The operating environment is changing at an unprecedented pace. Is your IR programme up-to-speed?
Good and effective investor relations don’t come easy, but need to be nurtured pro-actively in a structured way. In a world of rapid change, investor perceptions change as well. IR perception studies are both a handy and strategic tool to compile market perceptions.
The studies provide an objective external view of the company as an investment opportunity that in combination with internal insight help develop the IR strategy and programme.
Effective IR programmes often aim for targets that relate to disclosure, the equity story or availability of management to the financial market. Sounds all good, but how can we best assess if we are focusing our limited resources on the right things? And how do we know that our IR programme is working in an optimal way?
The share price performance could be one measure, but given that the share price is affected by so many other variables but good IR, the share price alone is not enough. We need to look somewhere else. Measuring the effectiveness of the IR programme is best done through a combination of things like investor feedback as part of the on-going dialogue, sell-side analyst research, and perception studies. Let’s focus here on the perception studies.
IR perception studies are at best conducted by an independent third party who has no other interest but to produce a high-quality study that pays itself back as a useful tool for listed companies in their continuous pursuit to improve their IR efforts. These primarily qualitative studies are traditionally conducted among the largest institutional shareholders and analysts who tend to have the biggest economic influence over the company due to the size of their holding, network etc. The studies are done on a non-attributable basis to enhance the quality and benefits of the study, including its IR recommendations.
At best an annual perception study provides senior management and the IRO with key stepping stones for the next 12 months in terms of e.g. disclosure, management of the investment story and the IR programme in general. It should also help the company to consider what matters to its shareholders, and support the company in building an attractive investment case that takes into account topics like the company’s risks, valuation and cost of capital. In combination with input from the ongoing dialogue with investors, analysts and corporate advisors, a perception study can also be a critical tool in shaping the IR story and strategy. If tracked on an annual basis, formalised investor feedback can also serve as a KPI of the IRO and his/her personal targets.
Structured market feedback is part of IR programmes and a component of internal Board and Management reporting of listed companies. For companies to attract investors there is a strong case for maintaining a regular dialogue that include an opportunity for investors to air their views and provide candid, non-attributable feedback through an independent IR perception study.
A customer centric strategy is key to increase sales and growth of the company. Equally important are investors and financiers who act as enablers of that same growth strategy. Listening to both in a structured way in a rapidly changing operating environment – and making use of that market intelligence – is more critical than ever.