A strong IR program has significant impact on a company’s valuation, according to a recent survey by IR firm TMX Equicom and CIRI. But while some of the results in the study are predictable, others are surprising, according to Equicom president David Mason.
The survey had two responding groups: the professional investment community – including sell-side analysts, investment advisers, buy-side analysts and investment bankers – and investor relations professionals.
Of the investment community, 98 percent agree IR has an effect on a company’s valuation. Given two similar companies with differing IR standards, 93 percent would pay a premium of at least 5 percent for the company with more credible IR practices. Sixty-nine percent would pay a premium of at least 10 percent, while 24 percent would pay 15 percent or more.
Again, 93 percent would discount share price by at least 5 percent for a company with less credible IR practices; 67 percent would discount at least 10 percent; and 22 percent would discount 15 percent or more.
Mason thinks the top qualities investors look for in IR practices are predictable. About 70 percent of the investors place ‘timely and comprehensive disclosure’ in their top three most valued traits.
The surprises come in the communication tools investors most value. Only 27 percent place IR websites in their top three, while 11 percent say social media are in one of the top three slots. By comparison, 36 percent of IR professionals put IR websites in the top three, and 9 percent rank social media in the top three.
‘I’d have expected those to rank higher, given the amount of publicity put on social media channels,’ Mason says. ‘But a lot of those types of activities and tactics are in transition. We see our own client base companies dipping their toes into it rather than jumping in.’
It might be that social media and websites are more important to retail investors (not represented in the survey), who lack access to IROs and management.
One other surprise: 62 percent of IR professionals rank press releases in the top three communication tools of most importance to investors, versus 47 percent of the investment community.
‘I would have assumed roadshows and presentations would have placed higher,’ Mason says. ‘It’s a relationship business and you need to be out there building a relationship with the Street. In my view, there is no more effective way to do that than roadshows and investor days.’
