Investor Relations: Driving Investor Engagement

Investor engagement represents a primary focus of any investor relations program. While the goals of an investor relations program can vary due to size of company and management objectives, the measure of successful engagement remains the same across all programs. Certainly, management execution and industry group are among important variables. Nevertheless, arguably the single greatest measure or indicator of an engaging Investor Relations program revolves around information flow. The best Investor Relations programs drive information flow from the company to investors, from the industry to investors, and from investors to management.

The best Investor Relations Officers and programs recognize that their primary constituents go beyond the C-Suite. The most successful Investor Relations programs seem to have a common denominator – information flow. The IROs running these programs are able to quickly and efficiently disseminate all types of information in order to address investor or management concerns.

Good information flow in investor relations revolves around three groups: (1) the company, (2) investors, and (3) the industry. The goal is to flow information in an abundant and transparent way. Doing so allows investors to easily engage with you and your story, while raising management credibility.

The Three Directions of Information Flow

1. Company to Investors: What the company deems relevant and material to investors.

2. Industry to Investors: Information about the industry that has a material impact on the company, or helps investors understand / refine their thesis on the company in question.

3. Investors to Company: Perceptions and opinions of investors on your performance, your overall business, or industry dynamics.

The primary way to determine the impact of a piece of information you want / need to flow is “Does this information materially impact an investment thesis and/or share price valuation?” Such information can range from internal company information to industry data points or news that may have been overlooked by the investor community. At a minimum, helping investors interpret industry news and events always represents an impactful driver of an investment thesis or valuation.

Four Types of Investor Relations Information Flow

In order to drive investor engagement via information flow, the IRO needs to be adept at sourcing and disseminating four types of information:

1. Company Information: The IRO must be capable of taking internal messaging and information about what is important to investors, and package and disseminate that information in a way that complies with Reg FD.

2. Industry Information: The IRO must be capable of sourcing and understanding the undercurrents, as well as interesting available data sets, facing his or her industry. The ability to find and position such data accordingly represents a primary way an IRO can become value-add to Wall Street

3. Exogenous News Flow: The IRO needs to be adept at interpreting exogenous news flow both on a macro and micro level and helping investors interpret the impact of such news flow on the company

4. Education: The IRO needs to be capable of educating new and familiar investors not only on the company’s thesis, but on how the company fits within its own industry group.

The best IROs can find, create, and provide valuable information that is both internal and external to the company. At DFT, I built a reputation for finding seemingly any available hyper-scale cloud statistic, which we then utilized in both our earnings call script and investor deck. Reading Sell-Side research on not only my competitors, but also cloud companies helped me to create a value-add reputation.

Four Tools of Investor Engagement

Now that we understand the four types of information flow impacting investor relations it is important to understand the tools available to drive engagement. The primary tools of engagement available to an IRO include:

1. The Earnings Call: An earnings call represents the primary time for management to highlight and discuss the operating performance of the underlying business. The company must provide the necessary long-term and short-term context for investors to make education buy and sell decisions. The earnings call allows the IRO to position the CEO as a strategic thinker that can illustrate a future path for the company. At the same time, it allows the IRO to use the CFO’s messaging to anchor investors to primary performance indicators and future expectations.

2. Corporate Access: Meeting with management represents one of the most popular vehicles for information flow in the Investor Relations world. Investors meeting with management are (1) new to the story or industry, (2) well-heeled shareholders, or (3) the hedge fund information fishermen. The best IROs are able to manage meeting requests and push back on conference schedulers when bad meetings pop up on the 1x1 schedule. Corporate access represents where the rubber meets the road, as these events represent the opportunity to retell the same story to numerous investors in order to build consensus. At the same time, you can gain valuable information about what competitors are saying or what investors are thinking.

3. Investor Deck: In my view, the investor deck represents a primary tool for an IRO to drive information flow. The deck can be used to not only tell your basis story, but also position your company in terms of the industry and macro backdrop. Furthermore, the investor deck allows you to present information in a way that constructively refutes or contests key investor debates. At DFT, we used the investor deck to help investors better understand the negative churn dynamics associated with retail colocation versus wholesale colocation. Additionally, we used the deck to highlight what made DFT an attractive business model, despite investor objections, via competitive benchmarking.

4. Press Releases: Content and frequency represent the most important aspects of press releases for the IRO. The press release allows the IRO to disseminate the most important information and must be transparent and informative to the realistic extent possible. Frequency of press releases are often overlooked. A higher frequency of press release that establish consistent news flow about the company can be a primary driver of reduced volatility in share price.

A quick comment on competitive benchmarking. I believe competitive benchmarking represents one of the most important tools I learned while at DFT. Developing a compelling story via competitive benchmarking represents one of the most constructive and effective ways to help change investor mindset. Providing investors the necessary performance indicators that the company’ focuses on helps drive narrative and helps to point investors in the direction of the conclusion you want them to realize.

Recently, much has been made of Investor Relations programs using social media. If you think social media helps your IR program great. The problem is I consistently find myself asking the question, “does using social media make me a better IRO, or make my IR program better?” My answer is no. My guess is that social media drives engagement mostly with retail investors. Furthermore, I have not come across many IROs who are measured on their ability to build a retail investor base with the exception of say biotech. The best tool to organically drive investor engagement revolves around abundant and transparent information flow.