Quit Pounding the Table - Use an IR Framework That Actually Works

Public companies often see a disconnect between their performance and their valuation. This is especially true for public companies with a market capitalization of less than $10 billion. The challenge for mid-cap companies (and smaller) is that market efficiency breaks down for them due to a lack of awareness and understanding of their story. This in turn causes analysts and investors to assign an inappropriate value to these companies which is detrimental to their cost of capital.

CEOs that pound the table, fervently arguing that their company is undervalued, only succeed in damaging their own credibility. Such behaviour will always fail to yield any constructive change in shareholder value. Instead, leadership should use this investor relations framework to enhance shareholder value and achieve a fair valuation for their company.

Enhance Shareholder Value Using this Investor Relations Framework:

1. Simplify and distill your company’s story;
2. Package the story so it is clear and compelling; and
3. Tell the story to the right investors.

Simplify and Distill Your Company’s Story

Investor relations can enhance shareholder value by stripping away the clutter and uncovering the bold success story that lies at the foundation of your company. If you would like to learn more about how to do this, read my article entitled Uncover Your Company’s Great Story.

The Five Year Plan

Once you have come up with a compelling vision for your company, you need to articulate how you’re going to get there. This normally takes the form of a five year plan. Failing to lay out a detailed long-term plan to generate shareholder value opens the door to someone like Bill Ackman who will come in and do it for you (Although you might be out of a job).

Once you have established your organization’s five year strategy, launch it using the principles below.

Package the Story So it is Clear and Compelling

Packaging Matters. Every book is judged by its cover. If your story isn’t packaged properly, it will fail to gain the attention of its intended audience no matter how compelling and interesting it is.

In the preceding step we refined your message, boiling down your company’s story to it’s purest and most compelling form. Now we need to communicate this message with high impact to generate the share of mind, recall and actions we want. There are three tools at our disposal to accomplish this:

1. Powerful visuals;
2. Graphic technologies; and
3. Clear language.

If you fail to use these tools then you are failing your investors. If you would like to learn more about how to do this, read my article entitled The Packaging Matters.

Tell the story to the Right Investors

Disclosure in the old days (three years ago?) meant transmitting a news release over the news wire, filing it with the securities commission, and uploading it to the corporate website. Today, you need these additional tools to maximize your reach and potential:

• An investor relationship management system;
• A rich content management system;
• Email news alerts sent as soon as a news release crosses the wire;
• RSS/XML feeds; and
• Social media syndication to LinkedIn, Twitter, Stocktwits, etc.

Investor communication channels are rapidly evolving. Is your investor communication platform ready? If you would like to find out and learn more about how to build the right platform, read my article entitled Investor Communication Platforms.

Connecting Face-to-Face

Nothing can adequately substitute for you telling your company’s story in person. If you’re going to launch a five year plan, do it justice by holding a high quality investor event. Hold your event in one of North America’s investment centres.

It is also important to arrange roadshows to meet one-on-one with your institutional investors after significant news. That said, avoid over-marketing. The maximum number of times I recommend hitting a single market in a year is four. Any more than that and your investors are going to wonder who is running the company.

Does it Work?

So does this framework actually work? You be the judge. The figure below represents a case study of what this investor relations framework, combined with solid operational performance, accomplished over four years.

While this figure is notional, it demonstrates what I believe happens when you layer the following elements on top of a base valuation (shown in grey):

• A good story;
• That is well packaged; and
• Told to the right investors.

That said, no company that poops the bed strategically or operationally will do well in the capital markets for long. (There is only so much investor relations can do!)

Thank you for reading this article. If you liked it please share it on LinkedIn. Also, please let me know if you didn’t like the article and why in the comments below.

If you would like to receive a weekly or monthly summary of Market Climber’s Insights then please subscribe to our newsletter. In addition, if you have further questions please contact me. Finally, please feel free to use these confidential self-assessment tools to evaluate your communications, investor relations and marketing.