Archive for April, 2009

Benchmarking the best: II on IR

April 29, 2009

When the going gets tough, the best companies get going – to communicate more than ever with shareholders and analysts – according to Institutional Investor‘s ranking of “America’s Best Investor Relations.”

The article in the magazine’s April 2009 issue is worth reading, but IR folks who want to benchmark against the “best” should go online and explore II‘s interactive rankings page. It’s a clunky interface, but you can find your industry among the 54 sectors covered.

The magazine polled more than 650 portfolio managers and buy side analysts, along with 400 sell side analysts, to compile its review of winning IR. Some examples of championship efforts cited by II:

  • With volatile currency exchange rates hitting many companies’ earnings, MasterCard and McDonald’s won kudos for providing extra data on the impacts, such as income and expense sensitivity to the dollar-euro rate.
  • In a scary time for airlines, Continental “soared above its competitors by being open and giving detailed information not provided by others in the sector” – e.g., monthly projections of revenue growth and jet fuel costs. The IRO also says investors appreciate predictability – like being able to count on seeing Continental’s traffic report on the first business day of each month.
  • When Coca-Cola Co. and its largest bottler had a run-in over pricing, KO launched a two-stage outreach – contacting top shareholders and influencers to answer rumors and concerns, then following up with a broad communication effort on how the two companies work together.
  • With the recession pinching casinos, slot machine maker WMS Industries emphasizes “being much more visible” by meeting personally with investors and analysts. WMS’ IRO says he’s on the road twice as much now as at the start of 2008.

Bottom line, professional investors are working harder than ever to eke out returns. To cultivate long-term relationships, IR people and the companies we serve must go the extra mile to help investors analyze and understand this challenging time.

Tiptoeing into 2.0

April 28, 2009

A growing number of companies use blogging and social media networks like Twitter to reach out to investors and other audiences, but many are moving tentatively amid legal concerns about disclosure, The Wall Street Journal reports (“Corporate Blogs and ‘Tweets’ Must Keep SEC in Mind,” April 27, 2009, p. B4).

Among the Fortune 500 companies, 81 now sponsor public blogs, and 23 of those use Twitter to blast out 140-character corporate tidbits, according to the Society for New Communications Research.

IR 2.0 participants include old-economy giants like Wal-Mart, Chevron and General Motors, the WSJ says. Last week Johnson & Johnson distributed 23 news fragments – excuse me, Tweets – from its annual meeting via Twitter.

But getting out there comes with some concerns. the story notes:

Such efforts raise thorny questions. Blogs and tweets can run afoul of Securities and Exchange Commission regulations on corporate communications. But sanitizing such posts risks hurting credibility with online audiences.

‘This is all new to companies, and they’re not sure where they can go,’ says Dominic Jones, editor of IR Web Report …

Companies are taking different tacks on interactive IR issues.

Although several tech companies are in the forefront of social media for IR, chipmaker Intel has stayed away from blogs and Twitter because of concerns about SEC disclosure rules – and a desire to avoid sponsoring what can be negative comments from online followers – the WSJ reports.

On the other hand, tech company EMC likes Twitter’s ability to gather instant commentary and diverse opinions from employees, investors and other outsiders.

Online auction house eBay is balancing these concerns – using its corporate blog and Twitter updates to report on earnings calls and other business topics, while adding regulatory disclaimers to some posts to protect itself.

We’re in a great time of change. If you missed yesterday’s WSJ story, it’s worth going back to read. And taking a look at some of the blogs and Twitterers it mentions.

In different ways that fit our own companies, we should all be tiptoeing into 2.0.

Let’s talk about political risk

April 23, 2009

As investor relations people, we don’t generally talk about “politics.” But all the fears about nationalization of big banks, a federal takeover of automakers and so on have captured the market’s attention.

In fact, political events – writ large to include wars and all sorts of government or anti-government disruptions – are huge influences in the market. They affect economic life and individual companies.

A new book, The Fat Tail, digs deeply into the many “political” events that pose risks to a company’s business or even entire economies:

Looking ahead, political risks are likely to become more, not less, relevant to both governments and corporations. … War, terrorism, expropriation, violent changes of government, politically motivated lawmaking, and civil strife are not going away.

Geopolitical experts Ian Bremmer and Preston Keat argue in the book that seemingly fat-tail-scan1very unlikely (but catastrophic) events – say, 9/11 or the current severe credit crisis – are in fact somewhat predictable. And they offer plenty of historical examples.

