A key theme of Enable has always been, and will continue to be, to focus on all of the key issues involved in growing your company at the earliest possible stage. As our road-map takes us on a course toward an initial public offering (IPO), it is crucial for us to continue to follow this theme. Therefore, today's column covers a topic that most companies only think about after their IPO: investor relations. Proper investor relations before, during and after your IPO will enable you to continue to reap the benefits of being a publicly traded company without a lot of the hassles and problems.
I am very happy that avid reader and investor relations specialist Barry Goverman has agreed to contribute the following perspectives on investor relations. These perspectives will also give you a glimpse into the future and show you what it will be like when your company is public.
Your company is growing. You are successful. You have taken your private company public. Now, you can't wear all the hats anymore. As a public company, you have outside Board members, government reporting requirements, public disclosure requirements, and more. You have hundreds, or maybe, thousands of investors
watching you, not just one or two. You have media and industry reporters, stockbrokers and analysts, all calling for information. What and how should they be told, and who should tell it to them?
Public Company - New Requirements
Let's take a look at this different breed of investors, the public shareholders. What are their needs and their requirements? In the past, the investor relations function for a public company was easy. The company CFO filed the necessary quarterly and annual reports and the company sent out proxies and annual reports to the shareholders. Annual shareholder meetings were nothing more than a vote count for the Board of Directors and maybe a quick review of the past year. Government requirements actually precluded any talk of the future projections and opinions.
The investor relations function has come a long way from this view. Due mainly to the Internet and the proliferation of information available from computerized investor services, all investors, not just large institutional ones, have access to information. But this can also be too much of a good thing. Institutions have their own in-house analysts to do their research, but who can the smaller investor trust?
Public companies, through professional investor relations (IR) specialists have seen the value in being proactive; making their investor relations function a marketing one. Just as the buyers of your company's products and services make purchasing decisions, shareholders also make decisions based on the value of the information they receive. If you reach out to your shareholders, as you do to your product and services customers, you can serve as the source for their information needs and thus you can lead them into buying, holding or selling your company's stock.
Two Way Street
You can see that this proactive/ marketing investor relations function is a two-way street; investors looking for trustworthy information and your company providing it. Stockholders like to receive their information directly from the source. But, they need to feel sure that the information provided is credible. So again, this is a two-way street: your company provides credible information and in return has a confident, loyal shareholder base.
Studies have shown that you will reap the rewards at proxy time, when you are looking for stockholders to support your decision to invest in that current plant and equipment plan versus an acquisition being discussed by analysts. This is when you'll know that your investor relations program is working.
Published by Israel's Business Arena on March 7, 2000.