Investor relations are activities aimed at building and maintaining positive relationships with the investor environment of an organisation that, with shareholders, potential shareholders, strategy investors, and other entities that constitute the basis and support of a capital market.
Investor relations are built, among others, through such activities as the creation of a department of investor relationships in a company; examining entities in the environment, as well as public opinion when it comes to company image; implementation of campaigns aiming to modify employees’ attitudes to ownership changes; conducting a reporting policy, and the 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 who have invested in company shares become its owners. That is how you should treat them – as owners, no matter whether 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 their 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 the questions they ask.
Treat investor relations as part of a strategy
Investor 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 a prospectus or quarterly report. In order to be efficient, it should be an important element of the 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 the company, informing people about ways of building relationships with investors, raises their trust and loyalty.
Adapt to the 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 detailed market research. Just listen to problems and doubts, and react to them. Only thanks to feedback will you be able to develop relationships.
Investor relationships mean dialogue, not a monologue. Closed call-centre, weird contact form on a website, no answer to queries – this is what discourages people and makes 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 shareholder’s meetings or obtain up-to-date information all the time. That is why it is worth investing in such solutions as general shareholder’s meetings online, investors’ chats, and publishing on a website, the meeting 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; do not concentrate only on publishing results or indicators, and talking about net profit forecasts. In order to raise investors’ trust and attract them, you should treat them as owners. Be visible. Inform them about initiatives the company is engaged in, facilitate communication, and take part in conferences or meetings with investors. This will positively influence the company’s reputation, and make 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 it is you who should reach investors, not the other way round. In the case of social media, your task is really easy; you can show at the same time how important good relationships are 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, and regular communications – this is the key to success. If you have published on the website a record of investors’ chat, do it in the case of future chats as well. If you have announced a general shareholder’s meeting via e-mail – do the same each time. Make investors accustomed to some behaviours, be predictable.
Do not avoid contact in time of crisis
Behaviour that is very common in 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 side, in the case of a slump, this activity stops. It’s a mistake! A professional company is equally active all the time. In the case of a problem, investors need communication as much as in good times, or maybe even more at this time. In informing them about your future steps in the case of a crisis, you reduce the possibility of their withdrawing their capital. Project the image of a professional company that solves problems, not one that avoids investors.
Concentrate on modernity
Using modern tools in IR is a very good strategy. It will make both your work easier, and positively influence the company image. Follow and implement current IT novelties. 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 information.
Take care of quality
Remember: an investor is a co-owner, a client, and a partner.
The company should care about their contacts with its investors. Make sure that reports are written in clear language, adjusted to the 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, and emphasis.
Building investor relationships is a process where effects are not immediately visible. 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 investor relationships has a great potential, and allows the possibility to create the company value and image in an investor’s 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 departments. Only companies with good internal organisation are able to guarantee the greatest quality of external communication.