Investor Relations Can Challenge The Smaller Company

Sunday, September 17, 2006

Adrian Holliday, IR Magazine - May 2006, Pgs. 36-39, http://

Abstracted from: Too Young To Fly?

Staying in touch.
Smaller companies around the world face unusual challenges when they embark on an investor relations program. The cost and logistics of IR communications are daunting (one company hires students to lick stamps for mailings), and the need to have third-party intermediaries forward information to individual shareholders makes the process even more cumbersome. Adrian Holliday asked executives about their strategies and goals for investor relations. According to the CEO of one energy technology company, effective investor relations means using every possible opportunity to communicate to shareholders clearly and assertively. The CEO of Hardy Amies, the UK haute couture house, views it as a way of keeping in touch with shareholders and encouraging them to vote on important matters, although he admits that shareholder apathy has brought disappointing results on the latter front.

Clarity seems key.
Explaining corporate strategy to potential or current investors in industries that are complex or new presents another challenge, the author explains. One Internet technology company that also has a utility operation is concentrating resources on the IR section of its website, which contains share price and industry information as well as articles on energy, the environment, and carbon emissions. Getting sell-side coverage remains an important yet elusive goal. Companies that do IR road shows often do not realize that they must first have independent research published about the company before most brokerage firms will feature the stock. An analyst with one London-based broker says coverage hinges largely on the expectation of generating sufficient commissions or winning an advisory relationship. While some companies will pay for coverage, buy-side participants typically read traditional brokerage research.

Keeping a balance.
Companies listed on smaller, less-strict alternative exchanges­such as London's Alternative Investment Market (AIM)­are not required to take a proactive approach to investor relations and some choose to keep corporate information close to the vest. One partner at a London law firm, the author points out, advises companies to follow legal guidelines for maintaining a dialogue with shareholders; nevertheless, the majority of his recommendations deal with corporate governance. The trick is to balance the need to provide information without disclosing anything that could harm the stock price. Clarity, consistency, and balance must be the IR watchwords for small public companies.

Abstracted from IR magazine
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