CULTIVATING RELATIONSHIPS

Six Steps to Building Strong Relationships with Investors 

A healthy relationship between a publicly traded company and its investors is critical to its long-term success. Companies, through their Investor Relations Officers (IROs), want to build strong, long-lasting relationships for a variety of reasons such as enhancing long term shareholder value and building credibility with the investing community. A good relationship with investors is also helpful when a company seeks to raise capital and in fending off the dreaded activist investor.  

Over the past few years, companies have seen the composition of their investor base change with the rise of retail investors. Just as the investor has changed, so too has the role of the IRO. IROs are rethinking their playbook to manage the inherent complexity that comes with an increasingly diverse range of shareholders.  

Here are some tips for cultivating long lasting investor relationships:  

Don’t Rely Solely on Social Media as Your Primary Communications Strategy  

Social media and other platforms are accessible, efficient channels for a company to broadcast a message to their audience, allowing executives and investors to communicate somewhat informally. However, relying on these platforms as relationship building tools is a risky endeavor as informal communication can lack context and is more likely to be misconstrued. Given that investor relations at its core is an interpersonal business that requires clear communication, IROs should be weary of relying on social media as their sole method of relationship building.  

Call Your Mother…And Your Investors 

There really is no replacement for the old-fashioned phone call as it offers instant 1:1 communication with an investor (be it institutional or retail). In a world of direct messaging and in the absence of face-to-face meetings, it also offers a personal touch at a speed that cannot be replicated by any other medium. We would argue there is an over reliance on the less-personal mediums like e-mail, and by hopping on the phone, it shows a willingness to put yourself out there and answer tough questions directly from investors and allows for a two-way dialogue where you can quickly clarify any misunderstandings. Don’t forget that investors can be great independent sources of information, supplying important details on where they think the company can be improved. Feedback on how the company is perceived by investors is essential, even if it makes management sweat.  

Don’t Be Afraid of Overcommunication 

Building relationships with regular communication allows you to identify which investors are committed for the long haul and which might support activists pushing for a quick profit. Additionally, frequent and honest contact between you and your investors means they know what to expect from you and can help identify challenges ahead of time. It is easier to communicate bad news when you are in regular contact.  

Be an Open Book 

Open and transparent communication between an IRO and their investors is the fastest way to create credibility and trust. Integrity is further cemented when the IRO communicates openly about difficult things facing the company and often leads to better engagement and commitment from an investor as they become more comfortable with the company’s vision. It leads to a cohesiveness and bond where investors will go above and beyond to help the company address any issues. Warren Buffet argues for a high degree of openness. He likes to treat stockholders as he would co-owners who are siblings, discussing what worries him, what the various businesses are worth, how durable their competitive advantage is and how he plans to allocate capital. 

What’s Your Story? 

Reaching out to prospective and current investors is an important first step in building relationships, but what you are communicating is just as important. A compelling narrative that resonates with your investors encourages them to want to know more, invest and advocate for the company. Good investor relations requires taking an active role in articulating company strategy and purpose to all classes of investors and developing ongoing narratives about their business goals, incentive performance goals and targets. Investor engagement depends not only on the frequency of communication but the message you are delivering.  

It’s Not All About You 

The more engaged investors are, the more beneficial the relationship. Some companies are guilty of spending vast sums on digital marketing and driving people to their website without thinking about ‘then what.’ Increased site traffic is much better than none but, it’s not enough for them to just visit your site. Think carefully about what you want the user to get out of their website visit. Once investors are engaged, your goal is to keep them engaged by feeding them content that delivers real value, not just making their visit just about the company. Coinbase does a fantastic job of this. Its investor relations page is a masterclass in showing a deep understanding of their audience in the way that they present not just company information but also learning tools and other industry insight that is of real importance to the investor.  

Make sure you are using the right communication channels, communicate often and openly, and craft messages that tell your company’s story and deliver helpful content to investors. Relationship building requires time and resources, but is worth the effort when you successfully raise capital or rebuff the advances of activist investors. After all, the point at which an activist arrives on your doorstep is not the moment you want to start educating major investors about your story and strategy.