strategies and hiring an external firm does in fact make a difference for companies that are not “highly visible” due to size, location or other factors. They studied 210 firms.
In their paper, authors Brian Bushee and Gregory Miller write that:
Firms initiating IR also experience increases
in analyst and media coverage, as well as improvements
in the book-to-price ratio. Overall, our results indicate
that IR activities are successful in improving
visibility, investor following, and market value.
And that has a significant effect. By increasing the participants willing to put up capital to help the firm operate, the company’s valuation can rise and its cost of capital – the money paid to borrow money or issue stock – can fall. Communicating product attributes is something that brand managers know how to do well. Finance officers and senior management can take a cue from their marketing counterparts, getting help to craft and tell a compelling corporate story to investors willing to listen.
It’s earnings season, and despite the daily headlines about the recessionary economy, the earnings reports haven’t been all bad. Today, GM reported that it tripled its profits from last year. Whole Foods reported its best quarter in five years. Goldman Sachs disappointed the street with quarterly earnings of $2.74 billion. MasterCard profits are on the rise. Big oil, same story.
Healthcare, energy, banking and financial services are trending well – something that their investors expect, and appreciate. But how successful is too successful? Particularly when gas and milk are both costing nearly $4 a gallon? When millions of Americans are uninsured or can’t afford their prescriptions because they’ve lost their jobs and can’t afford private healthcare? Do companies run the risk of reputational backlash when their success is perceived as being “on the backs” of their employees, their customers or their communities?
This is a tricky equation. A growing profitable business creates and preserves jobs, provides much needed tax revenue to our communities and fuels growth of our stock markets and our economy. I think the answer to this question is “it depends.” When necessities like food, gas, healthcare and heating your home are viewed as “unaffordable” for many Americans, record earnings growth, big bonuses and other symbols of so-called “corporate greed” can create real reputational challenges. This is where the communications becomes very important…the difference between applause and reputational backlash is all about context. What will the Company do with those record profits? Who will benefit (in addition to the shareholders and leaders of the company)? What new employee programs can be funded? How many people will be hired? What investments will you make in the future?
This is why investor relations and financial communications professionals can no longer just think about their messaging and narrative exclusively through the lenses of Wall Street’s response – management’s commentary and company news spreads through the twitter-verse in minutes. Your financial performance is relevant to consumers, communities, regulators and elected officials. And it is reflected in both your valuation and your reputation.
When 140 characters is worth $50 million
January 13, 2011
Recently I posted about the declining impact of celebrity tweets, citing the major failure of Keep a Child Alive’s Digital Death Campaign (which barely raised a million dollars for HIV/AIDS btw). Just goes to show you that for every rule, there is an exception. Like the series of tweets from 50 Cent, that translated into a $50 million increase in market cap for a Company you probably never heard of before, H&H Imports.
Closer analysis suggests that while the tweets certainly had some impact, there were also some more classic IR strategies at play. The rapper appeared on CNBC – long recognized as a market mover. And the Company wisely engaged a high profile third party investor to advocate for their story. But his tweets were not all that substantive, or even frequent on this topic – he gave a lot more attention to pushing his new headphones, for example. But everyone is talking about how 50 Cent pumped this stock.
Here is what they didn’t tell you – this is a penny stock, with a 52-week range of 4 – 51 CENTS. It hit a high 45 cents on the celebrity plug, and is already back down to 25 cents. That’s better than the 14 cents they opened at before all of this tweeting started, but hardly makes them a blue chip.
Sure, the company got some short term pop and media coverage with the rapper’s involvement. But from a strategic standpoint, what did that really do for them? Good financial communications is about helping companies achieve their highest sustainable valuation, based on articulating a story, establishing and meeting benchmarks, demonstrating quality management with a vision for the future that resonates with investors. And of course, performance.
For the short term, you may see the celebrity investor gimmick attempted by lots of me too companies. But you won’t see us advocating for that at MWW Group/FRB.
H&H Imports…if you want some real IR/financial communications help, you should contact Claire Koeneman, the President of FRB…otherwise, you’ll still be a 50 Cent stock, in every sense of the word.