Archive for June, 2008

Investor information & the shrinking sell side

June 27, 2008

One of the past year’s flurry of books on financial crises offers an interesting side comment on the connection between consolidation among investment banks and the “commoditization” of financial information:

“The informational ether – with access to real-time prices; market commentary flowing as a continuum from screens at home and office, airport terminals, and teller lines; stock recommendations spilling out of countless Web sites – reduces the market advantage of investment firms. With little left to differentiate themselves, their best offense comes from economies of scale and cross marketing.”

– Richard Bookstaber, hedge fund manager
& Wall Street risk management expert
A Demon of Our Own Design
(Hoboken: John Wiley & Sons, 2007)

Let’s talk about the market …

June 26, 2008

No, not that market – I mean the market for our products or services.

Some time back I was writing an annual report for a bank, so I called up a few analysts and institutions who followed the stock. “What would you like to see in this year’s report?” Their answer was succinct: Tell us about the markets where the bank does business. We’re in New York or Boston and don’t spend much time out in flyover country. Are your customers hourly workers or entrepreneurs, farmers or retirees? How fast is the population growing? Does it look like new suburbia or old urban core? What about median income, business formation, competition? Can we see a map?

The market for goods and services is the economic engine that drives future results, so describing and quantifying that dynamo is of great interest to long-term investors in our companies.

Too often, though, investor presentations and earnings announcements ignore the real-world economic interactions and focus only on reporting the latest numbers. Numbers are critical, but this emphasis feeds the short-term interests that CEOs, CFOs and IROs so often decry.

One way to speak to long-term investors is to put the company’s market front and center in the investor presentation, MD&A introductory disclosure urged by the SEC, website, conference call and so on. We can’t do anything about the stock market, anyway, but we can focus on our markets.

IR & PR – can we talk?

June 20, 2008

“Managers in public companies frequently underestimate – at their peril – the function of the press in their financial communications. … Cultivating these fundamental relations with the press is often the first step in creating understanding and visibility among investors and analysts.”

Gregory S. Miller
“How to Talk to Investors – Through the Press”
Harvard Business Review, January 2008

What’s next? Call it IR 2.0

June 18, 2008

What can public companies expect as the next big thing in investor communications – and in regulatory oversight from Washington? For my money, the hottest ticket at last week’s National Investor Relations Institute conference was a speech addressing that question by John White, head of the SEC’s Corporation Finance Division.

White’s message: Get ready for more interactive disclosure. And sooner rather than later. You could call it IR 2.0.

The official described four SEC current initiatives on investor communications, and all relate closely to new technologies:

… Interactive data, or XBRL, coming soon to a 10-K near you

… E-proxy, moving from voluntary to mandatory in 2009

… Proposals from an SEC advisory committee on financial reporting

… Guidance on corporate websites and blogs.

The advent of interactive XBRL data will bring public companies “a whole new category of investors who don’t currently have this kind of analytic ability,” White says. He urges IR people to anticipate the issues this new class of investors, armed with 21st-century data mining, will be able to raise with companies.

The SEC will likely update its regulatory guidance on websites and other online tools, last visited in 2000. White says the agency encourages Web-based and interactive communication. But he warns that companies need careful planning and controls for their Internet presence and innovations like blogs. Especially, he says, “Don’t forget that law thing.”

We’ve compiled notes on the details of White’s presentation – with links to more specifics on each of the key topics – on a separate page in this blog. As IR 2.0 emerges, it’s time to get ready.

A race not a journey

June 13, 2008

“As I tell everybody in our organization, we’re in a six-minute-mile marathon that never ends. That’s a race. When I hear people say they’re ‘on a journey,’ I ask them to find another company. Journeys are slow, and you’ve got a lot of time to pack your bags – we’re in a race! And it’s so important that our IR team work with that and think that way.”

– Jerre Stead, Chairman & CEO, IHS Inc.
at NIRI 2008 Annual Conference, June 9, 2008

Skill sets for an IRO

June 13, 2008

Asked at the NIRI annual conference this week what key skills a leading CEO looks for in an IR professional, Chairman Jerre Stead of IHS Inc. (who has led no less than seven public companies) cited behavioral skill sets over technical competencies.

“Three come to mind immediately:

“First and most important is knowing how to listen. That’s an art that I think half the world has lost, or more. Knowing how to listen is a critical skill set….

“Two, being able to work, often with complex and complicated issues, in a parallel path. We keep a lot of balls up … being able to do those on a continuous basis.

“And then, three, being able to draw the demands of the different questions and issues we have, get the right resources inside the company, and make our team feel good that they’re providing those. So that’s a team-building skill set.

“But if there was only one, it would be listen.”

Markets & information

June 12, 2008

“The lifeblood of capital markets is good information.”

– Robert H. Herz, Chairman, FASB
at NIRI annual conference, June 9, 2008

Why IR Café?

June 12, 2008

Inspired by some folks at the National Investor Relations Institute annual conference this week, I’m taking a few steps into Web 2.0.

Why start a blog now? And why call it IR Café?

… Because after 30-plus years as a communicator with a passion for financial markets and information, I have a few ideas to share.

… Because IR matters to shareholders, executives and employees.

… Because anyone engaged in the adventure of telling a company’s story knows that investor relations is hard work. It demands constant learning and attention to detail. The high-energy staff role can get frustrating or lonely at times, even in the nerve center of a company.

So inviting colleagues into a café to join a conversation and sip a little caffeine for the mind should be fun. I hope you enjoy it with me.