We asked Professor Baruch Lev a few questions
– the author of Winning Investors Over.
In the book Winning Investor Over Baruch Lev describes, based on his own and other economists’ research, how to intelligently deal with Wall Street in order to increase the share price (although there are some differences to the European markets, it is to a great extent applicable here). By using real case studies and supported by rigorous analysis of data Lev shows, among other things, how to build and maintain market confidence and how to deliver bad news effectively.
Winning Investors Over is arguably one of the best books written about investor relations, and clearly shows that despite the uncertainties surrounding the stock market today, it is possible to develop a long-term, mutually beneficial interaction with the investor community.
We asked a few questions to Professor Lev who was on his way to Europe to talk about his book:
Q: One objection to providing guidance is: “But then we might have to warn on profits, which will have terrible consequences”. What is your comment on this standpoint?
A: (Regarding warning on bad news.) First, you don’t lose anything on the warning because when the bad earnings come out you will get hit anyway. But if you warn, studies show that your credibility as an honest investor friendly manager increases significantly. Also, the likelihood of being sued by shareholders decreases significantly, though this may not be a great concern in Sweden.
Best way to reach investors
Q: Many companies see investor relations merely as a discipline to comply with rules and legislation, what do you find to be the most effective way to communicate with investors?
A: The most effective way to communicate with shareholders is by providing relevant information beyond the legally required. I devote a whole chapter in my book to this (Beyond GAAP).
The importance of providing the right message
Q: Some surveys claim that communication can make up anything between 25 to 40 per cent of a company’s market cap. What is your view in this matter?
A: I don’t believe you can permanently increase share prices by PR. But if you present better your fundamentals, you can get a substantial price boost, because many companies are undervalued because investors do not understand the complexities of the business.