There are a lot of questions to consider when communicating with current and potential investors. What information is necessary to share? Which publications should we choose to distribute our material news? What is our communication schedule?
With so many elements to consider, and so much at stake, IR teams have to be careful to avoid any missteps that can hinder their ability to meet their goals. We're listing four of the most frequent mistakes we regularly observe in IR messaging – and how to fix them.
Pitfall #1: Neglecting to communicate long-term goals
Many investors want to hear about how a company is making decisions that will impact its results in the short term. However, not all goals cannot be achieved in a matter of months. Due to some investors' insistence on short-term results, some companies fail to communicate their long-term initiatives when necessary. Investors need to understand that long-term goals are just as consequential as short-term advancements.
For instance, a company may be under pressure to trim its operating costs by reducing headcount. While that decision might provide shareholders with a short-term gain, in the long run, it will be detrimental to the business not to rebuild headcount in response to growing revenue. Announcements of short-term initiatives should coincide with an outline of how those initiatives fit into the long-term plan for the company.
Short- and long-term goals can also work in tandem. If a company reduces its headcount during a downturn to focus on its core business, that will enable the organization to slowly rebuild. If growth is achieved, the company will put more resources toward a long-term goal, like expanding its service offerings. Even when announcing short-term initiatives, it is necessary to remind investors how those choices will impact the company in the long term.
Pitfall #2: Using jargon and over-communication
With the increasing involvement of retail investors in market activity, it is critical to have a clear and digestible message for both investment professionals and everyday investors. For example, most investors understand the concept of year-over-year growth, but many may not comprehend CAGR or even know what the acronym stands for (Compound Annual Growth Rate). Retail investors are more likely to choose your company if they understand what you're communicating about how your organization is functioning.
Additionally, some companies are tempted to communicate granular detail about their operations. For example, a healthcare company might provide a thorough explanation of its scientific method for researching a new treatment when a short and simple explanation will suffice. While navigating the line between being informative and comprehensive can be challenging, the most effective messaging is clear and concise.
However, if there are circumstances where you need to provide detailed information that might go over the heads of everyday investors, there are other ways to present it. Cision can build dedicated pages on your IR site to highlight your initiatives akin to your investor presentations.
Pitfall #3: Inconsistent messaging
Many companies overlook the value of having a consistent schedule for their messaging. If a company is inconsistent in delivering updates, it can create confusion for the investment community. An unpredictable schedule for earnings, roadshows and important meetings will cause investors to question your communication strategy and whether your company is unorganized in other operations.
Additionally, the information you communicate in your earnings releases should mirror the investor presentation you give in Wall Street roadshows and conferences. Don't assume that if your messaging is inconsistent across various channels that no one will notice. Your company's reputation is at risk if your communication is inconsistent and unpredictable.
Pitfall #4: Limiting your targets
Some organizations make the mistake of disseminating critical information to a limited audience. This is unfortunate, because limiting your distribution reach unnecessarily restricts who views your message. For example, some of our IR clients will only distribute their material news to financial publications or industry targets. By overlooking widely read national publications, these companies lose out on reaching potential investors who receive their investment information via more mainstream sources.
With the rise of the retail investor, investor relations officers (IROs) need to rethink who their audience is and where their audience receives their information. There isn't a downside to increasing your company's visibility in key outlets. In fact, wider distribution will improve brand awareness and keep your company at the forefront of investors' considerations.
Investor communication is not merely a box to check in order to satisfy SEC disclosure requirements; it’s essential to communicate the right amount of information without being overly technical or providing unnecessary detail. Additionally, having a communications strategy that is consistent and highly visible will win over both new and existing investors.