IR Café

The Kansas City chapter of NIRI heard today from Derek Cole, an experienced investor relations pro and NIRI national board member who is Vice President-IR & Corporate Communications for ARCA biopharma Inc. in Denver. A sampling of Cole’s advice on “Winning IR in a Tough Economy”:

• “Get out there” – despite the tough economy and market. The recession causes some CEOs to withdraw because they don’t feel comfortable with a negative macro picture and the difficulty of predicting where it’s headed, Cole says. Companies need to explain what they don’t know, as well as what they do, he says. And investors won’t expect a CEO or IRO to have crystal-ball answers that no one has. They’re looking for sound management and strategy amid this environment.

A bunker mentality creates a dual “opportunity”  for the IRO: First, you can be an advocate with the CEO and CFO to get out and meet with investors – build credibility and distinguish your company. And, second, as an IR person you can get out more yourself – if the CEO or CFO will send you, it’s a great time to develop your relationships with investors and analysts without taking their time. Stepping up at a difficult moment enhances your stature.

• Be a strong advocate for good disclosure, including taking your hits when things go wrong. Cole told of a heated internal debate, in a former job, when a key clinical trial failed for a biotech company: Do we announce the trial failed, or come up with positives to gloss it over?

Telling it straight, Cole said, is how companies develop long-term credibility with investors and other constituencies. “If you’re correct in what you’re doing, you really should be willing to push your management team very hard to do the correct thing,” he said.

• Be sure you’re targeting IR efforts to the appropriate investors. In the life cycle of companies, and through economic cycles, your mix of investors will change. You may know and love the manager of a giant mutual fund, but if you’re a microcap you won’t be appropriate for that manager’s portfolio – so meetings and communication could be wasted.

Cole says a database of institutions yielded 2,500 investors who have owned names in his company’s industry in the past 12 months. He and the CFO know the top 75 or so very well. But those aren’t necessarily the ones they should target right now – smaller funds by make a better fit – he says. The IRO brings expertise to decisions on where to focus efforts for maximum benefit.

• From a career standpoint, a tough market can be a time to shine. Most IROs are probably getting more face time with CEOs, CFOs and boards right now – in a crummy market – than during easier times, Cole notes. It’s a time to be the center of information for those constituencies.

Create an “Ask and Read Hour,” Cole suggests. Set aside time to increase your expertise in critical areas. He suggests reading more about your industry, your market, how-to ideas for IR, your boss’s concerns (read magazines that the CFO or CEO draw upon). Also, ask questions that help you learn: What do your analysts or investors want that they don’t currently get? Where do industry experts see down the road? What is the CEO’s strategy?

• Investor relations is about explaining your company – and this doesn’t change in a tough economy or bear market. Cole says the macro environment may change your content, but not the mission of IR. You need to keep explaining your business, what your company does, how you see the economic situation and its impact on your business.

• Really, says Cole, it’s not about “Winning IR in a Tough Economy.” It’s just about “Winning IR.” And he’s right.