Top 10 IR strategies for companies in a bear market

Monday, August 10, 2015

As the investment community gets increasingly sophisticated with easy access of financial information, it is paramount for companies to differentiate themselves, be it the products and services they provide or the public perception they establish, in order to attract interests from both the analysts and investors. 

The recent oil price rout for instance, set alarming headlines almost every other morning when I log in to the various newswire apps on my smartphone. Overwhelmed with synonyms such as crisis and turmoil, it is no surprise that the relevant sectors suffer from massive sell-off. 

Thinking in retrospect with my investor relations (IR) hat on, I performed a cross-sector IR audit and analysis on more than 700 companies listed on the Singapore Exchange and discovered that most of the lacklustre-performing companies maintained a relatively low presence within the investment community. Fulfilling the barest minimum in terms of IR commitments, some companies do not even publish press release on their corporate developments or quarterly results announcements. While this may sometimes be a conscious decision by the management due to certain circumstances, we believe that consistent two-way communication with company’s stakeholders, even during the down cycles, can truly distinguish a sterling company. When the uptick for the business eventually returns, such companies would be well-positioned to benefit. 

Having experienced various market cycles, we highlight 10 IR strategies to help companies differentiate themselves in a bear market:

1) Maintaining visibility

When everyone chooses to remain low-key, take charge and lead by providing insights of the industry’s landscape to the market. While most investors stay on the sidelines in a bear market, it is important to remain in their investment radar.

2) Acknowledging the problems

Upholding investors’ confidence and trust ensure sustainable growth for the company. Instead of glossing over a set of poor financial results, take ownership and acknowledge the problems, followed by defined strategies to address them.

3) Focus on the balance sheet

When investors value companies on their growth prospects, the income statement matters but in a bear market where survival is key, the balance sheet becomes the focus. Discuss the size and nature of assets and liabilities or even the company’s cash position.

4) Do not over-commit

Management may sometimes stretch themselves thin by committing excessively in financial performance to the investment community. Avoid doing this as failure to deliver results will discredit management. Instead, lay realistic assumptions for the market to build their own financial projections.

5) Share the long term perspective

While next quarter’s top and bottom line is important knowledge for investors and shareholders, it is imperative to share the long term perspective of the company to align their investment interest.

6) Fact-driven presentations

All qualitative statements should be well supported by quantitative means to ascribe credibility to management. The objective is to provide data for the market to execute their own evaluation.

7) Consistent messaging

Companies should speak with one voice only so make sure that all communication to the investment community and media are well-coordinated between your IR representatives and the management. Having multiple responses to the same query not only confuse the audience but also diminish the impact of a holding statement.

8) Be prepared at all times

Surrounded by myriad issues that include political and regulatory changes, professional IR representatives should prepare anticipative questions and propose answers for the management to stay vigilant to any likely queries.

9) Quash the rumours 

The sensitivity to information, true or false, heightens in a bear market so it is important to monitor the chatter around the company and quash any rumours instantaneously with facts.

10) Forget the share price and sell your story

Nothing matters more than understanding a company beyond its financial books in a bear market. Knowing where the company stands today and its plans for the future will dictate where it will be when the industry recovers.

Some might find it a cliché but the old saying “What goes down must come up” has an interesting relevance in the financial markets. For every sell trade executed, there is a buyer on the other end who has a different opinion from the seller, so the question is, are you doing the right thing in a bear market to empower your investment audience?

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