Q. How can I better sell my equity story to the market?
A. Markets are becoming more complex and increasing liquidity fragmentation makes it more difficult to monitor your share flows. Electronic trading, often driven by quant research, represents an increasing proportion of trading volumes and is disconnected from company performance.
In this context, you may be wondering if it is still worthwhile communicating your equity story to the market. For me, the answer is a resounding ‘yes’, particularly if we refer to the results of our latest corporate access survey of 370 institutional investors in Europe and the US.
Almost all of the investors surveyed (96 percent) consider corporate access and financial communication to be an important part of the investment decision-making process; most of them meet more than 40 companies per year. On the other hand, only one third of respondents read annual reports in detail and most of give them just a rapid glance or read a few pages. The focus must therefore be on regular dialogue and one-on-one meetings between corporates and investors.
One might also ask who the spokespeople should be and which channels of communication should be used. For the majority of investors surveyed, an investment decision is four times more likely to be made following a meeting with a CEO or a CFO than one with a head of investor relations. This is primarily due to management’s in-depth knowledge of strategy and decision-making power.
Does this mean IR serves no purpose? Not at all. Most of the investors surveyed consider the head of IR to be a key contact in terms of knowledge of markets and investor expectations. His or her personality, relationship with management and access to information are also key factors. What qualities overall do investors look for in a head of investor relations? Consistency, availability, clear communication and anticipation of market concerns.
Roughly 90 percent of investors also believe the best channels for meeting corporate executives are either roadshows or conferences. UK and US investors in particular value company management coming to their offices at their request. Site visits and investor days are the least sought-after means of access.
In terms of financial reporting, the survey throws up some interesting ideas.
- Add some medium-term forecasts to your financial communication: for more than nine out of 10 investors, they are the real investment barometer.
- For your press releases and presentations, first write summary pages focused on key messages and then detailed appendices – four out of five investors prefer this format.
- Pay particular attention to your quarterly reports: three out of four investors consider them to be useful, and one third very useful.
Bénédicte Thibord is global head of marketing at CA Cheuvreux.
