The first six months of 2022 marked one of the worst first half for stocks we’ve seen. In a recent statement, Larry Fink, CEO of BlackRock even noted that, “The first half of 2022 brought an investment environment that we have not seen in decades”.
As the globe grapples with managing the impacts of rapid inflation, tightening monetary policy and rock bottom sentiment, many IROs may feel like there isn’t much they can control right now. You might be surprised to hear that, at Q4, we’re confident that there are several things IROs can do now to begin retaking control of their investment narrative as they adapt to this new market landscape.
Revisit Your Investment Proposition
Major market movements can cause big shifts in investor perception across the capital markets in all types of securities. Macro and sector factors coupled with big swings in sentiment can cause investors to completely rethink or retrench their positioning as they reassess where they are looking to add to current positions or make new positions.
In these types of environments, it’s critical to revisit how you’ve been positioning yourself to investors in terms of your overall investment proposition, key messaging and the financial and operating metrics you’ve been using to tell your investment story.
For example, many companies previously thought of as growth companies due to premium valuations and strong top line growth may now be starting to make their way onto long only value investors’ radars. This is due to dented valuation measures like price to sales, price to earnings, or EV/ EBITDA ratios.
This is an especially important area of focus if those in your peer group have not experienced similar types of re-ratings or are now trading at a premium. As you do your re-evaluation, ask yourself:
- Is our past messaging still consistent with the current and projected operating performance of our business?
- Has the messaging from my peers changed?
- Is there a way to double down on the unique value of the business to cut through the noise caused by macro factors?
The sooner you’re able to reconcile where the capital markets are now relative to your and your peer’s investment narratives, the better equipped you’ll be to refocus on finding and targeting the right sets of new investors while working with current investors to ensure you are instilling confidence.
Deep Dive into Your Current Investor Base
Once you’ve revisited your investment narrative, it’s time to start analyzing how that narrative maps against who is currently holding your stock and who should be.
Start by leveraging an organized shortlist of key investors who currently hold a position in your company and also those who should, based on their investment strategy or peer holdings. In this analysis, dig deep into your past engagement efforts and prioritize based on when you last connected.
Once this strategic analysis is complete, start providing updates to both existing and potential new investors around the operating performance of the business and contextualize your investment narrative against the capital markets backdrop.
Grounding your engagement efforts armed with this information can help you thoughtfully make the right calls to the right people, and increase the likelihood current investors up their allocation or new investors take a position.
Reset on Who is Watching Your Stock
When the market becomes volatile, many investors expand their view to new opportunities for making-opportunistic allocations. For IROs, this can present unique strategic opportunities to find new partners, but it can also present activist risks. This is precisely why periods of volatility are crucial for getting a clear picture of your current shareholders and who your next shareholders might be.
To start, examine who has been attending your previous earnings calls, events, who has been spending the most time on your investor relations website, and what type of information they are consuming.
Once you’ve done this, compare that list side by side with the list of your current and target shareholders, to see if you can uncover potential gaps in investor perception or if there might be an activist risk. This type of insight can be a game changer when it comes to understanding how the behavior of current or potentially new investors might be driving changes in your company’s stock price. This analysis can also be useful if you are in the process of reevaluating your past targeting efforts to double down on your ideal investor profile via a new targeting program.