Businesses should plan for these “fat tail” events, so called because they’re out in the low-probability tails of a normal distribution curve – but actually occur far more often than probability suggests. By extrapolation, I might add that investor relations teams should consider how political trends or disruptions should be disclosed.

In the US and developed world, businesses across many industries today face possible regulatory controls they might not have imagined a couple of years ago. The outpouring of anti-business feeling suggests plenty of potential activism by politicians that may wind up damaging individual companies or even the whole economy.

The writers offer one warning a bit late, noting that if businesses do a poor job of communicating, they almost invite political ill will:

External, reputation risk is one area where transparency and clear reporting are important. Shareholders and regulators are two other constituencies with whom communication must be well managed. A lack of reporting and transparency can transform itself into political and regulatory risks.

Politics can seem even less predictable in some parts of the world. The authors note that “emerging markets” – an occasional darling of investors – are optimistically named. Some of these markets will not emerge at all, and some will go along nicely – until a coup or civil unrest suddenly devastates their economic prospects.

Imagine how uncertainty, especially a government upheaval or popular uprising that could cause total loss of a business in a country or region, changes the discount part of an investor’s valuation formula.

So, let’s talk politics – wisely – with investors.

Social media strategies: Talk, listen or … ?

April 17, 2009

I had a good conversation today with three friends who work in social media. (This was an old-fashioned conversation, sitting around a table at a coffee shop and chatting). One topic was how do companies use social media, or how should they use it?

Three strategies we’ve seen in businesses using Web 2.0:

  • Talking. Some companies are using Twitter, for example, to issue 140-character summaries of press releases or marketing pieces (with links). I heard another social media maven say recently that getting comments from other people isn’t the goal – it’s about getting your message out. He said the communications platform is what makes it “social.”
  • Listening. Other companies are listening intently to chatter in blogs and social networking sites, gleaning from these online conversations feedback about their product or service – and then fixing it. Or they’re hearing about the unmet need of consumers that could become their next big market.
  • Engaging. And then there are companies who really are creating a conversation. (“Conversation” is the social media buzzword that not all participants actually do.) These businesses are talking and listening. They may be systematically listening, which goes by the sinister-sounding verb “monitoring.” They answer questions. When they see someone complain about their company in a networking site, they reach out and offer to help. Almost like an old-fashioned conversation. 

So what’s your opinion: In the world of investor relations and corporate communication, what is the goal of blogging, Twittering and other-2.0-ing? Should a company talk, listen or engage with financial or corporate audiences online? 

And now you can engage: Click where it says “comments” at the end of this post. No name needed. And, of course, there’s no right or wrong answer – at least not in my book.

Swatting a gadfly with a cannon

April 14, 2009

Keeping a sense of perspective can protect you  from embarrassment, and this holds true in the chaotic world of social media. Goldman Sachs seems to have lost track of what’s important by sending its lawyers after a blogger who is criticizing the company – a “corporate gadfly.”

A gadfly, you know, is a little person with no power but a big mouth (or pen). He complains of some perceived wrong, and pretty much no one listens, unless … well, you can be the judge of the complaints in this case.

This story starts with Mike Morgan, a Florida investment adviser and real estate broker, setting up a blog in March called GoldmanSachs666.com. The name tells you where he’s coming from. Many of America’s corporate giants have spawned critics in the blogosphere – it’s a place outside the control of corporate giants.

But who would have read the 666 guy’s blog? I don’t see anything too interesting. He has posted about 30 times in the three and a half weeks it’s been up, offering conspiracy speculation and links to other blogs and news stories. I can’t find a disclosure of his personal or business agenda, why he’s going after Goldman Sachs.

Then Goldman – actually, its Wall Street law firm – threw down the gauntlet by sending him a cease-and-desist letter claiming he’s violating their trademark by using the company name in his URL. I’m no lawyer and don’t know the legal merits of their position. But this comes across like trying to shut up a critic.

That salvo encouraged Morgan to go into full attack mode. Besides encouraging blog readers to alert the media to his story, he’s filed a pre-emptive suit claiming the GoldmanSachs666 blog is posting news and commentary, not infringing their service mark. Some financial bloggers and the UK’s Telegraph are covering the case. Morgan is recruiting volunteers online, planning a media conference call and so on. He’s campaigning to become a cause celebre.

