Investor Relations in Turbulent Times

There is no doubt that the last two years have been tumultuous for the corporate world. However, as we emerge from the pandemic, there are strategies that we can implement to bolster our investor relations efforts and build for the future in what is being termed the ‘new normal’. 

Increased efficiency

Communication with investors and other stakeholders in the financial markets has never been more important. The already volatile markets were further disrupted by COVID-19, and it is an Investor Relations Officer’s job to reassure shareholders old and new that the organisation has taken on board the lessons from the last two years and has a solid, efficient strategic plan in place to ensure a positive, sustainable future for the business. 

Traditional in-person events such as roadshows and capital markets days have moved online, initially due to necessity and potentially continuing into the future due to its convenience. This means IROs need digital solutions at their fingertips, including: 

• A high-performance investor customer relationship management (CRM) platform
• A robust investor targeting solution
  
  

As we move forward, the efficiency of your IR plan is all-important. 

Investor diversity

This efficiency is necessary when you consider the diversity of investors in the market today. In 2020, the institutional investors involved in companies listed on Euronext came from 67 different countries. The United States accounted for the largest share at 46%, followed by Great Britain at 20% and France at 10%. In addition, 86% of institutional

investors on Euronext Paris are international investors.

In addition to this breadth of backgrounds, IROs must balance the multitude of strategies, from long-term pension funds to asset managers focused on short-term gains. 

Knowing your shareholder is key to understanding who is investing and which gaps you need to fill to balance things for the long-term good of the business. An IRO must work hard at building relationships with current and potential investors, as well as other stakeholders. 

The new rules of play for IR 

Successful companies have been already harnessing the power of digital technology to interact with investors. Rather than the only regular communication coming from publishing obligatory disclosures, many organisations now utilise IR websites, social media and video conferencing, to varying degrees.  

Other digital solutions for IR include: 

• CRMs – A German survey found that only half of listed companies made use of a professional CRM like IR.Manager to optimise IR work processes, despite the many benefits of efficiently managing relationships with institutional investors, analysts and other stakeholders. 
• Virtual AGMs – Many countries implemented laws allowing online AGMs during the pandemic. There are many benefits to this approach, including increasing attendance and lowering costs. Companies should ensure shareholder rights are upheld when conducting the event online. 
• Online roadshows – Using online roadshows allows IROs to talk to shareholders in multiple territories on the same day. They save time and money, too. Using professional, dedicated webcasting software, such as Company Webcast, you can hold effective and productive meetings with investors without leaving your office. 
  
  

Although we envision in-person meetings will return to some extent, these online alternatives have proven successful and beneficial. So, they should continue to form part of your future IR strategy. 

Targeting Your Perfect Shareholders

To grow for the future and to mitigate potential shareholder activism, you must target potential investors who align with your strategy and desired shareholding structure. The process for targeting runs in this manner: 

• Identify and analyse your current shareholding. The Shareholder Rights Directive II (SRD II) allows listed companies to access the identities of investors. Platforms like IR.Manager take this information and analyse it to give you important insights into who these investors are and what their motivations and future movements are likely to be.
• Analyse the investors in your peer group. They already know your industry and, therefore, should have some prior knowledge of your business. This means that they could react favourably to your targeting. 
• Identify shareholders in your geographic location and share index in order to target those who might fit your strategy. 
• Filter your top targets and approach them with a view to connecting at a roadshow or investor day. 
  
  

You should utilise data to inform your targeting strategy so that you can find and connect with the best fit in terms of investors. 

Communication Best Practices

Many issuers had to publish profit warnings at the start of the pandemic. Nowadays, handling these forms of communication should be a major part of your IR strategy. If you get it right, you can instil trust in your business model. If you get it wrong, it can be disastrous.

Below are some best practices. 

• Do not rush a statement out. Wait until you have solid information to impart and, if possible, release in the preliminary quarterly and (semi-) annual financial statement.
• Don’t be too optimistic. If you have to subsequently revise and lower your projections even more, it can cause concerns.
• Use broad brackets in a major crisis. Investors will understand and accept this, given the circumstances.
• Make contact with analysts and top investors as soon as possible after publication to reassure them.
• Be transparent and admit misjudgements in order to gain trust.
• Show empathy. Understand that, in a pandemic, the reasons for the profit warning are obvious. You are instead judged on how you handle the situation.