If I had to pick just one event that remade US investor relations over the past two decades, Regulation Fair Disclosure (Reg FD) would get my vote. It changed everything, from how IROs do their jobs to the role of the sell side. And, like any truly seminal event, Reg FD, enacted in 2000, continues to make waves, affecting IR as it adapts to new realities like social media and globalization.
It didn’t happen in a vacuum, however. Reg FD was a response to the changed reality in financial markets brought about by the internet. There was a time a few still-sentient IR professionals can recall when fax machines were a rare and precious resource, email non-existent and a more than three-way conference call a technical impossibility. Sell-side analysts would actually analyze – sometimes with slide rules – and check their assumptions before authoring a report that was sent to a financial printer, returned for proofreading and put in the mail to clients. Two weeks later, ‘the market’ would know what the analyst thought. In that era, IROs had to be skilled in the art of talking numbers up and down.
But email and the internet changed all that. Instant communication meant the old way was not just irrelevant, it was unfair. One group – the press – was explicitly exempted from the restrictions of Reg FD, because of the theory that the job of the media is to disseminate information broadly, which brings us to a necessary new skill IR practitioners need to have: media relations.
Take the case of Apple Computer. Not surprisingly, the company declined to comment about the events described below so the conclusions are my own. Apple has faced skepticism from some quarters about whether new chief executive Tim Cook can build on the trailblazing legacy of Steve Jobs. What’s the next big thing the company from Cupertino will introduce? What innovations will disrupt markets the same way iPods and iPhones turned the music and cell phone industries on their ear?
Building on its loyal mobile users, Apple has introduced some innovative Blue Tooth-enabled technologies such as iBeacon and Touch ID, which make the Apple in-store experience unique and showcase the promise of a mobile-enabled digital wallet. But Apple’s rivals are moving along a different technology path to implement touch-and-go payment systems on Android phones, potentially leaving Apple on the sidelines.
In January, the tech giant was preparing to report a quarter in which growth in iPhone sales was below expectations while activist investor Carl Icahn was pushing a non-binding shareholder resolution urging an increased share buyback. The day before Apple’s scheduled earnings release, a headline in the Wall Street Journal declared: Apple pushes deeper into mobile payments. Official company spokespeople from the fanatically tight-lipped company refused to comment, but the news report raised eyebrows by sourcing ‘people familiar with the situation’.
The next day an analyst on the earnings call asked Cook about the company’s intentions regarding mobile payments. Here is part of his answer (thanks to Seeking Alpha for the transcript): ‘People love being able to buy content… from their iPhone. It’s clear there’s a lot of opportunity there… We have zero issue coming up with things we want to do that we think can disrupt in a major way.’
Although the stock took an 8 percent hit on slower iPhone growth, Cook’s comment set pulses racing for some analysts and commentators as speculation over what this could all mean mounted. Apple took the price hit as an opportunity to increase its share buyback and Icahn ultimately dropped his buyback proposal. Cook also told his shareholders in a letter explaining an additional $500 mn purchase of Apple stock: ‘We believe a revolutionary payments solution is now a very real opportunity the company could choose to pursue.’
Whether coincidence or orchestration, this particular media story clearly benefited Apple with its investor relations side effect.
