New year – time for a new IR plan
Now that we are at the beginning of a new year is the time to go through last year’s IR activities and analyze what went well and what perhaps did not go well. The next step in the process is to reconcile this against the targets set in last year’s IR plan in order to develop and improve the plan for 2011. Since much of the IR work is reactive to its nature depending on both external and internal events, it is imperative to plan the activities aiming at the investor community and set both long and short term goals, combined with a plan to achieve those objectives.
Unfortunately, many companies tend to equate the IR plan with the financial calendar and have no other objective than to satisfy the regulated requirements. This does not create a good breeding ground for building shareholder value over the long term.
Is it worth it?
With a thorough, consistent and transparent IR work over time, companies can achieve increased liquidity and reduced volatility in the shares, an optimal and well-diversified shareholder structure, reduced cost of capital, increased shareholder value and higher multiples relative to competitors and/or other appropriate comparable companies. To achieve these goals more is required than just reactive work. A well-conceived and firmly established IR plan is the first step toward creating true shareholder value.
Isn’t this something that should be in the interest of all corporations?
/Mikael Zillén, @mikaelzillen
Founder & Digital Specialist
+46 762 13 00 40 | mikael.zillen (@) boxcomm.se
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Sheryl Joyce
februari 8, 2011 at 20:09Hi Mikael,
Good post on merits of why companies should have an IR plan. In addition to having some well-defined objectives, IROs should take the time to really think about how they are going to evaluate the plan’s effectiveness.
There are many schools of thought on what metrics should be used to measure the success of the IR plan. Some may include number of media hits, increase in sell side coverage and the number of buy side meetings during the year – but I don’t think these are enough anymore. Especially since there has been a steady decrease in the number of sell side analysts over the past few years and social media has changed the game for newspapers with an increase in the number of journalists who use Twitter and YouTube to get story ideas and share their articles.
I’m not saying it is wrong for all companies to include the aforementioned metrics to help gauge the success of their IR plan, after all a larger company will no doubt have analyst coverage, whereas a small cap company may have none.
Measuring the success of an IR plan shouldn’t be taken lightly and should involve collective input from the IRO and the management team where a frank discussion is held that asks ‘what it is they want to accomplish’. Defining concrete metrics together will help provide a good foundation to realistically evaluate the IR plan while also bringing to light items that could be included as the plan evolves over time.
In my experience as both an in-house IRO and consultant, a typical IR plan is measured on an annual basis, but like anything, this can differ based on a company’s particular business strategy.
In addition to the three metrics I cite above, some more examples of what to measure may include new institutional investors or an increase in holdings by existing investors, investor perceptions, number of face to face contacts made through roadshows and meetings with targeted investors, and website visits.
This is by no means a comprehensive list and again the specific objectives you set, will drive what is measured.
Best,
Sheryl
Mikael
februari 8, 2011 at 20:24Thanks Sheryl.
Very good input, of course it is of outmost importance to set measurable goals in conjunction when implementing an IR-plan.
Best regards
Mikael