Six Do’s and Don’ts for Managing Investor Expectations
When it comes to dealing with investors and analysts, what you say can be every bit as important as what you do.
Effective communication can burnish your company’s image and help drive interest in your shares. Conversely, ineffective communication can undermine your reputation and distort even the strongest of investment stories.
To improve the likelihood that you’ll get your communication with investors and analysts right, let’s review some proven do’s and don’ts.
Do Understand Your Audience
Developing a message that resonates with investors and analysts starts with understanding what matters to them. What are they looking for?
Step out of your role as a company leader and try to think like they do. The investors and analysts themselves are the best source of insight. Keep your eyes and ears open when you’re interacting and communicating with them. What questions are they asking? How are they responding to the various parts of your presentation?
Just as you need them to understand you and your company, you need to understand them and their investment firms. With this intelligence, you can tailor messaging to satisfy your audience’s preferences and interests without sacrificing your objectives.
If you’d like to do even more to better understand analysts and investors, there are steps you can take. For example, there’s nothing stopping you from hopping on a peer company’s public conference call or webcast with the investment community. You also can take a look at the investor perception study compiled and published by IR Magazine. And, of course, you can conduct a perception audit of your own.
Don’t Overshare
There is no doubt that you should aim to be as transparent as possible. Provide as much information as you can on the issues investors care about so others don’t fill in the blanks for you.
However, avoid releasing unnecessary or immaterial news through press releases. There is truth to the expression that the more you say, the less you’re heard. By including superfluous information, you run the risk of burying your core message and distracting your audience.
Also, be careful about statements that you may wish you could retract in the future. Eliminating big, bold promises is a good place to start. Communicate with conservatism. Don’t make ambitious claims and then fail to live up to them, especially with guidance. That will be very difficult to recover from.
Do Communicate with Substance
Inform the investment community with the facts, not hype. Leave the spin to the Sunday morning talk shows. Set realistic, achievable, and believable expectations, and express them in carefully chosen words. This kind of reliable communication reinforces your credibility, which should go a long way in your relationships with analysts and investors.
Don’t Talk Over People’s Heads
Your analysts and investors are sophisticated and experienced, but they are nowhere near as knowledgeable about your company as you are. So communicate in a way that even laypeople can understand. Keep your language clear and simple. Exclude the jargon and acronyms that you and your colleagues use internally as a time-saver.
You want your audience to fully comprehend your message.
As Nietzsche said: “Those who know that they are profound strive for clarity. Those who would like to seem profound to the crowd strive for obscurity.”
Do Be Consistent
When it comes to effective messaging, the key is to deliver a consistent message to all audiences, in good times and bad. Focus on what really matters – the fundamentals and the core business – and touch on these points with regularity.
And don’t make the common mistake of modifying your message just because you’ve grown tired of saying the same thing over and over.
Even if you’ve grown weary of a certain message, there are those who are just beginning to hear and understand it. Remember that analysts and investors are working to keep track of numerous companies, not just yours. And if you mix your message, you’re only making it harder on them – and on your company.
Do Initiate Communication, and Respond Routinely
Initiate communications with shareholders on a consistent basis. Again, your goal is to ensure that they have a strong understanding of your company’s strategy. Get in touch with them regularly.
Likewise, if they reach out to you, be responsive. Nothing is more frustrating to an investor than a phone call or email that goes unanswered for a long while, or is not answered at all. Being accessible is very important.
Keep these guidelines in mind as you strive to improve your communication with investors and analysts. If you need further assistance on any topic or initiative associated with investor relations, contact us at your earliest convenience.
Peter Vozzo is a Managing Director on Westwicke's life sciences, healthcare services, and healthcare technology teams. He has extensive experience in investor relations. He has a BS in chemistry and an MBA in finance/accounting, both from the University of Connecticut.
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