I don’t know the behind-the-scenes story of Goldman’s contacts with the 666 guy. In general, companies should do one of two things about a corporate protester, online or on the street outside the office:

  • Look for a way to engage and mollify the critic. Go the extra mile in person or by phone to see if there’s a grievance that can be solved, meet with him, offer respectful and factual answers or see where he’s coming from. Or if he seems intractable …
  • Ignore the gadfly, while preparing message points to rapidly respond to the criticism. If the negative chatter spreads to other venues or threatens the company’s business or reputation, provide your message points quickly but one-on-one. Don’t issue a press release or file a lawsuit (both of which just turn up the volume). Answer reporters’ inquiries in a noncombative way. And perhaps comment directly on other blog or Twitter posts as they arise, especially if they overlap into your own social media constituency.

But taking aim with the legal cannons seems to be the surest way to make a big noise and get the wrong kind of attention. It’s like calling the police to arrest someone carrying a picket sign outside the office – guaranteed to make the evening news. Goldman Sachs, with all else that is on its plate these days, has more important things to do.

Gag rule for bankers

April 10, 2009

Well, so much for transparency and all that. Now it seems the Federal Reserve is telling 19 of the nation’s largest banks not to disclose how they’ve done on the Obama administration’s vaunted “stress tests” (read AP story or Bloomberg).

With earnings season and conference calls upon us, bank CEOs and CFOs might face questions from investors: Does the government think you’re going to survive – or not? Does a rigorous look by regulators show the bank is healthy, or heading back to the Bailout Window?

Mum’s the word, the Fed decrees. Only the government is allowed to disclose the outcome of the stress tests – which it is supposed to do by the end of April.

As AP tells it, the Fed is protecting weak banks against panic if executives of the healthy institutions let the cat out of the bag:

The order was the latest in a series of government moves designed to keep good news about strong banks from dooming others to a downward spiral of falling share prices and financial weakness. If banks receiving the highest marks trumpet their results, the fear is investors might push down share prices of those companies that make no such announcements.

After Wells Fargo surprised investors with good earnings on Thursday, CFO Howard Atkins declined to talk about the government’s tests. “We haven’t commented on regulatory matters and we won’t start now,” Atkins said [to Bloomberg]. “We don’t comment on the process.”

The gag rule seems a little Orwellian coming from folks who champion “transparency.” For those of us brought up on efficient markets, open disclosure and so on, it’s an ethical imperative to tell investors about material information in a timely way.

But, then, if the government is going to control the big banks, the big banks are going to be – well, controlled by the government. Sssshhhhhh!

A dry summer ahead for funding?

April 8, 2009

The financial crisis and depressed market are a life-threatening drought for many biotech companies, according to an April e-newsletter from the Biotechnology Industry Organization. Says BIO:

There may be no summer lovin’ for biotechs. By most accounts, investors will remain tight-fisted with their cash for some time, opening up their wallets for only the most promising investments.

Writer Eric Wahlgren cites Burrill & Company estimates that more than a third of 344 public biotechs were down to less than six months cash on hand at the end of the first quarter.

Despite the gloom, there’s still investment money out there, but companies will have to work harder to get it, experts say. The key to being successful at raising money in the current environment will be to think creatively, remain flexible, and start talking to potential investors well before there is an urgent need for cash.

In the BIO piece, industry players suggest biotechs may have to tap existing venture capital investors for inside-led rounds, consider venture debt, outlicense more compounds for the cash, set up special financing structures and the like.

One example of creative dealmaking is Exelixis, BIO says:

The advice for companies looking for cash, [Exelixis CFO Frank] Karbe says, is that they should always be having lots of discussions with all types of investors, including bankers, venture capitalists, specialty funds, and other biotech and pharma companies.

Thinking creatively and working harder, by the way, may mean experiencing more than the usual pain in fundraising and valuation – for example, selling the company when you’d rather just raise cash.

The advice to biotechs – work hard, stay flexible, be creative – probably applies to investor relations teams in many industries. Money doesn’t seem likely to rain down on anyone in 2009.

Companies are adopting IR 2.0

April 7, 2009

In an excellent  NIRI webinar today on “Trends in Technology and Disclosure,” investor relations officers of three real-life companies tell their nitty-gritty stories of implementing corporate blogs, financial news releases via website (as opposed to sending the numbers out over a wire service), and enriched company IR websites:

Sun Microsystems has developed a rich portal of investor information. On this IR page the investor finds a wealth of data, including a complete array of traditional data such as news releases, SEC filings and so on. Attractive graphics guide your eye through the page and call attention to the most important items, such as recent earnings. Also, investors can sign up to get IR news via RSS feeds or Twitter. The portal is a best-in-class example for IROs to benchmark against in evaluating their own websites.

By the way, Sun IRO Paul Ziots noted on the call that the web portal was not called into action for the past week’s media speculation about takeover talks between IBM and Sun. That falls under a strict policy of “not commenting on rumors or speculation,” in person or online, he said.

