It is sometimes difficult for Asian CEOs and senior management to see the benefits of investor relations following an IPO. In a straw poll conducted among Thai IROs privately some time ago, it was clear that many Thai small and mid-caps have never felt the need for an IR officer at all, preferring to use the CFO or someone in the finance department. Following a talk on IR at Bursa Malaysia once, two women waylaid me near the stage begging for more advice as they were secretaries who had been assigned by their boss to ‘do IR’. An IRO at a well-known listed company in Singapore once advised that shareholder meetings should simply have plenty of food and fun quizzes with prizes as a pacifier for retail shareholders.
Clearly, IR means different things to different people. The common denominator is that IR is often seen as a cost center or part of a PR strategy. That companies sometimes don’t put sufficient emphasis on it is because they don’t see what is in it for them. Unsurprisingly, many Asian IROs have different opinions about the purpose of their job, which is not a bad thing in itself as different companies’ investors may have different needs.
One may ask how much money your company made from its shareholders last year without raising capital. The answer is likely to be zero. For all the trading in the stock market, the company makes nothing from each transaction. When one then counts the cost of meeting investors over the years it may look like you need to raise capital simply to justify your IR program! Unfortunately, even a sniff of raising capital in Thailand will cause the stock price to drop. Many investors here believe ‒ rightly or wrongly ‒ that money borrowed from shareholders is free and never needs to be repaid.
For a few Thai companies, shareholders are a burden after the IPO, once the money is in the bank or the project. They find it difficult to see what use IR would be once the money has been received. Some may meet investors once a quarter, some prefer not to meet investors at all. When they find their loans becoming more expensive, and most especially at a time when interest rates are falling, they may wonder why lenders make it so hard to borrow at reasonable rates.
Companies often forget that IR aids on the debt side by keeping up a steady flow of factual information to everyone equally. IROs are all-rounders who can also make simplified explanations of technical issues. It is not unusual to receive a phone call from a bank checking that the numbers given by the finance team match the numbers IR has. This is more confidence-building than anything else but giving lenders confidence is part of the secret sauce IR brings to the table.
While a banker might appear knowledgeable when listening to a pitch by the CFO, perhaps by studiously nodding in agreement from time to time during the presentation, it is rather common to hear later that he or she really didn’t understand all that much. That is when IR gets a call to help explain in plain language.
This is important as there is a tendency among some Thai management teams to feel they have to show their foreign education by couching everything in the most obtuse language. I once worked for an organization where the department head was a PhD who insisted that if it was too easy for people to understand what she said, they wouldn’t respect her. IR needs to be able to speak in plain English (or plain Thai in my case), otherwise there is not going to be a payback for the company in terms of trust and knowledgeable investing.
What companies need to understand is that there is a lot in it for them once they commit to an investor relations program ‒ and even if there is no plan to raise capital, there are other constituencies that require factual information in plain language.
Richard Jones is head of IR and corporate communications at Indorama Ventures, based in Thailand
