IR's Seven Deadly Sins

It’s amazing how efficiently some companies damage their capital market relationships. I have grouped these common mistakes into what I call the seven deadly sins of investor relations.

If you’re looking to inject a little ‘excitement’ into your otherwise dull investor relations program, committing any of these seven sins will make your life a lot more hellish.

The full article is available here.

The Seven Sins:

Condescension

Speaking down to anyone will raise their hackles. But when you do it to someone in the capital markets the consequences can be swift and severe.

Petulance

Throwing an undignified fit and acting like a cry baby when an analyst puts a sell or a hold on your company can also do serious long-term damage to your analyst relationships (Word will get around). Most of the time, if you have a good relationship with your analyst, they’ll give you a heads up outside of market hours before their report goes out. If their recommendation is supported by the facts: thank them for the heads up, be calm, and carry on. If it’s not supported by the facts, then kindly and professionally point out the discrepancy with supporting evidence.

Enigmata

While being dark and mysterious might work wonders in the dating world, it has the exact opposite effect on your capital market relationships. If your disclosures and reporting are cryptic, or make your operations an unpredictable black box, then you’re unlikely to garner coverage from the sell-side and investment from the buy-side.

Indiscretion

If you choose to selectively disclose material information your investors and analysts will probably think one thing only:

“I am dealing with an unprofessional chump.”

That’s right chump. Not only did you break the law, now the person sitting across from you thinks you whisper material information to anyone you can get your hands on. They won’t trust you and they probably won’t invest in you.

Promotion

This is one of the worst. Never say that you're undervalued. Never talk about what your company's value should be. And don't, for the love of God, talk about what your value is going to be (unless you look good in an orange jump suit). And don't compare yourself to others.

These acts are grossly promotional and demonstrate one of two things:

1. You're desperate; and/or
2. You have a complete lack of sophistication in your understanding of the capital markets.

The companies that do best in the capital markets are those that under-promise and over-deliver.

Exclusion

When raising capital, if you exclude a broker-dealer from your syndicate, or give them an insulting percentage, their enthusiasm to do work for you will diminish. An extreme example of exclusion is to raise money through an un-brokered private placement. See the original article for more examples of harmful exclusionary behaviour.

Avoidance

If your company has just put out some bad news, your should get out in front of it. Meet with your investors and provide them the context they need to truly understand what is going on. Unfortunately, many companies burn their bridges by avoiding their investors during challenging times.

Conclusion

There is always a natural tension between the interests of broker-dealers, investors and public companies. That said, the capital markets represent a critical resource to companies and their management teams. Broker-dealers provide research coverage, access to capital and bring forward accretive M&A opportunities. Investors provide capital for management to allocate.

The seven deadly sins of IR negatively impact capital market relationships and, by extension, shareholder value. We’ve seen the consequences to companies that consistently make and repeat these mistakes. Increasingly, shareholders are holding management teams and boards accountable for their sins.

Please don't hesitate to contact me at 403-466-7220 or [email protected] if you have any further questions.

If you're interested in evaluating your current investor relations program I encourage you to use this five minute self evaluation tool.