5 Critical Strategies to Improve Your Investor Targeting

18 November 2019

By Allyce Maclaren

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Targeting the right investors is crucial to growing your shareholder base and boosting your company’s liquidity and visibility. But developing and implementing an effective investor-targeting plan isn’t always a walk in the park. In fact, in a recent article, we identified some common barriers IROs come up against when targeting investors, including time and budget restraints, and the nuances of today’s changing investor. The bright side is that, with the right tips and tools, you can overcome these hurdles to develop a well-planned and effective targeting strategy.  Read on for 5 key techniques to help improve your targeting exercise and establish a circle of promising investor targets.

1. Analyze investor ownership

The critical first step in any effective targeting exercise is understanding your investor landscape. Spend some time looking at who makes up your shareholder base and why, as well as who owns your peers. One of the simplest and most effective targeting techniques is to look at current shareholders who are underweight compared to a typical position. They have familiarity with your story and sector and, with the help of some engagement, have the potential to size up. 

This exercise also opens the door to other “low-hanging fruit”, like investors who do not currently hold your stock but could be a good fit based on peer holdings. In a recent interview, Matthew Tractenberg, Investor Relations Partner at Q4, explains “Targets who already have exposure to your peers are considered “warm” as they are educated on the competitive space, themes, and metrics. They’re also easy to find. This is the most common type of ‘peer’ targeting.”

2. Understand investor mandates (thematic targeting)

Matt also suggests identifying what themes are driving your business and aligning those with the interest of investors. He argues portfolio managers tend to invest in things that they have a predisposed position on, such as a favourable theme (e.g. “Internet of Things”), an exceptional management team (e.g. the IBM pedigree), a business trend or macroeconomic driver. Matt explains, “If I’m able to identify a theme and apply it to others in the industry, I can then find out who is buying those other stocks based on that trend and initiate a conversation”.

3. Geographical considerations

It’s also important to look at key regions where you might be under-represented. According to Billy Eckert, Head of Surveillance and Intelligence at Q4, “Geographical targeting can be a big deal, especially when you look at some of the large capital centers of North America. If you are underrepresented in any one of those pockets, and there’s interest in the peer group, that can be a great opportunity for both management and IR to get in and fill a valuation gap with a region that might not have as much familiarity with your story, but should.”

4. Leverage technology and data

The hallmark of a good targeting program is rooted in data and technology. Investor relations teams today have access to more data than ever before, with visibility into who is visiting their website, downloading content, attending conference calls, and watching webcasts. This is a great way to uncover potential investors who have shown an interest and might want to learn more about you. Billy explains, “These insights are a great place to start building your targeting list because those people are already familiar with your name. You can skip the elevator pitch and say ‘I noticed you joined us for that conference call, are you willing to sit down and chat about it?’”.

And while, as individuals, we simply can’t analyze the sheer volume of data available, we can reap the benefits of technology. In fact, over the past year, the reliance on brokers for investor targeting has decreased by 12%, with more than 50% of companies using tech platforms to enhance investor targeting. 

For example, Q4’s AI Targeting tool leverages capital markets intelligence and machine learning to uncover the most ideal investors, at exactly the right time. Its ability to crunch multiple data sets is undoubtedly beyond the realm of any human analyst. The algorithms analyze more than 700 factors to predict which investors are in the best position to buy your stock, over the next 90 days. 

IR teams can then take this data and analyze how well these investors are aligned with their company. Investor Relations teams should also look at a quantitative score, like Q4’s AI targeting score, to determine decent fit within a portfolio and supplement the insights with firms or funds that have the ability to purchase material position on stocks.

5. Plan and diversify your conferences

Investor conferences are an ideal avenue for you to tell your story to investors and present an efficient opportunity to meet numerous investors. But, it’s important to plan out and be strategic about your conference attendance. In addition to attending a bank’s annual conference, look for additional opportunities that may be outside of your comfort zone. 

For example, banks are increasingly hosting thematic conferences focused on specific industry areas that provide an opportunity for IR teams to get in front of investors who have a specific interest in their industry. As well, keep an eye out for conferences that aren’t necessarily industry-specific, and may attract generalist investors and portfolio managers. While this type of investor may not be as well-versed in your industry, they may still have an affinity or appreciation for your business themes. 

However, Matt suggests not always waiting for scheduled roadshows or conferences to get in front of your targets. Instead, he advises IR teams to plan meetings around the leadership team’s existing travel schedule. He says, “Try to be proactive in finding out where your targets are located and which executives are going to be in those areas at certain points in the year.”

Think holistically

When it comes to investor targeting, thinking holistically is crucial. Although a well-developed targeting plan is a helpful tool, it doesn’t go very far without a plan to actually engage with the targets. Align your targeting plan with your annual calendar, making sure to fit top targets into your travel schedule and match them with the right speaker. Map it out quarter by quarter and make sure you’re getting in front of the right people, in the right places.

At the end of the day, it’s important to recognize that targeting is a marathon, not a sprint. Much like a sales pipeline, investor targeting is an ongoing exercise where you’re cultivating relationships and nurturing leads often time, often years. It’s not uncommon to begin a relationship where, at this point in time, you do not fit into their portfolio. Instead, you’re identifying them as a “potential customer” for the future. In fact, it’s quite rare for an investor to buy stock days or even weeks after a meeting. 

According to Matt, “Measuring success or failure of a targeting exercise on a quarter to quarter basis is really selling yourself short. It’s a very short-sighted view of a long-term strategy.” In the interim, he suggests leveraging data to show progress to the C-suite, no matter how minor it might seem. For example, showing that a potential target is doing further research on your company, downloading content or watching webcasts, can go a long way.

For more successful targeting techniques, download our ultimate guide to targeting best practices.

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