Top 10 Investor Relations Communication Mistakes + Solutions
Top 10 Investor Relations Communication Mistakes + Solutions
“If you just communicate, you can get by. But if you communicate skillfully, you can work miracles.”
– Jim Rohn, author, speaker and entrepreneur
The role of an investor relations officer (IRO) has changed in recent years. From what was in many cases a reporting role, linking investors with directors to provide a communication channel between the parties, now the IRO must provide deeper analysis to shareholders to feed their desire for greater insight into the functions of the issuer.
This changes the way that IROs communicate with investors. In a digital-first environment, there are many opportunities, but there are also potential pitfalls to navigate.
This guide highlights the top ten investor relations communication mistakes and provides practical solutions to help investor relations professionals avoid them.
The post-pandemic IR landscape
The COVID-19 pandemic drastically influenced the realm of investor relations. Amid global lockdowns, Investor Relations Officers (IROs) found themselves in constant dialogue with anxious investors, portfolio managers, and analysts, discussing the company's prospects, performance and countermeasures.
Previously, IROs operated in a systematic, orderly and premeditated manner, but the pandemic necessitated a shift towards adaptability and readiness for unexpected challenges. As financial markets fluctuated and street situations remained unpredictable, it was unclear when business activities would fully resume. Amid this uncertainty, IROs had to use the scarce reliable information at their disposal to reassure shareholders about the company's fortitude.
Moreover, the crisis altered the communication methods between IROs and investors. Virtual and semi-virtual exchanges became commonplace, and the efficacy and convenience of these online methods suggest that they will remain a significant component in the ongoing dialogue between these parties, even in the post-pandemic world.
The top 10 investor relations mistakes
1. Not being accessible
Without adequate communication channels through which they can make contact with the issuer, investors can feel ignored and lose faith that the company is transparent and trustworthy.
Ensure they can reach the company with questions, concerns and suggestions and that you acknowledge their outreach. Open more ways to contact you and keep the conversation going. However, consult with the CEO over which investors to prioritise, as resources are not infinite.
2. Inconsistent communication
Investor relations outreach needs to happen all year round. Otherwise, those communications just ahead of the AGM might appear less like a helpful update about the company and more like an attempt to garner investor support and approval ahead of the meeting.
To avoid the negative impression inconsistent communication can create, engage investors regularly through virtual and hybrid events and maintain visibility to avoid confusion and suspicion. This can help not just increase AGM attendance but also build long-lasting bonds with your shareholding.
3. Inconsistent messaging
The message you send to the industry in your updates needs to match that sent to investors, too. Discrepancies can breed suspicion, which can be avoided by deciding on a coherent team disclosure strategy.
The shape and form of your marketing materials will vary considerably between channels, but the overall theme should be coherent. Make sure the messaging across different outlets is consistent to avoid damaging the company's reputation and eroding investor trust.
4. Lack of transparency
It can be tempting to hold back bad news, or to minimise or spin it, but this is a risky strategy. Investors want accurate data to help them form investment decisions, and if they feel that they are not gaining the whole picture, it can colour their impression of an issuer.
The solution requires IROs to understand that investors are aware that companies experience both positive and negative events which impact share prices respectively. Being honest about bad news and backing it up with a clear plan to reverse any detriment is much more effective than pretending everything is fine and being found out by shareholders. Transparency is key to building successful relationships with investors.
5. Overhyping or underestimating
A sudden shift in reporting of financial results can unsettle shareholders and that means that an IRO should look deeper into the reasons behind the discrepancies. Rather than simply claiming credit for a better-than-usual performance or resigning themselves to an abnormally low return, they must put it into context for investors.
Are there reasons behind the difference between the expectation and the result? Are they to do with something internally or are they based on external factors?
Investor relations teams must keep the ship steady and help investors understand what the current state of the company means in the medium to long term, not just in the present.
6. Failure to manage expectations
IROs must be realistic and open about risks and challenges to prepare shareholders for possible outcomes. Any surprises can lead to distrust or disappointment and a breakdown of the relationship.
It is important to understand that investor communications are not just for marketing. Rather, it is intended to inform and provide value to investors as they decide on their strategy.
7. Lack of dialogue
The job of the IRO is to inform potential investors and shareholders, keeping them up-to-date with the issuer. However, it is also to field communication from shareholders to management and help them make sense of whatever they need clarity on.
When organising such events, it is helpful to create interactive virtual presentations because that can encourage dialogue and engagement. One way to achieve this is to use a professional IR webinar and webcasting platform, such as Company Webcast.
8. Unclear communications strategy
Investors have access to multiple communications channels and your strategy should offer clarity to target them wherever they like to gain their engagement from issuers. Otherwise, you risk alienating or missing investors with your outreach.
Consider what you want to communicate and the target for that communication. Consider using a range of methods, including roadshows, emails, blogs, social media, webinars, ebooks and others. Reuse and adjust content from each of these IR communication channels to optimise it for other platforms. This means you don’t have to spend too much time or resources on creating brand-new material for each medium.
9. Not listening to retail shareholders
The rise of retail shareholders is something that might have taken some IROs by surprise. There is a lot of merit in targeting your biggest and most vocal prospective investors, but without ignoring individuals. Retail investors accounted for 52% of global assets under management in 2021. And this is expected to grow to over 61% by 2030.
Consider their differences in motivations and concerns from institutional investors and the ways in which they are more likely to engage. Create a strategy to cater to the needs to retail investors and communicate your messaging on the channels and in the manner that most resonates with them.
10. Limiting outreach
Diversify your distribution channels to reach a larger portion of the investment community, including sell-side analysts, journalists and influencers, to increase brand awareness and transparency. It is not sufficient to only rely on previously tried and tested approaches such as press releases to the industry press. This is not to say that these methods are not effective anymore, but it is important to incorporate more modern IR best practices into your process to achieve the best results.
However, you should ensure that you are providing a service that engages the investor of today and tomorrow as well.
Investor Relations Solutions
By addressing these investor relations communication mistakes, IROs can improve their company's standing in the eyes of investors, demonstrate transparency and adapt to the changing investor landscape. Embracing flexibility and using diverse communication methods will help keep investors informed and engaged with the company.
For more information, read the full ebook on investor relations mistakes to discover the ways to resolve them, plus expert insights and data relating to how investor relations professionals can avoid these errors and prosper.
Company Webcast allows IROs to create engaging and interactive investor events in a hybrid or fully virtual manner. With thousands of events organised every year at our best-in-class studios across Europe, we can provide you with professional assistance and equipment to create IR events your investors will be eager to join, online or in person.