Hard numbers can be misleading
While it’s important for firms to keep track of their IR activities, experienced IROs often caution against using metrics like number of meetings or conferences to demonstrate success as it may lead IR teams to fall into the trap of equating ‘busyness’ with adding value.
When gauging the success of investor engagement, data center business Equinix is focused more on softer, qualitative factors than hard numbers.
Chip Newcom, director of investor relations at the company, says: ‘There really is more art than science in investor targeting and how to measure it. I can feel like we’ve got the best story on the planet for an investor. But not everyone’s going to buy that story.’
Some might even take the reverse view, he adds: ‘The way we’re measured internally is not based on whether we got X number of new investors into the stock this year, or if we are seeing rotation within the current portfolio. I’d say it’s less tangible than that. It’s about how well we know our current shareholders, how well we know potential shareholders.’
That closeness with the investor base was put to the test earlier this year when Jim Chanos, a well-known short-seller, put out a bear case on all physical data center businesses. When the news broke in the financial media, Newcom immediately checked in with Equinix’s major shareholders to find out what they thought.
‘I very quickly had conversations with both the buy side and sell side,’ he recalls. ‘And I knew, across our shareholders, that none of them bought into it. That’s really valuable for the management team.’
Another measure of success at Equinix is whether management’s time is being used effectively. C-suite time should be saved for meetings with important existing or prospective investors, and both sides should come to the meeting prepared, says Newcom.
‘If an investor is coming in for a meeting with management, I should already have had a conversation with it. It should be a ‘warm’ introduction,’ he recommends.
Keeping scoreSteve Adams, managing director and chief of staff at Clermont Partners, the strategic communications consultancy, agrees that qualitative factors are most important when assessing the success of engagement. He notes, however, that companies can use a scoring system to keep track of their meeting activity.
Adams suggests making a list of key criteria, such as management preparedness and quality of questions, and giving each one a mark after a meeting. IR teams can then look at their average score to see if they are happy with their performance. This requires IROs to be very honest with themselves as they are effectively marking their own homework, Adams adds.
Besides investors and sell-side analysts, IR teams must also judge their success based on their retail engagement, says Sue Ennis, head of investor relations and corporate development at Hut 8, the Bitcoin mining company listed on Toronto Stock Exchange (TSX) and Nasdaq.
I can feel like we’ve got the best story on the planet for an investor. But not everyone’s going to buy that story
‘A lot of IR professionals don’t understand just how much the industry has changed,’ she says, noting the influence of online investing communities like WallStreetBets and StockTwits. ‘Retail investors are the new decentralized hedge fund. They have more power than ever.’
Ennis engages with these online communities directly. For example, she looks for crypto-focused YouTube channels with large audiences and gets in touch, offering to provide information and appear in interviews.
While it can be hard to measure retail ownership exactly, Ennis says a clear sign of success came when Hut 8 built enough trading volume to enter the S&P/TSX Composite Index.
‘We were the first blockchain or crypto company to ever make it into the index,’ she points out. ‘That was a big deal for us.’
