15. Investor Relations AL AKHAWAYN UNIVERSITY COMMUNICATIONS STUDIES SCHOOL OF HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS STUDIES 15. Investor Relations Lecture by Dr. Mohammed Ibahrine based on Seitel’s The Practice of Public Relations

Structure of the Lecture 1 Dealing with Investor 2 Investor Relations Philosophy 3 Investor Relations Activities 4 Dealing with Analysts 4.1 internet Investor Relations 15/05/2019

1 Dealing with Investor Individuals who specialize in investor or financial relations are the highest-paid professionals in the public relations filed They should earn an MBA A Master of Science in Finance Chartered Financial Analyst designation (CFA) In Europe and Asia, they should have Certified International Investment Analyst designation (CIIA) 15/05/2019

1 Dealing with Investor Another major component of keeping a company's health and wealth is communicating with shareholders and prospective investors Investor relations (IR) is at the center of that process The goal of IR is to combine the disciplines of communications and finance to portray a company’s prospects from an investment standpoint 15/05/2019

1 Dealing with Investor Some key audiences are: Financial analysts Individual and institutional investors Shareholders Prospective shareholders Financial media 15/05/2019

1 Dealing with Investor Financial media 15/05/2019

1 Dealing with Investor What about employees? They increasingly become an important public Because they have stock options 15/05/2019

1 Dealing with Investor Investors relations increased importance as the stock market of the late 1990s climbed ever higher Investor relations was born in the mid-1930s Investors are the owners of the company When individuals buy shares of stock , they become owner in the particular corporation in which they have invested 15/05/2019

1 Dealing with Investor What exactly is IR? It is the effort to narrow the gab between the perception of a company and the reality Helping the firm’s securities reach their appropriate market price To do this, IR professionals must encourage stockholders to buy and hold company shares and persuade Wall Street financial analysts and institutions to take an interest 15/05/2019

1 Dealing with Investor A strong shareholder base is necessary to support management's objectives Helping build a strong shareholder base is the duty of investor relations officers Integrity and credibility must form the basis of professional IR practice One way to win shareholder support is through timely and valuable communications This is the job of investor relations 15/05/2019

2 Investor Relations Philosophy The essence of investor relations lies in a public company’s obligation to disclose information that may impact an investor's decision to buy, sell, or hold a stock This means that a company must disclose information that is adjudged to be “material” The legal standard of what is “material” is any fact that would be important to making an investment decision 15/05/2019

2 Investor Relations Philosophy Typical areas of expertise and work are the following: 1. Proposed mergers or acquisition 2. Change in dividend policy 3. Determination of earnings 4. Acquisition or loss of a significant business contract 5. Major management change 6. significant change in capital investment plan 15/05/2019

2 Investor Relations Philosophy Typical areas of expertise and work are the following: 7. Purchase or sale of a significant asset 8. incurring a significant debt or sale of a significant amount of equity securities 9. Pending significant legislation 10. A major discovery or invention 11. The marketing of significant new products 15/05/2019

3 Investor Relations Activities The typical corporate investor relations office is staffed by two or three individuals Investor relations professional are responsible for a variety of communications activities: Annual report. The annual report is a company’s key financial communications tool The annual report generally include he following elements: 15/05/2019

3 Investor Relations Activities Annual report. The annual report is a company’s key financial communications tool The annual report generally includes the following elements: Company description: Letter to shareholders Financial review Explanation and analysis Management and marketing discussion Graphics 15/05/2019

3 Investor Relations Activities 1. Company description: This includes the company’s name, headquarters address, description of its overall business, and a summary of operation 15/05/2019

3 Investor Relations Activities 2. Letter to shareholders: This incorporates a photo of the firm’s CEO, an account of last year's performance, and a forward-looking view of the industry, environment, and company’s prospects for the future The best shareholder letters are those that are frank, fun, and straightforward 15/05/2019

3 Investor Relations Activities Financial review: In light of the U.S. Security Exchange Commission’s increased demand for financial disclosure companies have expanded financial sections to include required filings and registration statement 15/05/2019

3 Investor Relations Activities Explanation and analysis: This complement to the financial review is a general discussion of the factors influencing the financial results 15/05/2019

3 Investor Relations Activities Management and marketing discussion: The annual report has a narrative section that allows the company to expand on its products and prospects 15/05/2019

