Saturday, September 25, 2010

Investor relations, conversation with an idiot:

First up is the wiki short form of what Investor relations are. In my book it means getting your company into a very strange jungle where you do not speak the language, have very few connections with the natives and need their services almost constantly but have never tried to contact them because you do not know them and they do not know you. I will not get into the why or the what of IR because that should be self evident, if there is a huge community of people who can help or hinder you then you need to get to know them. IR does that.

Remember when your main competitor, got a $100 million because they needed it? Supposedly your financial advisor team did that for them using an active and aggressive IR campaign which they subsequently shut down. They shut it down for the very same reason your team will not support IR for you.  The worst thing that your investor wants is an informed and well introduced company that can access a number of options whenever financial needs have to be met. So if your finance team says no, try to figure out why. It is not the $12k over two months that he is bitching about, hell that is just the price of one long range business trip, it’s the exposure they are trying to avoid.

Some of the companies you admire so much have millions invested in IR because it pays them back in spades through connections, access to other CEOs at a high level, it permits you to impress a whole new market and attract brand new types of investors, clients and suppliers. A typical example is Apple, check out their IR website, understand that more than HALF of Jobs’ marketing efforts are based on IR. See how easy they make it to understand the underpinnings of their business. They do that because products do not create money flow, only money creates money flow. If your products are great and you do not support them with solid PR (more on that at another date) and finance them with solid backing from multiple sources you will fail.

When I set up the IR department for one of my clients I checked into bare bones services that linked essential info to the website, this is one of them and it answers most of the IR questions, from small holders to giant corporations. It also conveys the idea that my client was open and ready for anyone to buy their stock. Now they have a full time IR person who prepares corporate meetings, invites analysts and financiers and handles investor questions on a daily basis. He is worth the $175k they pay him. He knew the right people, he got their CEO in front of those people and he is a whizz at handling the financial media. He actually knew the difference between buy side and sell side investors.

A CEO will trot out the numbers and present the his company's products at an investor and financial conference in New York. There will be over 150 financial people in attendance to listen to the CEO, CFO and COO present their company’s position on key issues and their major products. The simulcast web conference will be followed by over a thousand other people interested in investing in that company.

You asked me what the IR Consultant does, that is what she did for one company, the company where i was responsible for IR and could not do it. It did not happen overnight, and it did not happen by accident, it happened because an IR specialist buckled down, analyzed the company, determined which segment of the market needed to be there and started the hard work of contacting them and setting them up.

One day you will go to a trade show. At that conference a number of investors, analysts and bankers will be walking the floor and looking at your competition. Why do you think they talk to me, because I always make sure that they are advised to meet with me, remember that small JV Bank we visited? They were another group that I have worked with for many years. Unfortunately that did not pan out because of the excessively arrogant attitude of your partner. Did you know that your company banker has an investment analyst on staff? Do you know his name, because I do and I intend to work with him on a couple of my projects. I sent your CFO and CEO to meet with him, they unfortunately did not understand why the meeting had been set up and I lost some points there. That could have been avoided with some solid IR training and review of goals.

OK, that is my last word on this topic, except to tell you that my IR consultant will not promise anything more than what she intends to do for you. How you and your company take care of that is out of her purview since she will be unable to repair damage done to your company by your own people. I am being candid here because I have exposed your company to a number of my associates, contacts and others only to find out later that it had been a mistake. We have been patient because we passionately believe in your company.

I just wish you shared the passion for the ride and not the perks,

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