By Thomas Murrell MBA, CSP International Business Speaker
Investor relations is an inexact science. Unlike an accounting balance sheet there is no right or wrong answer. It is a balancing act.
The new dynamics of continuous disclosure, greater compliance, second by second share market analysis and increasingly demanding shareholders make the role of an investor relations professional a challenging one.
In Australia we're seeing many high profile cases over the concept of continuous disclosure and whether information that will have a material effect on the share price is disclosed to the market.
This is a serious law and you can go to jail for not keeping the market fully informed over company activities.
Out of the approximately 1.5 million companies registered in Australia, more than 2,200 are listed and traded on Australia's national stock exchange, the ASX.
Out of these 2,200 stocks, as an investor which ones do you monitor, trade or buy and sell?
Finding a fair value for a stock is the challenge and the goal is to manage reasonable market expectations. This is what we call the investor relations balancing act.
But in terms of size, the top five listed companies in Australia represent about 80 per cent of the capitalisation of all listed stocks.
So the big companies dominate and smaller stocks have trouble getting noticed.
This causes frustration and because they get ignored they don't spend much time, money or effort informing shareholders about their business.
But this has all changed with these latest high profile court cases.
So what are the essential investor relations trends for 2011 that every company director, employee of a publicly listed company and investor needs to know.
**1. Continuous Disclosure Matters**
The regulators have made it clear that they are serious in both prosecution and education.
Expect to see more high profile cases and educational road shows explaining to listed company employees and Boards the finer details of what has been a fuzzy area in making announcements to the stock exchange.
**2. Stock Exchanges Merging**
The proposed merger between the Australian and Singaporean stock exchanges is just the tip of the iceberg.
In 2011 we will see more consolidation of share exchanges around the world.
What does this mean in a practical sense?
Get ready for having to understand cultural differences at both an executive Board level and with shareholders.
Professionals should prepare to have their announcements translated into other languages, especially Mandarin as China takes a bigger role in global financial markets.
**3. Changing Ownership Structures**
Share registries of listed companies are going to see a dramatic change in 2011 because of changes in superannuation regulations.
Retail or mum and dad investors are going to be further squeezed out by the big institutional investors.
Laws around increasing super contributions means all that extra money has to go somewhere and we will see more superannuation funds take a bigger slice of listed companies.
This will have a major impact on capital raising and the mum and dad investor opportunities in big companies like Telstra and the Commonwealth Bank of the last decade will be a thing of the past.
Communicating with institutional investors, who come in a range of sizes and shapes, will be a challenge in 2011.
**4. Power to the Few**
Share register diversity will be diluted as the big super funds dominate the market.
Share ownership will become more concentrated giving more power to fewer decision makers.
So in effect, companies will have to deal with fewer but more influential shareholders.
And these shareholders are not your normal mum and dad retail investors who turn up at the AGM for a free cup of tea and a biscuit, they are serious, well educated, well paid and sophisticated investors who invest in the stock market big time, every day.
They are rewarded for their performance.
**5. The Bear Scares Off Investors**
The GFC, volatility in the sharemarket, flat returns, uncertainty and the rise of other investment opportunities has scared off many small and part time mum and dad investors.
They are trying to save more and pay off the mortgage because of tighter economic conditions and the constant worry of rising interest rates.
The decline in retail or mum and dad investors will continue in 2011 as the masses hang onto their money or plough it into their mortgage.
**6. The Champion Chairman**
Chairman of publicly listed companies will play a bigger role in building trust with shareholders.
They will expect to be both visible and credible.
Expect them to do more investor communications like road show presentations and financial media interviews.
The Chairman is the champion of the company, the brand and articulating the investment value proposition for shareholders.
**7. Increased Shareholder Activism**
Despite declining shareholder numbers, expect small shareholders to become more vocal, agitated and aggressive.
Social media has given anyone with a cause a platform and a voice.
Expect more monitoring of social media sites by listed companies.
In 2011, listed companies will put in place stricter social media policies for employees to protect their online reputations and avoid continuous disclosure issues.
**8. More Customised Communication**
The old days of just sending an announcement to the ASX and hoping it would be picked up by the financial media are well and truly so 1990s.
It is all about customisation of the message to different audiences.
Relationships are so much more complex now, so in 2011 expect customised communication to different target audiences on the buy and sell side as well as other important stakeholders.
**9. Online Communications**
Expect to see more communication through online and social media.
CEO interviews on a listed companies own YouTube Channel, messages to investor groups on LinkedIn, real time communication via webcasts.
A well-written electronic investor newsletter will be a standard investor communication tool for most listed companies in 2011.
**10. The Rise of the Investor Relations Professional**
With this increased complexity, the role of the profession will be elevated.
In 2011, expect to see more investor relations professionals be elected to Boards.
Expect to see pay rises in the industry and strong jobs growth. The value proposition of a well executed investor relations plan will be more broadly accepted as one which can add dramatically to the wealth and value of a company.
Need investor relations advice? Contact Tom for a one-hour no obligation consultation.
Labels: investor relations, investor relations advice, investor relations consultant, investor relations trends