I agree...FWIW...
Two Versions of a Press Release
At Kei, clients can expect a strategic rather than tactical approach to the investor relations task, Pawlowski says. "A lot of them see investors in an undifferentiated way. I say there are individual investors out there and your task is to find out what each wants to hear."
IR is equal parts communication, marketing, finance and law, according to Pawlowski. "A company is like a living organism. It grows and evolves and goes through cycles, and so its investor profile also changes. Management must help investors understand where the company is headed and what will happen to the future cash flow."
Her profession has come a long way since the 1980s, Pawlowski adds. IR has evolved to match the growing role of large institutional investors and mutual funds in stock ownership and the demands placed on companies more recently by regulatory changes, she says. The large investors have become increasingly sophisticated and voracious consumers of company data and analysis. That, in turn, has raised issues of selective disclosure and attracted new SEC rules, such as Regulation FD, to level the investment playing field.
Years ago, Pawlowski used to do two versions of a company press release: One was a simple recitation of its sales, net income and earnings per share, aimed at unsophisticated readers of news wire services. The other was aimed at the financial community and went farther in parsing the company's financial statements. "Now, this would be a violation," she says.
At the same time, the so-called "global settlement" engineered by New York Attorney General Eliot Spitzer has had a hand in tilting the investor relations landscape toward the buy side, says Louis M. Thompson Jr., president and chief executive officer of the National Investor Relations Institute. Under the settlement, Wall Street firms paid $1.4 billion in penalties after revelations that their analysts exaggerated the merits of companies that brought investment-banking business to the firms and have separated their research and investment banking functions to avoid future charges of conflicts. "If you are a research analyst, you don't talk to an investment banker without a lawyer in the room," Thompson says.
That has meant that smaller, often marginally followed companies have lost analyst coverage altogether. Companies that once could gain the stock market's attention by talking to a handful of analysts must now reach out directly to potential investors, a more time-consuming and expensive task, Thompson says. (Small companies should expect to pay between $60,000 and $120,000 a year for the services of a good IR firm, Pawlowski says.)
Thompson cautions, however, that "the job of IR is not just to boost the stock price, although most CEOs look at their IR person and say, 'I want you to get my stock price up.' But you don't grab that hook. Your job is to get information out about the company in an evenhanded way, good and bad news, and then the market has to decide" how much it values the company.
Bushee cautions that IR is not simply an act of advertising. In hiring an IR firm, a company's management is making some onerous long-term commitments to investors, including providing them with more access to management and more disclosures. "It's not that you can just hire someone to shill your stock and then people will buy it," he says.
Published: April 6, 2005
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