Microvision has created a corporate blog, “The Displayground,” a word play on the company’s product focus on miniature video and display gear. It’s a multi-author blog that mixes marketing and corporate information – from videos showing off gear at a recent tech conference to direct investor communications. 

An example of the latter: One week before a Microvision earnings call, IRO Tiffany Bradford posted to the blog asking investors for questions to address on the call. Good tactic – and it drew about 40 responses. The management team addressed those questions on the call, and Tiffany followed up with another blog post giving a written FAQ from that exercise. She sees the blog as an efficient way to provide nonmaterial information to a far-flung base of individual investors.

And BGC Partners, an electronic inter-dealer brokerage, has taken the SEC at its word by directing investors to the company’s website for earnings and other financial announcements in satisfaction of Regulation FD. (See July 30 post on IR Cafe and the SEC’s August 2008 guidance on use of company websites.)

BCG announced in early February that it would discontinue sending out the numbers via wire services – and send only a short release announcing that investors can find the earnings at the BCG website (with links to the full release). 

IRO Jason McGruder noted that the company took considerable care to make the full-text and full-number release accessible at various landing pages, available through search engines and the like. BCG lawyers kept the company’s full safe-harbor disclaimer, even in the release-announcing-there’s-a-release.

So people out there are implementing IR 2.0 approaches. The webinar is well worth listening to – a replay should be available soon at the NIRI website. I found it useful to hear how these three companies worked through questions of how interactive tools help them carry out their strategies for communicating with investors.

Get ready for new regulation

April 6, 2009

Wondering what new wave of regulation is coming our way? Chairman Mary Schapiro of the Securities and Exchange Commission today offered an outline in a speech to the Council of Institutional Investors.

Schapiro’s agenda for the SEC in 2009 includes proposals for new disclosure requirements, proxy and compensation changes, and other ideas that investor relations teams will want to watch closely.

The initiatives will focus on strengthening the hand of shareholders in electing boards of directors and holding them accountable:

  • In May, the SEC will consider a proxy access regulation to ensure that shareholders “have a meaningful opportunity to nominate directors.” Details to come, but one option was considered before. As MarketWatch reports: “A similar approach was introduced by ex-SEC Chairman William Donaldson in 2003, however it was never approved. Labor-backed investors and activist hedge funds have pushed for the authority; however corporations have opposed it arguing that investors with special interests such as labor unions would push their agenda at the expense of the company’s effort to improve share-value.”
  • The SEC will consider requiring more disclosure on board nominees – data on a candidate’s experience, qualifications and skills, beyond the current brief description of recent experience.
  • The Commission may require boards to disclose reasons for using a particular leadership structure — such as an independent chair, non-independent chair, or combined CEO and chairmanship.
  • Schapiro will seek more compensation disclosure, such as how executive pay drives management’s behavior, including risk-taking. She also wants companies to explain their overall comp approach, beyond highest-paid officers, and reveal consultants’ conflicts of interest.
  • In risk management, the chairman has asked the staff to develop a proposal “that looks to providing investors, and the market, with better insight into how each company and each board addresses these vital tasks.”

In addition, the SEC tomorrow will consider alternatives for limiting short selling – a thorn in the financial side for some companies and IR teams.

The devil is always in the details, and regulatory expansions can be especially devilish when they spring from political outcry. The media are describing the public’s current attitude, especially in Washington, as a “rage” brought on by bear-market investor losses and corporate scandals.

No doubt, securities lawyers will continue to have plenty of work ahead. IR practitioners should keep an eye on the SEC to prepare for what’s coming.

Best April Fool’s story

April 1, 2009

The UK’s Guardian carries the best story I’ve seen for April Fool’s Day:

Consolidating its position at the cutting edge of new media technology,the Guardian today announces that it will become the first newspaper in the world to be published exclusively via Twitter, the sensationally popular social networking service that has transformed online communication.

The move, described as “epochal” by media commentators, will see all Guardian content tailored to fit the format of Twitter’s brief text messages, known as “tweets”, which are limited to 140 characters each. …

A mammoth project is also under way to rewrite the whole of the newspaper’s archive, stretching back to 1821, in the form of tweets.

The story offers examples of new-media stories such as: “OMG Hitler invades Poland, allies declare war see tinyurl.com/b5x6e for more”

Come to think of it, this isn’t all that far-fetched. Have you seen an annual report yet in 140 characters or less? “Notice & Access” may evolve there.

Anyway, hope you enjoyed a good chuckle today.