Fundamentals of Investor Relations: What can Companies Learn?

Darcy Brooks |

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In many cases, it can be beneficial for startups, small businesses, and private companies to act as though they’re publicly traded when it comes to shareholder communications. But how should they go about doing so?

I recently heard Robin Sundstrom of IRonside IR talk about campaign management from a communications perspective. She mentioned a crowdfunding campaign that she herself bought into that involves a product not unlike FitBit ($FIT). The company’s communication both before and during crowdfunding was unimpeachable, but as soon as the product shipped, they went radio silent, leaving her confused and angry. Just because the money has been exchanged, doesn’t mean the information exchange should stop.

Fostering a Positive Relationship with Shareholders

Increased shareholder interest, when positively directed, makes it easier to raise money in the future, improve liquidity, and increase share price. According to BMIR, the competition for capital is not always won by the "better" company. It’s won by the company that is better known, better understood, and that has a better relationship with its investors.

Investors are smart. There’s volumes of information, analysis, conjecture and opinions being shared in investor blogs, and chances are, there’s exchanges about you – whether you’re part of them or not – and good shareholder communications create good will.

Sundstrom suggested focusing on communicating anything that will affect shareholder risk, a category that includes costs, revenues, earnings, acquisitions, debt, market change, and cash flow. What was clear from her talk is that it’s important to keep talking, and to have a plan with the goal of building a long-term relationship in mind.

Harvard Law’s School of Corporate Governance identified a few key components of a shareholder communications plan, the chief of which is that the responsibilities of management and the role of directors need to be delineated, and paths for shareholders to communicate with both need to be established. But investor relations is evolving beyond strictly delineated communications, and focusing on bringing basic communications principles to bear on the traditionally stilted flow of corporate information – and your shareholder communications policy should too. While the SEC didn’t confirm that social media is a viable forum for company announcements until 2013, on the condition that investors are made aware of where to look, it‘s becoming commonplace as an investor relations tool.

In a nutshell, much of a successful investor relations campaign involves incorporating the fundamentals of PR and communications, including providing information via social media, working to ensure transparency and scheduling consistent disclosure year-round.

If you were launching a new product, you wouldn’t do one marketing blast and leave it at that, so why would you do so with the people that own little bits of your company and have a say in its future?

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FIT Fitbit Inc. Class A 7.97 -0.01 -0.13 8,468,860

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