When designing and maintaining an investor relations strategy, how important is your company website? Pretty important, it turns out. A Thomson Reuter’s 2012 survey showed that 84% of institutional investors use a company’s IR website as part of their research process. Importantly, 74% of respondents also indicated that the IR website has an impact on their perception of the company and its IR program.
First impressions are extremely important, and your website is often your company’s first chance to make an impression. Here are some key places investors go on your website, and some tips on how you can make their experience a valuable one (for them and for you):
- Make the site easy to navigate. If a website is not laid out logically and clearly, visitors will become frustrated and give up looking. Key information – such as presentations, press releases, SEC filings and other news – needs to be displayed prominently, allowing potential investors to get to it quickly. This doesn’t just apply to the investor relations section but the entire website. Don’t make it hard for investors to learn about your company and products.
- Make sure all info is up to date and accurate. Too many times, sites continue to display information that is wrong, or outdated. This can lead investors to assume that IR is not important to the company. Continue Reading
An investor perception audit – a formal survey of buy-side investors and sell-side analysts, typically conducted by an independent third-party – has become part of the standard investor relations activities for many public companies. Done properly, a perception audit should highlight the good, the bad, and the ugly about a company’s IR efforts and its reputation on the Street. While many companies shy away from asking the tough questions, we would encourage companies to seek both positive and negative feedback, and to actively address any concerns that are raised.
In a 2007 survey of over 3,000 companies titled, Perception Studies: What are They Thinking?, the National Investor Relations Institute (NIRI) found that the majority of respondents surveyed had conducted perception audits. Of this subgroup, 92% said that they use perception audits to determine the extent to which their company’s strategy was understood and 78% noted that perception audits were useful when refining corporate messaging. Here are some other reasons why you should consider a perception audit:
- Measuring Effectiveness: Perception audits are great for measuring the effectiveness of IR practices. Your corporate strategy may be on target, but aspects of it could be getting lost in translation when you communicate with the Street. An audit can highlight ways to improve your corporate messaging and to market your business more successfully.
- Assessing Disclosure Levels: Understanding what investors appreciate in your disclosure and where you have the opportunity to be more transparent can be key. Importantly, determining how relevant your metrics are to the Street can be helpful as you craft your financial message.
- Management Perception: Audits can be a valuable resource for the board of directors to use as an objective analysis of management as well as a vehicle to collect feedback on the management team’s credibility and reputation on the Street.
- Audience Segmentation: A well-structured perception audit will allow you to identify differences in perspective, sentiment, or expectations between the buy- and sell-sides, between current shareholders and non-shareholders, and between the largest buyers and largest sellers in recent quarters.
- Investor Day Preparation: Perception audits can be used to help plan an investor day, providing you with an objective roadmap of what subjects to focus on, what information to present, and how to make the day as productive as possible.
- Building Credibility: The investment community values being asked for its opinion and views conducting a perception audit as an indication of the management team’s interest in improving.
As my hairs have gotten grayer in the last decade, I can’t help but to have noticed the major transformation that has altered how humans interact with one another. The digital revolution has permeated every facet of my life (as I’m sure it has yours): from how I get my news, to how I stay in touch with my family, to how I do business each day.
The “greatest generation” (i.e., those who grew up during the Great Depression) saw the widespread adoption of telephones and television sets. This generation spent the majority of its working years communicating through pen and paper, typewriters, and “snail mail.” The children of this generation—i.e., the “baby boomers”—grew up with much more access to information than their parents, but the information was not immediate, not “in your face,” and not coming at you from half a dozen devices at once. The way these two generations worked was very different, but the two groups’ outlooks were not necessarily in opposition. Like me, many of you reading this are probably part of Generation X or Generation Y. While we also have distinct world views and experiences compared to the generations who preceded us, we still are markedly different from the youngest members of today’s work force.
