Investor relations are activities aiming to build and maintain positive relationships with investor environment of an organisation, that is with shareholders, potential shareholders, strategy investors and entities constituting the basis and the support of a capital market.
Investor relations are built, among others, through such activities as creation of a department of investor relationships in a company, examining entities in environment as well as public opinion when it comes to a company image, implementation of campaigns aiming to modify employees’ attitude to ownership changes), conducting a reporting policy, preparation of information materials for the needs of the capital market institutions, such as annual reports, prospectuses, press releases etc.
What rules should be used to effectively build investor relations?
Do not favour institutional investors
All people that have invested in a company shares have become its owners. That is how you should treat them – as owners, no matter if the capital is provided by a financial institution or a private individual. Although the specificity of these groups of investors is varied and their needs as well as expectations are different, nobody should be favoured and you should not adjust your IR activities to only one of them. Unfortunately, individual investors are often neglected and their needs are omitted in communications. This is a mistake – treat everyone in the same way as each of them needs fast access to information, explanations and answers to questions they ask.
Treat investor relations as a part of a strategy
Investors relationships are not a whim, a waste of time or a waste of money. Your “to be or not to be” depends on it. When you decide to acquire capital from the market, your cooperation with investors should not be limited to publication of compulsory documents such as prospectus or quarterly report. In order to be efficient, it should be an important element of a whole. Emphasize this not only in reports or presentations, but also in places that are easily available by minor shareholders, for example on your website. A clearly presented strategy of a company, informing people about ways of building relationships with investors, raises their trust and loyalty.
Adapt to needs of your investors
You need financing and capital, so you need good relationships. That is why communication should be the answer to what recipients expect. You do not have to do a detailed market research. Just listen to problems and doubts and react to them. Only thanks to feedback will you be able to develop relationships.
Investors relationships mean a dialogue, not a monologue. Closed call-centre, weird contact form on a website, no answer to queries – this is what discourage people and make them not trust you. It is obvious that the relationship in which only one side is engaged cannot be successful. Individual investors, contrary to people managing funds or analysts working in financial institutions, do not have much time to take part in general shareholders meetings or obtaining up-to-date information all the time. That is why it is worth investing in such solutions as general shareholders meetings online, investors chats and publishing on a website meetings reports, presentations or newsletters.
Use understandable language
Your messages must be reliable, clear, acceptable and credible for all groups of stakeholders. Do not perceive relationships with investors only from a simple purchase-sale perspective and do not concentrate only on publishing results or indicators and talking about forecast net profit. In order to raise investors’ trust and attract them you should treat them as owners. Be visible. Inform about initiatives the company is engaged into, facilitate communication, take part in conferences or meetings with investors. It will positively influence a company reputation and let you stand out from others.
Use the benefits of social media
Do you publish compulsory materials? Is all information available on your website? This is not enough! Why? Because this is you who should reach investors, not the other way round. In case of social media your task is really easy and you can show at the same time how important are good relationships for you.
Use long-term actions
If your contact with investors is just a random relation, you are not going to succeed. Be consistent and regular A coherent and clear company policy, regular communications – this is a key to success. If you have published on the website a record from investors chat, do it in case of future chats as well. If you have informed about a general shareholders meeting via e-mail – do the same each time. Make investors accustomed with some behaviours, be predictable.
Do not avoid contact in case of crisis
The behaviour that is very common in case of relationships is talking about good things, about successes, and not mentioning problems or failures. If a company experiences a boom and is successful, there are many meetings with investors, press conferences and company owners want to reach the greatest possible number of people. On the other hand, in case of a slump this activity stops. It’s a mistake! A professional company is equally active all the time. In case of a problem investors need communication as much as in good times or maybe they even need it more. Informing them about your future steps in case of a crisis, you lower a possibility that they might withdraw their capital. Build an image of a professional company which solves problems and does not avoid investors.
Concentrate on modernity
Using modern tools in IR is a very good strategy. It will both make your work easier and positively influence the company image. Follow novelties then and implement them. Use new information channels: there are more social media than Facebook! Create RSS reader and a newsletter. Get to know CRM tools – they will give you good organization, regularity and quality of information.
Take care of quality
Remember: investor is a co-owner, a client and a partner.
The company should care about contacts with its investors. Make sure that reports are written in clear language, adjusted to a recipient (try to avoid obscure industry definitions). Ask for comments, introduce improvements. Inform investors about what you are doing: if a quarterly report is ready, insert proper links in your newsletter. If a company has planned some changes, inform investors about their introduction in social media channels. Take care about proper communication, commentary, emphasis.
Building investor relationships is a process whose effects are not visible at once. However, the key to success is quality and consistency. Effective communication is possible if it involves not only messages from a company to investors, but also some feedback, for example regarding expectations and emotions. That is why it is believed that using communications in investors relationships has a great potential and gives possibility to create the company value and image in investors’ consciousness.
Investor relationships must be a part of a consistent strategy based on controlled communication and introduced together with CEOs, people responsible for PR and finance experts from control department. Only companies with good internal organisation are able to guarantee the greatest quality of external communication.