FIVE Reasons Why Exempt Market Issuers Should Embrace Investor Relations
By: Jeremy Dietz
I make a living helping public companies position themselves within the capital markets. Technically speaking, you’d call me an investor relations consultant. The problem with the term ‘investor relations’ is that it means different things to different people. To me, an effective IR program combines a component of marketing strategy with responsible shareholder communication. IR should be less about promotion and more about proactively finessing investor messaging. It is a job function that requires constant attention in the capital markets, if for no other reason than because public companies are legally obligated to disclose regular information to their shareholders. That’s the bare minimum.
The good companies play the long game. They engage in continuous dialogue with their investors. They don’t limit their investor focused communication to legally required financial filings. Rather, they understand the benefits of having a differentiated capital markets brand. They know that brands aren’t built overnight and that their messaging needs to be unique and credible. And they know that having a clear identity on the street has big implications when they’re attempting to access capital years down the road.
I believe that the IR set of responsibilities in the public markets also apply to the Exempt Market, specifically to issuers. In fact, I believe that this sort of financial brand development and proactive shareholder engagement should be a permanent job function for the exempt market issuer. Investor communication should not be limited to the intermittent stops and starts that coincide with M&A or fund raising activity.
Here are my top reasons for why every Exempt Market issuer should have a dedicated person looking at this stuff:
1. Let the C-Suite Do What It Does Best
While upper management should remain in constant contact with investors, their responsibilities are broader than just this. Companies that rely on their CEOs and CFOs to handle their IR program are the same companies that take a reactive approach to shareholder communication. Typically, the c-suite does not have the time (and sometimes the skill set) to consistently ensure that their message is resonating with current and future investors. Allowing the IR job function to reside with a dedicated professional, allows senior management to focus on the broader functioning of the company – which is what they’ve been tasked with in the first place.
2. Defining Your Message
The CEO or CFO usually has an idea of how their company’s investment opportunity differs from others in the market. Articulating this message in non-technical and memorable terms is where they can struggle. I see this all the time. Even the most sophisticated of management teams can load their investor marketing collateral with unwarranted detail and technical jargon. This usually translates into a data dump where PowerPoint slides get bogged down in tiny font and excessive bulleting. Enlisting the help of an experienced IR professional can help to extract the company’s core story and unique market positioning. This can usually be summed up in a few sentences. While senior management has a tendency to get overly detailed, a good IR person can simplify your corporate identity into digestible, differentiated, and memorable terms.
3. Ensuring Consistent Messaging
Strong brands, financial or otherwise, are created with consistent messaging. Simply put, an Exempt Market issuer’s identity is very much tied to repetitive and clear messaging. Your corporate messaging should be consistently present in all communication vehicles. This begins at the offering memorandum stage and cascades outward from there. Companies that lack the IR function typically have a variety of people (CEO, CFO, Business Development) all communicating what they interpret the company’s message to be. This often results in a variety of messages hitting the market, which in turn can lead to an undefined corporate identity. Building out a company’s IR desk gives issuers a financial brand guardian that ensures all communication is consistent across a variety of investor communication vehicles.
4. Proactive Communication
A dedicated investor relations officer (IRO) will also have the bandwidth to ensure proactive investor communication before you need it. Attempting a $25 million equity raise is not the ideal time to initiate an investor outreach program. You want your brand identity firmly established within the financial community long before you get to this stage. It makes your story more believable and opens up doors that much easier. More specifically, this should involve proactively following up with EMDs and dealer reps on market feedback, ensuring timely responses to investor inquiries (you’d be surprised how many companies neglect this), actively seeking out opportunities to present the company’s story, and communicating the development of current investment offerings. Proactively hitting the market with your company’s story and its progression, builds trust with investors, EMDs, and dealer reps. It also allows you to reinforce a track record of success as you successfully achieve key benchmarks.
5. Market Intelligence
In the public markets, you’ve got to stay on top of street rumours and know what’s going on with your peers. By virtue of their constant communication with the street, the IRO is usually the person who’s the most tuned into who’s trying to raise what amount of capital and the specifics driving investor demand. By activating an IRO in an Exempt Market setting, issuers can garner increased intelligence on what competing products are coming to market and who they are competing against for capital. Much of this is information that’s accrued by staying in constant touch with EMDs and dealer reps. If you want to differentiate your product amidst a variety of competitors, it’s important to know who you’re competing against and how they’re being received.