Does Investor Perception really matter?

Perception studies conducted by Orient Capital allow companies to become better informed about how their performance impacts their investors sentiment towards their approaches to investor relations. Statistics from these studies have proven lasting positive impacts on investor engagement moving forward, especially when thoroughly conducted.

What are Investor perception studies?

Investor perception studies are comprehensive assessments conducted by issuers to gain insights into how their company is perceived by the investment community. These studies involve collecting feedback from existing and potential investors, as well as analysts and other market participants. The primary purpose of conducting investor perception studies is to understand and address any gaps or misconceptions that may exist between a company's actual performance and how it is perceived in the investment market. This article will discuss the value of the findings and the reasons why issuers should consider the use of perception studies.

Key reasons why some of our issuers conduct investor perception studies include the following:

Identify Investor Expectations

Investor perception studies help issuers gauge the expectations and priorities of investors. Issuers can align their communication strategies and business decisions accordingly by understanding what factors investors consider important, such as financial performance, strategic direction, management teams, or ESG practices. This enables issuers to better meet the needs and demands of their current and potential investors.

Improve Investor Relations

These studies allow issuers to assess the effectiveness of their investor relations efforts and by evaluating how well their messaging and communication strategies resonate with investors, issuers can identify areas for improvement. This includes refining their disclosure practices, enhancing transparency, and ensuring that relevant information is effectively communicated to the investment community.

Enhance Valuation and Shareholder Value

A comprehensive understanding of investor perceptions can positively impact a company's valuation. By identifying any misalignments or gaps between actual performance and market perception, issuers can take targeted actions to bridge these gaps. Accurate perception and understanding of a company's value proposition can lead to increased investor confidence and potentially drive the company's share price and shareholder value.

Facilitate Capital Market Activities

Investor perception studies can assist issuers in preparing for various capital market activities, such as initial public offerings (IPOs), follow-on offerings, or debt issuance. By gauging investor sentiment and preferences, issuers can tailor their messaging and positioning to effectively attract capital. Understanding investor perceptions and concerns can also help issuers address any potential barriers or hurdles in raising capital. All whilst helping shape a possible reduction in the cost of future capital.

Strategic Decision-making

These studies provide valuable insights that can inform strategic decision-making processes within an organisation. By understanding investor perceptions of a company's strengths, weaknesses, and opportunities, issuers can make more informed decisions regarding business strategies, capital allocation, and operational improvements. This helps in aligning the company's goals with investor expectations and market trends.

Recent statistical findings from perception studies carried out by Orient Capital highlight:

?????On average 43% of those surveyed disagree with the company strategy

?????75% believe that they have a good understanding of the strategy, although on questioning only 43% of them actually understand the strategy and are able to describe it

?????Over 50% would agree with a reduction in the dividend policy

?????At least one area of improvement for disclosure identified in each study

?????We have seen an increase in issuer requests to also speak also to Debt holders as part of a perception study

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“Full of informative insights into investor sentiment and delivered on time”

Orient Capital was engaged by a well-known, large cap, Natural Resources company, to assess investor sentiment towards the company’s overall IR performance in a 1Y Post IPO survey. The findings showed that while several investors felt the company’s valuation was fair, many felt that overall growth prospects and international expansion were not priced in and could provide room for further share price appreciation.

Dividends

The announcement of an incremental dividend policy was perceived positive, although numerous investors expressed a desire to align dividends to future capex plans and recommended an increase from 2024.

Disclosure

Investors requested additional disclosure regarding daily rates and Oilfield Services. In particular, it was suggested that guidance is revised following each new contract win and the plans to increase rig count per annum and the effect the change has on resulting revenues should be disclosed.

ESG

With respect to ESG, the most important observation was for the client consider, disclose and implement a long-term strategy for renewable energy.

Return on Capital

The majority of investors suggested that the issuer could accelerate shareholder Return on Capital through leverage.

Investor Relations Programme

Management and IR were asked to provide more context to numbers during investor meetings and in earnings presentations.

Client testimonial

“We partnered with Paolo Casamassima and the team at Orient Capital to conduct a perception study one year on from our IPO. Not only was our experience of working with Paolo friendly and professional, but the extensive knowledge Orient brought to bear was invaluable. The process of identifying the right balance of buy-side and sell-side participants, along with landing on a tailored list of questions was focused and efficient, leading to a well-managed process and ultimately high-quality output. The final report was extensive, full of informative insights into investor sentiment and delivered on time. We would work with Paolo again and highly recommend working with him and his team.”?

In summary, investor perception studies offer valuable insights into how a company is perceived by the investment community. Issuers can effectively engage with the investment community and maximise shareholder value by understanding and addressing the previously mentioned points: investor expectations, improving investor relations, enhancing valuation, facilitating capital market activities, and informing strategic decision-making.

I hope that this article has given you a deeper insight into the value of perception studies and how they can improve the ways businesses interact with customers and the investment community.

For questions or further information of perception studies and how we conduct them, please contact myself or Paolo Casamassima or visit our website here.