Times are changing

The lines between Ad agencies, PR firms, IR firms, brand strategists and other service providers have begun to blur. Historically, each business filled a need and stayed in its own lane. Corporations now prefer to have fewer partners with a greater number of capabilities to help them reach True Market Value.  In the public markets, that means a higher market cap and satisfied shareholders. In the private market, that often means aiding a capital raise or helping founders identify the right team to map future strategy to stated goals. If a key corporate goal is a higher stock price and/or a higher valuation, starting with that goal and working backward can often lead to meaningful shifts inside the board room. In my estimation, just a fraction of IR teams do the things necessary to help management teams deliver on financial and stock goals. Sometimes it takes an outsider to see the opportunities sitting in front of a company. A well-oiled IR machine can and should act as a competitive weapon to help drive happier current shareholders, new shareholders, and better brand recognition across end-markets. There are so many things a proactive IR team can do to drive new and better engagement across shareholders and the analyst community.

Here’s a recent conversation I had with industry leader SharonMerrill: What Does the Buyside Want From IR?

I focus on consumer trends, consumer behavior, consumption spending, and brand relevancy. I have a keen understanding of investor psychology (retail and institutional), how institutional Portfolio Managers make decisions, and the value a superior Investor Relations team adds to a company . I understand how to translate PR and Brand Strategy back to capital markets communications. These are skills that not every IR professional possesses. That makes my skill-set uniquely valuable and a scarce commodity.

About Me:

My roots are deeply entrenched in capital markets. I have 28 years of experience working across the asset management and investment businesses. I have been a Financial Advisor, an institutional & retail marketer, the team leader in building a new business line within a large, global asset manager, a full-time equity trader, and the creator and lead Portfolio Manager for a global brands equity strategy. I worked for an IR/PR firm in the early part of my career as well as being part of the in-house IR team at a major technology firm (EMC) in the late 1990’s.  This IR team was a key strategic asset for the executive team at EMC and helped them drive a significant following and loyal shareholder base across individual investors and institutions. Over the last 7 years as a global brands PM, I have had significant conversations with IR teams across my brands index coverage list. These conversations and my individual company research have led me to the conclusion that most companies do not derive the benefits they should be getting from utilizing the IR teams in an appropriate way. That’s where I see the opportunity.  A holistic IR strategy takes care of the day-to-day blocking & tackling required while also helping to build the messaging, branding, and differentiation that allows more investors to justify owning the stock. Below, I have listed a host of key areas an IR team can focus on to drive more interest, engagement, conversations and ownership in the stock. 

An IR Viewpoint:

What drives a stock price higher? More buyers than sellers. It’s just that simple.

Obtaining buyers requires an understanding of the drivers of purchase decisions across all “investor types”. Most public company management teams treat the IR function as a necessary evil versus a strategic weapon. If executed effectively, an IR team can be the key driver of building a loyal and long-term oriented shareholder base. One filled with committed institutional and individual investors who understand the short and long-term goals of the company and that understand how the company fits inside a portfolio. In order to be highly successful at IR, there needs to be a proactive + reactive approach to building relationships with buy and sell side analysts, and active investors.  Here are a few key areas that can help bring new buyers of stock:

·      Understanding and integrating the macro environment into corporate messaging.

·      Correctly categorizing the company so investors understand what style factor is appropriate.

·      Extracting the important metrics embedded in the company & highlighting them.

·      Creating a quarterly summary guide for all the important metrics driving the business.

·      Commit to being great story tellers. Passion for a brand drives engagement.

·      Creating an in-debt peer analysis for management as well as shareholders.

·      Creating the long-term plan and messaging with management and communicating it.

·      Understanding where a company sits in the stock universe – low beta, high dividend, etc.

·      Building deeper relationships with all investors and analysts. Includes being proactive.

·      Enhancing the communications and messaging around the brand and its place in the market.

·      Creating a simple and logical path to adding additional opportunities for growth & FCF.

·      Better communication of capital allocation plans & growth initiatives.

·      Understanding how ESG & ETF investing works and how the company stock gets included. 

·      Creating a DTC model to build deep ties with individual investors.

·      Make sure management teams understand the key perceptions about the company.

·      Build a detailed FAQ section on the IR website that can lessen the day-to-day workload of IR.

·      Committing to a “we will always respond to questions/requests” mentality drives strong loyalty.

The best IR professionals have these traits:

1.     Understand the business, drivers of growth and which operating metrics are best.

2.     Know the competition as well as the managers of these businesses.

3.     Have solid communications skills - verbal and written.

4.     Understand how to assess brand relevance through intangible and tangible metrics.

5.     Have strong presentation & marketing skills.

6.     Have a keen understanding of capital markets and how to position a company.

7.      Have strong technical awareness of stock.

8.     Willing and capable of building an outreach program to drive meaningful awareness.

9.     Act as an extension of current management & shield executives from unwanted distractions.

10.   Are highly aware of social media and the current sentiment of the stock.

11.   Understand how and when to outsource PR, brand strategy, and IR blocking & tackling.

12. Understand the importance of ESG and sustainability trends.

13. Expert in the current macro environment that leads to business trends & opportunities.

14. Have solid crisis management skills and the temperament to deal with multi-tasking.

15. Have a bias toward proactive communication & targeting versus reactive.

Brand relevancy is the key to reaching full potential.

Assessing brand relevancy from traditional and non-traditional angles by deploying quantitative and qualitative measures for each company adds a significant amount of value. I like to assess: 

• Corporate operating metrics & capital allocation decisions.

• Corporate governance details.

• Corporate culture and how it’s perceived from the outside.

• Board engagement - think like an activist & identify enhancements that can be made.

• Corporate innovation - past and future. Is the company missing key opportunities?

• Management vision & the communication of that vision.

• Style factor analysis across capital markets - how is a stock categorized?

• Additional addressable market opportunities that aren’t immediately obvious?

• Demographic diversity & customer loyalty. Can the customer base be more broad?

• Consistency of stock outperformance versus the S&P 500. How have peers performed?

• Dividend and dividend growth decisions. Are they the best use of capital versus growth?

• Corporate communications and investor relations acumen. Are they great story-tellers?

When I am assessing a business for investment, I go through a detailed process. The first step involves taking an x-ray of the current business using my Brand Relevancy approach. Once I understand the holistic business, I can get more granular on each component of the business which allows me to understand what is firing on all cylinders and what needs more work to reach full potential. Sometimes, all issues can be solved with stronger revenue growth, other times, it’s better operating efficiencies that will drive better metrics which ultimately drive interest in the stock. Understanding where a business sits inside a style box and portfolio framework is the first step in finding more buyers of the stock. In my experience, IR teams do not spend much time on the above items and spend the bulk of their days reacting versus being proactive. A highly successful IR team is a very important extension of the senior management team and their ability to tell stories and highlight features and benefits can drive new and lasting engagement in the company, its products/services, and ultimately the stock. This process is unique because it doesn’t stop with brand strategy or PR integration, it stretches through to capital markets messaging with a more appropriate IR effort that includes building the messaging and targeting the most appropriate shareholders, analysts, and investors. 

Eric M. Clark