Some CEOs and CFOs don’t believe, in their heart of hearts, that investor relations makes a difference. The numbers speak for themselves, they say – it doesn’t matter if you commit time and resources to doing a good job of IR vs. complying with the minimum requirements for disclosure. So why do IR?
A neat little video on the value of IR surfaced yesterday on Bradley Smith’s IR/PR Product Blog – published by Shareholder.com and NASDAQ OMX. The clip is Brian Rivel, president of Rivel Research Group, sharing a result from a recent survey in institutional investors. What Rivel says about IR:
- 74% of buy siders surveyed say good IR does has a real effect on valuation.
- How much does good IR help a company’s valuation? Median answer is +10%.
- How much of a discount does bad IR impose? Median answer -25%.
Rivel sums up:
So the difference between good IR and bad IR in this environment is 35% of a company’s valuation. So the answer to the question, Does IR make a difference? Absolutely. IR makes a difference.
This is a perception study, not scientific proof of causation. But it’s interesting, considering that buy side investors aren’t overly inclined to dispense praise, to see that they perceive the quality of investor relations as a real factor in valuation.
If for no other reason than the feel-good experience of having someone say your job is worth doing, you should take a look at the Rivel video – and while you’re there, browse Smith’s blog for interesting comments on other topics.