Since the start of the GFC, there has been a tightening of the investment market, and it has become increasingly challenging for companies to attract and retain investment funds. However, in recent months, we have seen a renewed interest in investing in shares, with several popular listings on the NZX and investors looking for new opportunities. This is a good time to make sure you have the right strategy in place to get investors interested in your business.
“Investor relations (IR) is essential. Far from being an additional cost, an effective IR programme can not only save valuable management time, but can also help to deliver a fair valuation for the company’s equity, reduced funding costs and provide a resilient shareholder base which will stand the company in good stead if times get tough.” UK Investor Relations Society.
CREATE A GOOD STORY
To get investors interested in your business, you need a good story.
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Make it appropriate for the people you are talking to.
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Investors and analysts - Tell the story in language that they will understand –accounting terminology, financial measurements, balance sheet metrics and financial targets.
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Highlight your USP – the product, service, strategy or IP that makes your company unique. Small and medium cap investors want to put their money into companies that have the opportunity to grow.
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Clearly outline your growth strategy, management credentials and market opportunity. Include your successes to date.
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Investors like companies or businesses that can demonstrate a good track record.
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If you’re talking to retail shareholders, make your story more entertaining and simple to understand. Avoid too much business and financial jargon.
IDENTIFY YOUR KEY INVESTORS
Work out who are the most important institutions and individuals to build relationships with. Also find out what their current opinion is on your company. Most investors will be happy to give you some time over the phone, and even face to face if you’ve got a good story to tell.
START SMALL Get private shareholders on board first, then work your way up to small brokerage houses, then bigger institutions and research analysts. Provide a steady stream of information about your company and your achievements, in formats that are accessible to the investor audience. As you put positive runs on the board and communicate your achievements, more and bigger investors will start to take notice.
ALWAYS DELIVER ON YOU PROMISES
Set realistic goals and then meet and exceed expectations.
OPEN DOOR POLICY
Make it easy for investors to find out more about your company, whether it’s providing informative content and updates on your website or allowing access to senior management for more indepth meetings. Answer investor queries promptly and follow up to create a lasting relationship with them.
ACCESS TO SENIOR MANAGEMENT
Many of the larger institutions and funds will research a company for 12 to 18 months before they decide to invest. Meetings with senior management are cited as some of the most critical elements in the research process
KEEP IT SIMPLE
Create communications that are simple to read, eye catching and engaging. Use graphics and imagery to share your story, rather than long pages of boring text. Put in place a planned programme of regular investor communications, and identify the most appropriate forms of communication for your audience, for example, email, print, website or events.
BE PROACTIVE
Don’t wait for investors to come knocking at your door. Be persistent, attend investor seminars and conferences, keep a list of contacts and send updates to them on a regular basis.
ENCOURAGE LIQUIDITY
Increased liquidity usually equates to a fairer share value, and is more appealing to investors due to the ability to find a buyer, if needed. Private investors often buy smaller parcels of shares and trade them more often, providing much-needed liquidity.
REVIEW
Once you have an investor relations programme in place, it is important to review its efficacy on a regular basis. Is the programme meeting its objectives, is the composition of the shareholder base appropriate, is the company targeting the right potential investors, are the most effective communications and channels being used?
For more advice and support with your investor communications, contact Jackie Ellis 09 360 8500 or email jackie@ellisandco.co.nz