Today, IROs have access to more information than ever before. So, when looking to create an IR program that is driven by data, it can be a challenge to consolidate, analyze, and utilize the vast amount of information that is available. However, with the right strategic approach, it is possible to efficiently aggregate data and insights into investor behavior to tell a complete story.
On a recent IR Magazine webinar, a panel of industry experts discussed the impact of connecting analytics, market intelligence, and artificial intelligence to identify activism, benchmark performance against peers, and better assess your shareholder base. Here are some of the tips discussed for leveraging data to inform and improve your IR program.
Reading the story data tells
In one of the event’s key discussions, webinar panelists discussed the importance of surveillance and capital market intelligence in interpreting the market, especially in times of volatility and uncertainty. The experts touched on the benefits and challenges of collecting and analyzing multiple data points as well as the trends – both before and during COVID-19 – behind the IR function becoming increasingly data-driven.
Data insights can help interpret what’s happening in the markets by stressing the importance of equity surveillance. Equity analysts are some of the only individuals on Wall Street able to truly follow trades from start to finish. They can see what’s happening in the market but can also dig deeper into the “why” of these equations.
Particularly in times of increased volatility, distilling trading patterns and delivering data around stock movement can provide the IRO and management a more complete picture of what’s driving that movement – not just within the individual equities but also the broader markets. An effective surveillance program can also illustrate company performance relative to peers.
Beyond market dynamics, recent regulatory changes have impacted the evolution toward data-driven IR efforts, as IROs see a significant increase in direct inbound interest, likely driven by MiFID II unbundling. Because these direct requests come without the benefit of context from sell side firms, IRO teams can tap stock surveillance and market intelligence teams to provide that context. Coupled with manual outreach to the funds themselves, surveillance can help IROs appropriately understand their existing holdings, fund style, peer ownership and other pertinent information to ensure they’re optimizing their time with the right investors.
It’s increasingly important for IROs to make investments that drive the conversion rate of potential to actual investors as traditional sales and marketing functions do. Data can be extremely valuable in this process as it allows IROs to connect the dots between the data they have (IR website traffic, quarterly call attendance, etc.) and patterns in trading data from a surveillance perspective. This knowledge helps IROs drive enhanced targeting efforts and improve conversion rates.
Prioritizing the right investor for targeting
Even before COVID-19 the rise of both algorithmic trading and passive investing put IROs and management in the position of competing in a much smaller pool of actively managed capital to try and influence decisions of these investors. This challenge and the need to intelligently and efficiently utilize management’s time highlight the value of data-driven insights in effective targeting.
IROs have never had access to more data. Whether public market data, proprietary data like web analytics and quarterly call attendance or alternative data sources, surveillance and capital market intelligence can help synthesize data points to build better investor intelligence. Bringing these different data sets together – including quantitative data points like AI targeting score and quality score – can ultimately drive a more engaging, higher quality conversation. Informing targeting efforts in this way saves time and can pay dividends.
A data-driven approach can be valuable beyond efficient targeting, as well. Surveillance is the best and primary defense against an activist moving in your stock. The COVID-19 global pandemic has highlighted the importance of this monitoring and getting an early warning on activism.
While we’ve seen the market, and particularly tech, come way back since its March lows, those still underperforming, despite a rebound in their sector or peer group, may be seen as a value opportunity, and therefore a target for activist campaigns. Surveillance analysts can leverage a holistic ecosystem, including CRM, web analytics, trading reports, custodial bank flows, and IRO insights to enable early detection of a threat – a topic of great importance for management and your Board.
Tracking performance and program effectiveness
Leveraging data and analytics to track performance can not only gauge the effectiveness of your program but also help refine your communications strategy for the future. Additionally, this benchmarking can be helpful in reporting progress to both management and your board, whether they’re most interested in your performance relative to peers, the progress of your ESG outreach, or the threat of activists in your stock.
In order to bring together insights and data to measure the effectiveness of your IR program experts stress the importance of first establishing defined performance reporting metrics and KPIs. Of course, these will differ from firm to firm but might include things like shareholder composition, quality of meetings, web activity, conversion rates and what activity you’ve put in place to engage both targets and existing shareholders.
During the webinar, the panel of experts discussed many of the opportunities presented by a data-driven strategy, as well as the industry trends driving this evolution. To learn more, listen to the entire webinar here.