Demystifying the Current IR Landscape
From the rise of virtual investor meetings to the challenge of delivering good news in a turbulent market, the role of investor relations has changed dramatically over the last two years. Larger forces shaped by technology and the democratization of information have categorically redefined the scale, scope and complexity of the function, in addition to its strategic value as a key part of the modern-day executive team.
Highlights from the newly released “2022 NIRI and Korn Ferry Investor Relations Career Trends Survey Report” reveal investor relations salaries rose significantly. The increase, across the board from small cap to mega cap companies, solidifies IR’s role as the bridge from the C-suite to the street.
Frequently, the IR profession is misunderstood by management and boards. With thousands of public companies clamoring for the attention of investors and the media, the goal of IR is to ensure the investment community has an in-depth understanding of your equity story and it is being heard—the value of which, is admittedly, difficult to measure.
By adopting a compelling equity story and distributing it as widely as possible, a company should—in theory—achieve a reasonable valuation. An equity story reflects the company’s positioning in the market, which, in turn, directly influences value and share price. Differentiation is a key part of a solid equity story that provides clarity for investors, bankers and financial analysts who rely on the story to advise on public market valuation.
That’s why participation in investor conferences is a critical part of IR strategy. Conferences, one-on-one meetings, and non-deal roadshows are one of the most effective ways to explain the business, how it makes money, the drivers behind it and why it’s a good investment.
The IR skillset pairs discretion with a subtle hint of promotion and a repertoire of credible adjectives intent on valuable differentiation. We translate industry jargon into layman’s tongue, communicating the fundamentals of a business and highlighting corporate strategy and outlook for medium term and long-term growth while adhering to timely disclosure.
IR keeps track of every question asked, who management met, and provides insightful feedback. IR also helps fine-tune the narrative, materials and delivery. IR advisors in the small cap world can be a cost-effective solution and a way to stretch a smaller IR budget. Considering the large salaries of an in-house IRO, it makes sense for small caps to outsource the function.
In practice, though, an understandable story doesn’t always command an upwards stock price or increased volume—a particularly acute challenge when markets are unstable. However, IR should never be measured by stock price rather, clearly framing an equity story and ensuring the investment community hears it and gets it. If you have a good business, the rest will eventually fall into place.
