genesis. key IR questions

These are just a few of the challenges you might be facing in today’s business environment. While your CEO and Board of Directors expect the IR team to tell your strategic story, build trust and credibility with investors, follow disclosure regulations and achieve “fair” market valuation, you may be trying to accomplish this with more limited resources then ever.

Are you facing any of these challenges?

Should my company continue to provide guidance?

While many senior managements and boards are asking this question, the answer is, “it depends.” There is no “one size fits all” disclosure policy. It depends on your industry practice, your company’s ability to forecast, your previous experience with providing guidance, and so on. In general, we believe it is critically important to provide investors with as much transparency as is possible and practical, including a framework for expectations. After all, investors are interested in the future. Perhaps the better question is not “should my company provide guidance,” but rather, “how can my company best provide a framework to manage expectations?”

This is an area where our consulting group has a depth and breadth of experience, from participating in the SEC Advisory Committee on Disclosure, to chairing the National Investor Relations Institute (NIRI) task force on disclosure issues, to lecturing on IR and disclosure best practice for NIRI and the SEC Institute.

If you are thinking about developing a disclosure policy, the following link to our sample Disclosure Policy template will help you get started. Or, call us and we’ll help you sort through the process, as we have done for many clients.

How do I address my management and Board’s Frustration with our valuation?

This is undoubtedly the toughest challenge faced by public companies and their IR staffs. The overall purpose of IR is, after all, to manage the content and flow of company information in order to achieve a “fair market valuation.” But there is often disagreement as to what is constitutes “fair.” It is widely believed that a significant portion of any company’s stock valuation is related to the economy and the stock market, and then to its specific industry’s fundamentals and valuation. So, why bother with IR?

We believe there is definitely an opportunity to affect valuation, and this opportunity lies in the art of providing forward-looking information - beyond guidance, we mean providing a realistic and compelling vision of the future, a clear articulation of the company’s unique customer offering, consistent strategies to achieve the vision and the metrics management will use to measure its progress. The opportunity also lies in building and maintaining credibility - “doing what you said you would.” Of course, the key driver of valuation is performance - and investor belief in the likelihood of the company achieving its future performance goals.

There are really three broad answers to the question of addressing management’s or the Board’s frustration with valuation.

The first is to provide honest investor feedback on the company’s current and prospective performance, i.e., from an investor perspective, does the valuation fairly reflect the company’s performance and prospects. And, if not, what must be done to change that perception.

The second is to carry out the basic IR blocking and tackling within the context of a Strategic IR Plan, including proactive investor outreach activities, the goal being to make sure that the company’s story is well and widely understood.

The third is to provide regular communication with management and the Board on the IR program, investor perceptions, competitive analysis and the key IR issues the company is facing.

How can I ensure that key investors understand our long-term strategy?

It may seem simple and obvious, but the answer is to communicate the company’s strategy clearly and consistently. Surprisingly, this is one area that investors frequently find lacking in company presentations.

At Genesis, we believe that the company’s strategic plan is the meat of the IR story and program. First, this requires that there exists a strategic plan for the company, or at least discussion of long-term financial objectives and strategies. Then the company’s strategic plan must be translated into a “short form” for communication with investors. Finally, the company’s strategic intent and milestones to measure progress should be incorporated into a strategic IR plan.

We’ve provided a sample Strategic IR Plan template that incorporates these ideas.

Is there a way to create an investor presentation that really differentiates our company?

Well, we certainly think so. An investor presentation is a unique vehicle for positioning your company. The presentation should tell your company’s investment story clearly and concisely, while addressing expected investor concerns. Beyond content, the presentation should reflect your company’s unique “brand promise,” industry position and personality, if at all possible.

We’ve provided some examples of investor presentations we’ve created that differentiate the companies in terms of both a compelling story and unique positioning.

How do I best communicate our investors’ perspective to senior management and the board?

One of the primary objectives of a strategic IR program should be to provide senior management and the Board of Directors with a capital markets point-of-view on the company’s performance, prospects and long-term strategies. The best way to gather this important feedback is to conduct periodic qualitative investor research, and then present the results of these “perception studies” to senior management and the Board. Investor feedback can then become the basis for evaluating the effectiveness of the company’s key messages and modifying those messages to correct misconceptions and, ultimately, to strengthen investor confidence in management and its strategies for the future.

Periodic investor perception studies can also be used as a benchmarking device. Company results can be compared to others in the same industry or across industries. And, as communication strategies address investor issues and misconceptions, subsequent perception studies can be used to measure progress over time.