In March 2013, a journalist for The RPM Report (subscription required) wrote that the U.S. Food and Drug Administration (FDA) had held a “late cycle” review meeting with a drug candidate sponsor. The meeting – an element of the 2012 Prescription Drug User Fee Act-V – introduced a new formalization of communication between the FDA and sponsors, and hailed a new investor relations dilemma for companies: Should “sponsors” disclose what is discussed in these late cycle meetings with the agency, or not?
Late cycle review meetings are a change from past FDA practice; previously the agency engaged in less formal, ongoing communications. Formality might be a good administrative move by the FDA. The agency will now more clearly state what page it’s on, rather than making the sponsor figure out the scenario via a stream of communications over several months.
Last week, we wrote about Regulation FD, now in its 13th year of implementation, and offered Part One of a quiz designed to test how well you understand the regulation. Here, we offer a slightly more challenging Part Two of the quiz. We hope you will find this helpful as you think about real life Reg FD situations. Since the following answers should not be construed as legal advice, we also urge you to talk with your legal counsel before deciding what practices are best for your company and its particular disclosure situations.
Reg FD Quiz, Part Two- Violation or Not?
1. CEO is aware that your company will likely miss quarter consensus estimates, but this hasn’t been disclosed. CEO looks downtrodden in 1×1 meeting, and talks about what a tough macro environment it has been for the industry. A week later, your company announces lower than expected revenues. Stock trades down sharply on higher than normal volume.
Did the CEO violate Reg FD? (YES) The CEO selectively disclosed material, non-public information through non-verbal cues. Hindsight is perfect; hold a poker face or don’t talk.
2. At a webcasted analyst day, management outlines its new product pipeline, how the products compare to existing technologies and treatments and the timeline for product launches. Two weeks later, in a 1×1 meeting with an investor who missed the analyst meeting, management answers questions about how some of the new products differ from competition.
Regulation FD, now in its 13th year of implementation, remains a source of consternation for senior management and investor relations teams in their communications with investors. Some companies err on the side of excessive caution and end up rarely engaging in regular, productive dialog with The Street. Other companies go the other extreme and provide copious amounts of detail while filing an abundance of 8Ks. Finding the appropriate balance is the best strategy for open, useful relationships with investor audiences while steering clear of actions that could lead to SEC penalties.
Here, we offer a brief description of what Reg FD is, followed by a simple test to help you determine your level of compliance with the regulation. We hope you will find this helpful as a starting point as you think about Reg FD. Since the following answers should not be construed as legal advice, we also urge you to talk with your legal counsel before deciding what practices are best for your company and its particular disclosure situations.
What is Reg FD?
Reg FD is the SEC’s attempt to level the playing field for all investors – institutional and individual – by prohibiting selective disclosure of material information.
On April 2, 2013, the Securities and Exchange Commission (SEC) issued a report that outlines how companies can use social media outlets to disclose information and remain in compliance with Regulation FD. The report was the result of the SEC’s investigation of statements made on Facebook and Twitter by Netflix CEO Reed Hastings, where he announced a “viewing” milestone for his online movie and TV rental company. While the investigation centered on whether Hastings violated Regulation FD, Hastings has maintained that his disclosures were neither material, nor exclusive.
From my vantage point, while the SEC’s new report opens the door for companies to disclose information via social media, it’s only propped open a crack and not enough that I’d encourage every company to use social media for this purpose. For one thing, a company is compliant only if it has previously communicated to investors that it plans to use certain social media outlets for news and information, and if access to these social media outlets is unrestricted. Following is more information about the report, what it means for your company, and what the risks are for communicating material information via this means:
What has changed?
The use of social media outlets is now included in the SEC’s interpretive release (34-58288), which in 2008 allowed company websites to be used to make disclosures under Regulation FD. The appropriate use of social media, like websites previously covered under this release, is the responsibility of the company. Websites and social media must be used according to the following rules:
- They must be recognized as a channel of distribution of information to the market
- They must be a source of broad dissemination to the market
- There has to be a reasonable waiting period for investors and the market to react to any posted information
What does it mean for your company?