In the always-connected social media environment, it’s often difficult for CFOs to say with confidence who their most important investors are listening to, what events will affect them, and sometimes, who they are.
The volume of data available to investors today — via traditional sources such as financial statements and analyst reports, and untraditional ones (read social media) — and the speed with which it’s distributed, have combined to produce an enormous change in how investors react to news about the companies in their portfolios. When Carl Icahn takes to Twitter in his efforts to prevent Michael Dell from taking his company private (“all would be swell at Dell if Michael and the board bid farewell”), we know the world has changed.
There is, however, one person whose job it is to know all that: the Investor Relations Officer.
Knowing the investors — who they are, what they’re thinking about, and figuring out what affects them, and thereby a company’s stock — is the IRO’s job, as is managing communications with the capital markets.
Unfortunately, at many companies the IRO can’t do that job effectively because he or she is viewed simply as a gatekeeper who sets up meetings for the chief executive officer and hosts conference calls. Consequently, IROs are frequently left out of decision-making. This denies companies the information IROs uniquely possess, and heightens the risk that company decisions will be made without knowing how they may affect investors.
And that’s dangerous.
This Is Your IRO Taking Care of Business
An IRO spoke with FTI and told us about her company, a developer of wireless technologies. As Wall Street saw it, the company kept missing quarters, regularly coming in below the analyst consensus earnings estimates. The company’s leaders thought the company was right where it should have been, and couldn’t understand why they were being slammed quarter after quarter.
Fortunately, the IRO was able to identify an analyst who, although not with a major firm, influenced other analysts. This analyst, the IRO knew, wasn’t interested in quarterly earnings; his projections were long-term.
The IRO spoke with the analyst, explained the situation to Thomson Reuters and NASDAQ, and convinced them to remove this analyst from their quarterly expectations reports while keeping him in for their 12-month consensus.