TARGETING INVESTORS PROMISING. Your Most TARGETING YOUR MOST PROMISING INVESTORS

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1 TARGETING Your Most PROMISING INVESTORS 1

2 Targeting is the bread and butter of many IROs responsibilities the main way of attracting new investors or encouraging existing ones to increase their positions. According to a 2012 National Investor Relations Institute (NIRI) study, 84 percent of IROs reported that they engage in investor targeting. Of those who target, nearly a third are very active; specifically, 31 percent said that they engage in investor targeting every quarter. Although targeting is a perennial on IROs to-do lists, it s a task that often gets neglected. Given the vast number of institutions out there, keeping track of the players is difficult. Some of the larger thirdparty targeting outfits boast over 45,000 entries in their databases. What s worse, institutions are constantly changing with new portfolio managers coming on board and different styles of funds being introduced. It s no wonder then that IROs often report that targeting is a goal, but that it sometimes gets sidelined when other priorities surface. 2

3 FIVE STEPS TO TARGETING The good news about targeting is that it works. More than four-fifths of IROs (82 percent) told NIRI that they saw results from targeting in one year or less. The not-so-good news is that IROs really need to take stock before launching a targeting initiative. Not only must they know how their company is perceived by the market, but they need clarity on how their peers are viewed and the forecasts for the broad market. To simplify, here are a few steps for IROs to consider: STEP ONE: KNOW YOURSELF AND YOUR PEERS The sell side organizes its efforts by industry IROs know what sector they re in and which analyst at Merrill Lynch or Credit Suisse First Boston will therefore cover them. Approaching the buy side requires far deeper analysis since portfolio managers tend to either embrace a particular investment style or favor one type of story over another. Before launching a full-scale targeting effort, some IROs commission third-party perception studies to accurately assess how they re viewed by the market. Others join StockTwits, Facebook, Google+, Twitter, or a myriad of other investment-oriented social media sites to begin listening to what investors are saying about them. STEP TWO: CONSIDER YOUR IDEAL SHAREHOLDER MIX A few years back, Thomson Reuters studied shareholder mixes within the S&P 500. As predicted, the top achievers within the S&P 500 had higher percentages of growth investors than others in the S&P 500. Each IRO will determine his or her own ideal shareholder mix, whether it s more retail owners or a higher percentage of international institutions. Once you can assess how your existing shareholder mix differs from the ideal, you ll know where to invest your roadshow time and management effort. 3

4 STEP THREE: HONE YOUR STORY Once you know how you re perceived, you can set out to either confirm that impression or dispel misperceptions within the marketplace. Deciding on a refined version of your investment story is just one task. The challenge lies in finding ways to tell your story to existing and prospective investors. Here s where blogs, vlogs (video logs), Facebook, StockTwits, and even ipad apps can help. STEP FOUR: RESEARCH BUY-SIDE PROSPECTS IROs tend to use a combination of the very personal (direct contacts) and impersonal (third-party consultants) when researching the sprawling buy side. Most IROs begin by reviewing their own encounters with investors who have requested information or who have seemed particularly friendly and interested at conferences and other face-to-face meetings. Next, IROs usually turn to third-party databases of institutions for more ideas. Investor-oriented sites are a great way to supplement third-party lists for little or no money. As an added bonus, the list an IRO creates independently will be individual and not the same as the lists sold to peers. IROs often shy away from social media, arguing that the buy side isn t using it. However, the buy-side has begun to tell a different story. In IR Magazine, Howard Lindzon, a former hedge fund manager who s now CEO of StockTwits, suggests that many institutional investors are sneaking around at the office, concealing their reliance on social media. He estimates that of StockTwits over 200,000 users, percent have day jobs as investors. STEP FIVE: MEASURE SUCCESS For many IROs, measuring the effectiveness of targeting programs is the Holy Grail. The goal is desirable, but it s very difficult to achieve. That said, IROs haven t given up. NIRI found that nearly one half of all IROs measure the effectiveness of their targeting programs frequently; 33 percent do so every quarter and 16 percent do so every six months. Targeting is not a static activity. As market conditions change, IROs must change course, too. The most dramatic example of this came in 2008, when the world financial crisis hit and practically all IROs found they had to revisit their targeting goals. For instance, MTS Allstream, a Winnipeg, Canada-based telecommunications company, found itself suddenly attracting growth investors. IRO Ian Chadsey met institutions suddenly intrigued by the company s one-to-three percent growth prospects, when only a few months earlier these same investors would only have spoken with companies forecasting ten-to-fifteen percent growth. Another turning point in a targeting strategy is the decision to approach a new international market. Jeff Smith, director of investor relations for Europe at Federal Express, makes two to three investor trips to Europe each year. FedEx s targeting program in Europe is different from the U.S., in part because there is far less data on European institutions than on their American counterparts. In Switzerland, Smith notes, private accounts are better targets than large institutions. Meanwhile, his targeting plan for London and Norway includes sovereign wealth funds. 4

5 A SIXTH STEP? BECOMING AN INVESTMENT TARGET Like other IR processes, new technologies have allowed targeting to be done more easily and thoroughly. Two decades ago, third-party targeting firms began amassing large databases of buy-side investors, providing relevant contact information and an overview of investment styles. Today, social media is able to capture the quickly changing nuances of how money managers make decisions. Today, Intel is readily pumping out information about its activities through its StockTwits IR handle: $INTC. The information tweeted doesn t necessarily relate to earnings or industry forecasts, but gives a broader picture of the company, noting, for instance, that for the seventh consecutive year Intel has been named to Working Woman s list of the 100 best companies to work for in the U.S. IRO Reuben Gallegos finds StockTwits an excellent way to gauge whether his IR messages are resonating because he can monitor how many times a given message is shared by others. 5

6 continued Prior to entering IR, Mark Sonefeldt, IRO at LinkedIn, was an analyst at Capital Research, and he draws heavily on his time in the institutional world to win investors for LinkedIn. Sonefeldt told IR Magazine that he prides himself on playing a role similar to that of Switzerland. In other words, he serves as an unbiased third party by furnishing followers on LinkedIn or Twitter with information that s about the industry or the economy, not just news of his company. Gallegos and Sonefeldt are arguably engaged in very untargeted targeting programs. What companies like Intel and LinkedIn are doing is disseminating a very clear vision of who they are including their views on their industries and the economy and then hoping a few investors will appreciate that perspective and get to know the company better. The last approach becoming an investment target, rather than actively targeting investors shouldn t be a company s main approach to targeting investors. Not just yet. However, it is a way to begin to attract new investor prospects without engaging in an elaborate targeting program. If you can get some of the right investors to come to you, you can save slots on your roadshow itinerary for those investor prospects that demand a more traditional approach. ABOUT MARKETWIRED Marketwired is a social communications leader offering best-in-class news distribution and reporting, as well as state-of-the-art social media monitoring and analytics. We open up new opportunities for our clients helping them tune into the conversations that count, find insights that matter, and influence the right people. CONNECT WITH US: WEBSITE marketwired.com US BLOG blog.marketwired.com CANADA UK +44 (0)