By now, most CEOs have internalized the importance of consistent messaging to financial audiences. “Say it, say it again and remind them that you have said it” is a phrase repeated ad nauseum by communications professionals over the past few decades. The real question today – is a consistent financial message disseminated by only traditional investor mediums, such as earnings press releases and published road show presentations, enough to communicate your corporate investor message? The way the investment community, media and other key influencers gather information and comment has changed dramatically. Financial communications vehicles, unfortunately, have not kept up.
Traditional financial communications were created when the Dow was 1500 and the bulk of US equity volumes were still traded by specialists on the floor of the New York Stock Exchange. Today, more stock volume is traded in the first hour of the exchange being open than in a single day in 1985, and a high proportion of the trading goes through black box or algorithmic systems on behalf of passive investment vehicles. So, the sell-side analysts who pepper earnings calls with questions are less likely to be briefing long-only, buy-side firms looking for good investment ideas, and more likely to be feeding short-term story nuggets to trading desks to pass on, usually electronically, to high-volume traders.
To win, you have to play their game and go beyond traditional vehicles.
Reaching the Global Audience
Traditional vehicles, in addition to not being real time, are generally not intended for more global audiences. The growing reality is that investors and influencers in your company are far more global in knowledge and in reach. More and more investors are global and very few European or Asian arms of investment funds talk to their U.S.-based brethren, in some cases because of regulatory walls between the two geographies. Depending on the sector, these investors may have a narrow view of business conditions in more than one region the company operates in or not fully understand either demand drivers or operational realities that give the company its competitive edge. Companies need to ensure that they tell their story in such a way that it resonates and that they have the relationships and resources in place to help them to reach the right audience.
Maintaining Support in the World of Shareholder Activism
Activists now have almost $100 billion in their war chest, and they have to deploy these funds quickly because of the limited life of their funds. They have become more mainstream, and therefore, most institutional investors give activists the benefit of the doubt, often supporting all or partial activist slates because they may provide a greater balance to corporate boards. For these reasons, the most disheartening new reality for CEOs is the decreasing impact on gleaning top shareholder support from one of the most traditional financial communications tool – the one-on-one meeting. Longstanding relationships with institutional investors are rarely enough to weaken the changing point of view on shareholder activists.
Unfortunately, there isn’t a new communications tool that can help keep companies off an activist’s radar screen. Even well-performing companies like Apple and Gannett are public targets of Carl Icahn and Jana Partners. But, companies can be far better prepared if an activist strikes – and there are several new communications vehicles that can help.
First, companies will need to identify their most acute points of vulnerability and create very quick and easy ways (if needed) to get the corporate story out around these issues. Consider board videos to showcase top-performing directors who will be up for re-election. Video snippets of the CEO answering the toughest questions at a sell-side conference or conference call housed on the corporate website. An industry analyst report supporting the company’s strategy, which investors might not normally have access to, can also be helpful. Most importantly, create a way to get this information out quickly if needed. Tweets with links back to the corporate website, a landing page devoted to the topic at hand with short and long-form questions, and responses and investor messages that can go live within hours of the first announcement an activist has taken a significant interest is a start.
But, the more things change, the more they stay the same. It is still critical to have a financial message that resonates with investors and their influencers. It just needs to be more accessible than to just the investment elite. Don’t ignore the financial media as important influencers. With an average of 100,000 followers per top financial reporter, there is no one that can move your story globally more.
Maximizing valuation requires management and their boards to address the new reality of financial communications. They must ensure that the corporate narrative resonates with key influencers, while utilizing the new channels to communicate with them.