Navigating Phase Two of COVID-19: Three IR Tips for CFOs


Transparency and clarity of communication are central tenets of investor relations, especially during a crisis. To deliver this, IROs and CFOs need to understand how their shareholder base has changed and what information investors and analysts want to receive in the coming months. Share price volatility shows little sign of calming to pre-COVID-19 levels, so navigating the uncertainty in a confident manner will be required. 

Speaking at a recent IR Magazine virtual event, Colleen Johnston, former CFO of TD Bank and current board director at Shopify, McCain Foods, Unity Health, and Q4, described how her views on IR were shaped by her experience during the global financial crisis. She talks about the fact that she and TD Bank’s CEO, Ed Clark, decided to ‘double-down’ on investor relations. “That was pretty unusual, frankly, at the time.  It was very hard to know what the heck was going on and it’s really uncomfortable to sit in front of investors and analysts and say that you don’t know where the world is going.”

“I always think the rule of good IR is to put yourself in the other guy’s shoes. These portfolio managers were facing big hits to their portfolios and their clients were very nervous.…So my best advice is to reach out and spend that time with your investors, even if you don’t know all the answers. Talk about your management philosophy, what it feels like in your organization and be authentic. Nobody has a crystal ball.”

Below is the IR-related information that CFOs and IROs will need to conduct effective and meaningful shareholder engagement during the coming months.

Analyze your shareholder base  

Between March and April, there were record levels of trading volatility and volume, meaning that many public companies will recognize a notable change in their shareholder base. A calm analysis of who traded in and out of your stock – and when – can lead to more enriching conversations with investors about why. Remember that investor engagement is most productive when it’s a two-way dialogue; your investors are navigating the same uncertainty that you are.

Some companies may find that they’re in a different market cap classification than before, or notice a change in the type of investor that is entering their stock. There’s strength in understanding whether your story resonates more with growth or value investors, and whether you need to therefore tailor your investor communications. 

Stock surveillance can be a tremendous resource in this respect, as Billy Eckert, head of surveillance and capital markets at Q4, shared in a recent post. “We’ve seen some great examples of IROs taking data to the next level, digging into the data and using it to guide the next set of actions, whether that’s honing messaging, changing course, or targeting specific investors in the pipeline. These proactive IROs are hitting it out of the park by looking for ways to improve the value delta we’re seeing in the market.”

This can also help to inform conversations at the board level about investor relations. For instance, a record number of poison pills are being adopted by US companies this year to ward off interest from activist investors. While this technique has previously been frowned upon, proxy advisors and investors are largely understanding of circumstances this year. Alerting your board quickly that an activist is taking an interest in your company could lead to sharp, investor-related decisions. 

Understand index rebalancing and rules 

Investor relations professionals are primarily focused on investors with actively-managed portfolios, but with the continuing momentum towards passive strategies, it’s never been more important for CFOs to understand the nature of passively-managed index funds. 

In the same way that the recent volatility will have caused turnover of active investors, it may also lead to exclusion or inclusion in index funds, depending on their rules for inclusion. Many passive money managers are preparing to sell off large quantities of company stock because it no longer meets the inclusion rules for a passively-traded fund. Rules can relate to any number of metrics including market capitalization, volatility, float, sector, balance sheet, or capital deployment. According to a data pull from S&P Global’s website, a large number of funds will rebalance between June 19-30. 

IROs and CFOs have the time to understand the inclusion rules of the indexes they’re included in and, if necessary, provide an update to the board on what to expect in terms of buying and selling when these rebalancing dates arrive. 

Conduct scenario analysis 

Since March 16, 841 companies filing with the SEC have withdrawn annual guidance, while 69 companies have withdrawn quarterly guidance, according to recent analysis from IR Magazine. Given the complexity and uncertainty that we all face, this was a reasonable step for many companies and one that investors and analysts understood. 

But it does leave a vacuum of information for the Street to interpret, which is where scenario analysis can help. Whether it’s communicated on the next earnings call, during a dedicated investor or analyst day, or in an investor update, scenario analysis can provide investors and board directors with a better picture of what the coming months may hold, as Colleen Johnston recently discussed.  

“The best [scenario analysis] I’ve seen basically has a definition of three phases: there’s the storm, the initial recovery, and the full recovery, and what actions need to be taken on the people, product, client, community sides. Then you go through your modeling – with a focus on the P&L, cash, capital, liquidity, and dividends. So, you end up with a base case, a bull case and a bear case…once you have that you don’t need an update every five minutes. You just need to be told where you are relative to the base case and it’s management’s job to tell you that.” 

CFOs can connect the dots between FP&A, investor relations, and the board to provide a clearer picture of what the future may hold. None of us are in a position to communicate with any certainty, but we can communicate confidently. By following these steps, you’ll be able to have more enriching conversations with your investors, analysts, management team, and board directors. Learn more about the metrics that matter most to your leadership team by reading How to Deliver Valuable Investor Insights to the C-Suite.

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