Recent findings show that many IROS do not currently use modern-tech tools as part of their IR program, and have no plans to actively leverage them in the near future. Amit Sanghvi, Managing Director for Europe at Q4, attributes this to concerns an IRO might have around tools automating the job, a role that hinges on forging personal relationships with shareholders, analysts and the overall investment community. Addressing this concern, he emphasizes that sophisticated CRM platforms like Q4’s “are not here to replace IROs.” Amit explains, “The idea is to give IROs the ability to elevate themselves from the day-to-day and provide strategic value, both internally and externally.”
When it comes to investor targeting, for example, Amit says most companies require an array of approaches and strategies to attract different shareholders and investor mixes, including current shareholder movement, peer ownership, and quantitative big data analysis. Examining so much data, however, can “make your head explode”. Amit instead recommends solutions like algorithmic analysis and machine learning – technologies that are able to process huge quantities of data, learn from that data and draw conclusions on the fly.
Amit explains that “algorithms and machine learning work hand-in-hand, to draw dynamic and sophisticated conclusions, without any predetermined bias.” These technologies can reveal hidden trends about your shareholder base and the investors who might soon be shifting into, or out of, your stock. They can also automate repeated tasks and free up your time to concentrate on your ultimate goal – shareholder value.
Despite being a self-confessed newbie to such tools, Julie Silber, Senior IR Adviser at Wildeco, recently had a chance to play around with Q4’s CRM platform which leverages AI Targeting. She reflects on an interesting case in which one of her Swedish clients – a mid-cap life sciences firm – had few matches with domestic investors. At first, this concerned her, but Julie came to realise that the tool had fairly judged multiple domestic investors to either already be current investors or legitimately not a good fit. To her surprise, it identified a big name in a far-flung state, Alaska, that looked like a perfect match. Julie explains that this helps a company avoid knocking on the same doors, and instead attract capital from new, untapped sources.
Julie underscores the importance of leveraging technology to more accurately target “different levels of investors that create the proper makeup for your company” – but added that this is only possible with an IRO’s expertise at the helm. While tools and automation can save on time-intensive labour, enacting the right shareholder strategy for your firm “only comes when you have the right plan in place,” she says. Tasks like organising a stressful investor roadshow – when “nothing stays on your calendar, or the C-suite changes its dates, or something comes up,” says Julie – still need an IR professional’s expertise to plan efficiently and create true shareholder value.
Patrik Säfvenblad, Chief Investment Officer at Volt Capital Management agrees with this point and says that one of the best applications of tools that examine your shareholder base or potential investors is to use the data produced to “regression-test” your own assumptions about your firm’s investor base. Comparing what you or your C-suite thinks about existing shareholders or potential targets with what the data tells you can be crucial to forming a well-rounded strategy, he explains.
Patrik oversees the investment thesis at Volt Capital, a Stockholm-based family investment office, which also advertises itself as a machine learning manager. It uses a system that also analyzes large amounts of market data to mitigate risk and promote compliance. From a disclosure perspective, Volt puts a premium on “data comparability.” Patrik explains that “a company needs to ensure that a full raft of data points is available on the IR website, with minimum effort on the investor’s part.” If that full set of data is not there, Volt may not consider a company for investment at all.
A final tip from Patrik is to not just consider the “9 to 5” time-saving benefits of these tools, but also the massive impact on “your 5 to midnight crisis handling situation.” When quick decisions have to be made in tight circumstances, extra intelligence about your shareholder base, your competitors or the market at large could make all the difference, he adds.
But if you’re worried that these new kinds of high tech tools might herald the end of the IRO as we know it, Amit reassures that technological solutions are always best employed under an IRO’s expert eye. “Last year, MiFID II was about figuring out how the new investment infrastructure would fit together,” he explains. “This year, we are anticipating even more sell-side analyst cuts. That gap can best be filled by an IRO’s expertise and specialist knowledge, backed by the extra time and information afforded by advances in technology.”