Top 5 Ways IROs are Using Stock Surveillance to Drive Better Targeting
11 October 2016
By Adam Frederick
Investor targeting and shareholder outreach are at the heart of an IRO’s mandate, and a critical measure of an IR program’s success. The quality of investor one-on-one meetings is the most widely used qualitative metric employed to judge the effectiveness of IR programs (BNY Mellon “Global Trends in Investor Relations – 2015”). Given the importance of investor meetings and shareholder outreach, it is critical that an IRO leverages all of his/her resources to secure meetings and ensure that those meetings are as effective and productive as possible.
Thankfully, the resources at the IRO’s disposal – specifically advancements in surveillance tactics and intelligence gathering – have evolved with new technologies. Let’s take a look at how IROs are leveraging real-time surveillance intel to navigate today’s trading ecosystem and pinpoint the most qualified targets available.
1. Maximize sellside-sponsored Non-Deal Roadshows
The sellside helps open doors, but are they always the right doors? Innovative surveillance firms assign quality ratings to institutional investors – ratings that rank investors by their desirability as shareholders, including buying power. Meaning real-time targeting can help IROs prioritize and screen investor meetings suggested by the sellside, targeting solid shareholders capable of building meaningful shareholding positions. Similarly, surveillance analysts can suggest strong prospective shareholders with which the sellside has not suggested meetings.
2. Identify buying and selling on a weekly basis
Most targeting products rely on databases of institutional investors. One drawback to that reliance is that those databases rely on public filings of shareholder positions. Good stock surveillance identifies buying and selling on a weekly basis. Identifying current and very recent buyers allows a surveillance analyst to help the IRO target similar institutions to capitalize on buyer interest.
3. Get behind the labels
A surveillance analyst with significant experience and real-time focus can explain how two institutions might share, for instance, the label “high turnover” in institutional database products, but have very different impacts on stock price when buying and selling. Both institutions might liquidate a position during a quarter, for instance, but one might sell its entire position in a day or two, while the other firm may work its orders much more carefully. Knowing the difference between the two in a targeting effort can make a significant difference in stock price volatility.
4. Leverage success
Stock surveillance often provides fast feedback on investor reaction to targeting efforts and of course identifies the timing of institutional buying and selling along with cost basis. IROs can take advantage of that early warning to understand the key drivers behind the investor’s buy decision, and to emphasize those drivers when speaking with similar investors. The more IROs understand about who is buying, and when, the better they are able to tailor their messaging to specific prospects.
5. Go global
Information flow across the globe is almost instantaneous these days, and access to around-the-clock trading has become ubiquitous. With these advancements ownership of US companies by foreign investors, regardless of company size, is on the rise. The issue for IROs, however, is most of these foreign-based investors only file positions on an annual basis – making it extremely difficult to track their ownership and/or the success of international targeting efforts. Ongoing real-time surveillance can immediately identify changes in ownership by international investors and alert the IRO. This knowledge can be leveraged to help make informed decisions about holders and/or specific money centers that ought to be the focus of new, or ongoing targeting efforts overseas.
These are just a few of the ways IROs are leveraging next gen surveillance to help them run better IR programs. Over the coming weeks we’ll continue to dig in further. I hope you find it helpful!