During our presentations we have chatted to numerous executives about that ensuring company’s stakeholders have a good working knowledge of why investors should invest in your company and the opportunities and risks driving that thesis at all times.
One executive dismissed this as a clearly bad practice due to the possibility that this information could be beneficial to a competitor. This showed us that the executive, like most of people responsible for IR or indeed implementing IR policies, need to change their focus on the information they provide to shareholders and prospective investors. This is the standard corporate presentation given in most situations in board rooms or analyst presentations:
“We have the best circuit boards in the world. Customers love our circuit boards; here are a few of their logos. We have a new secret recipe for circuit boards that we are very excited about. The circuit board industry is an $8 gazillion industry per annum. If you look at this map, I have placed red dots everywhere we have a manufacturing plant. Standing next to me are the geniuses I have hired that know a lot about circuit boards. I will now pass around some of our circuit boards for you to touch and feel. Please feel free to ask any questions that you may have.”
Everyone in the audience has their minds going 1,000 miles per hour through out the entire presentation trying to determine why they should invest by stacking the bits and pieces of information in their respective templates. It is a little like playing bingo with five cards, each card representing a different investment thesis, and every piece of information covers a spot on one or more cards until finally, BINGO! The faces on the audience members during these presentations can be fascinating. It’s like listening to a very long riddle where the person telling it doesn’t actually know the answer. An example of what they should have said:
It is our goal to be an excellent candidate for the “Growth at a Reasonable Price” portfolio. This chart shows the steady positive industry growth being driven primarily by the following factors… Our current market share is approximately (x) which has grown steadily from approximately (x) three years ago, which has been driven primarily by the following factors… Based on peer analysis tools, here are the average ratios and growth rates of similar shares to our company as compared to our current ratios and growth rates.
There is nothing in the second presentation that is of any value to a real competitor – this is all general knowledge to them. If anything, it’s the standard presentation that offers the potential for competitive insight. Okay, so what does this have to do with IR best practices?
- Push the information in the second presentation to the public in every possible format possible and by every means possible.
- Do everything possible to get the business cards (through online form or in person) of everyone who reads, listens, watches or consumes the information in any way.
- Update the information as necessary (but very promptly) to adjust for changes and to incorporate answers to frequently asked questions.
Submitted by a puzzled investment thesis bingo player.
“Competitive information rests in the companies’ products and services; investors don’t buy the company’s product or service, they buy into its investment thesis.”