The Value of (Investor) Communications in Times of Crisis

Exceptional market turbulence, soaring unemployment, disrupted supply chains, an overtaxed healthcare system, empty streets, parents struggling to motivate their kids for home schooling. I could go on, but it is clear that the COVID-19 pandemic has impacted the world like nothing most of us have ever experienced before.

We are faced with huge uncertainty: health wise, economically and socially. One of the most important things for people under these circumstances is to have access to regular and reliable information. Roughly speaking, people want answers to the following:

1.    What’s going on, what will happen, how am I impacted?

2.    How long will this last?

3.    What can be done?

This need for information extends to the capital markets. Applying the questions above, this is what investors want to know from the companies they are invested in:

1.    What’s new? What is different in how you operate today as compared to pre-COVID days, and how are your customers behaving differently? How will this impact your results/prospects/capital needs?

2.    How do trends in the general environment affect you (positively and negatively)? Are you seeing any trends that will allow you to predict how you will be impacted if this lasts for one month, three months, six months?

3.    What are you doing to mitigate the impact? How are you preserving/generating value?

These are obvious questions. While it may not be possible to provide all the answers, acknowledging these information needs, and addressing them as best as possible, will go a long way towards creating goodwill, credibility and investor brand equity.

Staying in the Portfolio

One very important thing to keep in mind is that during testing times such as this, you are not only competing against your peers, you are competing against the other stocks in an investor’s portfolio in order not to be sold. Positions are being liquidated. To give yourself a fighting chance to remain in that portfolio, reduce the pressure on your stock, and maybe even have people decide to add to their position: communicate.

Over the years, I have spoken with thousands of investors, as well as analysts and journalists. I connected with them when things were going well for my clients, and when things weren’t looking so rosy. Universally, people appreciated a Company that was accessible and provided information. That is, as long as the information provided was authentic and meaningful, and not a collection of platitudes to keep people calm and quiet.

Generating Value

The ROI of communicating was very clear. While going up, we broadened investor bases, increased liquidity, generated sell-side coverage (and accessed sell-side sales teams to go marketing with). In times of trouble, we managed to keep people on board, prevented the stock market equivalent of a bank run, and helped provide companies with the oxygen and time needed to implement turnaround programmes. In short, we created value by communicating.

A common adage in investor circles is that a good IR and communications program will add at least 20% to the value of a company. For small and mid-sized companies, this number likely is even higher.

Communicate

In times of uncertainty and crisis, such as with the COVID-19 pandemic, it will be crucial for many companies to step out of their comfort zone and increase their efforts to connect with stakeholders. You may not get the share price up too much, but you won’t go down as much as others will. At the same time, you are creating goodwill, credibility and a susceptible audience for when things turn around, as well as for when you have to go back to the market for capital.

So, please continue to communicate. Your shareholders will value you for it and your life, long-term, will become at least somewhat easier.

A few more recommendations:

·     Own the conversation: Don’t put yourself in a position where investors start drawing conclusions based on what is said about other companies, help them understand what makes you different and how they can measure this.

·     Be the signal, not the noise: The industry is fragmented, lots of companies, lots of claims, lots of noise. In order to be heard, you need to be differentiated and so does your message. You need to establish credibility, so focus on how you can substantiate your messaging and support your claims with proof points.

·     Be creative: There is no more effective way of having your message not be heard than by doing what others are doing and saying what everyone else is saying.

·     Treat investors as stakeholders: Whether you are public or private, quite often investors are employees, customers, suppliers or partners. As such, their importance goes well beyond their status as part owner of the business. In communicating with them, you show you understand this, are addressing their needs as stakeholders, creating goodwill, loyalty, and perhaps even sales in the process.

·     Spread the word: While press releases are important, there are other channels you can utilize to get messages across. Blogs, podcasts, virtual and physical conferences provide platforms for you to a) get your message to a broader audience and b) provide important colour that you may not be able to get across in a press release.

Being quiet is not an option, it’s a one-way ticket to exit a portfolio. Keep talking.

Marc Lakmaaker is the founder of Clearview Capital Consult, a boutique investor relations and communications agency, deeply embedded in the cannabis, technology and cleantech industries. Clearview also provides strategic advisory services. For over 20 years, Marc has helped companies stand out and deliver.