3 Investor Relations Activities Graphics: Photos and charts are critical to help bring to life the company and its performance 15/05/2019

3 Investor Relations Activities Annual report. In recent years, as companies have suffered credibility problems Some corporations have tried to break the traditional mold They offer fresh and innovative annual reports Google 15/05/2019

3 Investor Relations Activities 2. Quarterly report. Quarterly or interim reports are issued every quarter to keep shareholders abreast of corporate developments, particularly earnings, between annual reports 15/05/2019

3 Investor Relations Activities 2. Quarterly report. Companies compare their performance during the current quarter with their performance over the same period of time in the previous year 15/05/2019

3 Investor Relations Activities 3. Annual meeting. Once a year, the management of public companies is obligated to meet with the shareholders, in person, to discuss the firm 15/05/2019

3 Investor Relations Activities 3. Annual meeting. This annual “mating dance” between management and shareholders is greeted with fear and loathing by CEOs, particularly if the company has had problems 15/05/2019

3 Investor Relations Activities 3. Annual meeting. Shareholders are the “owners” of the company and deserve answers 15/05/2019

3 Investor Relations Activities 3. Annual meeting. In addition to question-and-answer sessions, the annual meeting also consists of management speeches updating the shareholders on corporate performance And stockholder voting on proposals spelled out in previously mailed proxy statements 15/05/2019

3 Investor Relations Activities 4. Conference Call. An increasing number of companies are releasing quarterly corporate earnings information with conference phone call to analysts, institutions, and individuals Top management conducts the call, explains earning, and answers though questions 15/05/2019

3 Investor Relations Activities 5. Media Contact and Monitoring. Savvy investor relations specialists must Keep investors aware of current market developments They also keep current through regular contact with the monitoring of these important financial news outlets 15/05/2019

3 Investor Relations Activities 6. Proxy Mailings. Proxy is a technique/server used to cache information on a Web server and acts as an intermediary between a web client and that web IPO Letter 15/05/2019

3 Investor Relations Activities 6. Proxy Mailings. Infrequently, corporations become involved in contentious shareholder issues that must be resolved by a vote of the shareholders In these contexts-called- “proxy fights”- investor relations professionals participate in mailings to shareholders expressing management's point of view as to the direction of the vote 15/05/2019

4 Dealing with Analysts The principal investor relations contact is the stock market analyst Analysts “analyze” They are responsible for determining the value of a stock, based on its current valuation in the market and their expectations of the company’s future earning per share 15/05/2019

4 Dealing with Analysts Analysts are divided into two types: Sell-side analysts Buy-side analysts Sell-side analysts research specific stocks in particular industry groups and attempt to predict future earnings In doing so, they place a recommendation on each stock to by, sell, or hold 15/05/2019

4 Dealing with Analysts Analysts are divided into two types: Sell-side analysts Buy-side analysts Buy-side analysts’ duty id to find stocks that their institutions can purchase and make a profit on Because Buy-side analysts work for only one institutional entity and are “selling” nothing to the public They have escaped government inquires unscathed 15/05/2019

4 Dealing with Analysts 4.1 internet Investor Relations Just as it has affected most areas of public relations work, the Internet has revoloutionzed investor relations In the 21st century, companies must use the Internet to reach investors 15/05/2019

4 Dealing with Analysts 4.1 internet Investor Relations It has become expected of a forward-looking company to have a homepage providing investment information A well-designed website provides service to investors and potential investors that they can receive nowhere else Anywhere in the world, a potential investor can learn about the company as an investment 15/05/2019

4 Dealing with Analysts 4.1 internet Investor Relations The firm can better control its messages to investors through an integrated website than it can through randomly distributed news releases and investor packets Today’s investor not only often invests by using online mechanism but also prefers to research personal investments on the Internet 15/05/2019

4 Dealing with Analysts 4.1 internet Investor Relations A strong investor website will include all of the staples of investor relations work: News releases SEC documents Links to corporate filings Executive profiles Annual and quarterly reports Stock price data 15/05/2019

Summary The need for intelligent investor relations professionals, knowledgeable about both finance and communications- will increase over time The area of investor relations will continue to develop as a fertile ground for public relations practitioners 15/05/2019