The Problem with Investor Relations, Published May 3rd, 2015 on LinkedIn by Anthony Licausi
The definition of Investor Relations (IR) according to Investopedia states “A department, present in most medium to large public companies, that provides investors with an accurate account of the company’s affairs. This helps investors to make informed buy or sell decisions.”
The main issue with that definition is that it leaves out micro and small cap companies, who happen to be the ones that need IR the most as they usually fly way below most investors’ radar. Their stocks typically suffer from a lack of liquidity, low-pricing, and volatility which effectively deters new investors from taking a position in the stock.
In today’s age of technology, companies need to engage in an IR program that maintains consistent and regular communications across ALL available platforms, combining a strategy that uses traditional media outlets and newer channels including social media, SMS texts, emails, and online conferencing to name a few.
There must be relevant information and interesting content conveyed about the company to existing and potential investors to increase liquidity and elevate the stock price to levels that truly reflect the intrinsic value of the company.
Throughout my career as a corporate development and IR professional, the worst thing a company can do (and I’ve seen it time and time again), is take the lowest cost approach available which typically comes in the form of an email blast targeted at speculative buyers looking to make a quick buck.
The problem with these campaigns is that the “IR firms” you hire to execute them could care less about the long term value of your stock and just want to collect payment as quick as possible, usually in the form of cash (ranging from $5k-$30k) and/or stock they can sell in the open market as soon as the email goes out, driving your stock price down which defeats the purpose of the IR program in the first place!
This is why you will almost always see your stock price spike the day the email goes out, followed by 1 or 2 more days (if you’re lucky) of further price appreciation only to wind up back where it originally was or worse, even lower.
If you truly believe in your company, your people, and your products/services and are looking to create genuine value and appreciation of your stock to reflect those beliefs, you need to hire a professional that takes a multifaceted approach to an IR program. Just like people, no two companies are exactly alike, and there needs to be a customized strategy in place that will create value over the long term.