INVESTOR RELATIONS Chapter Fifteen

15-2 Investor Relations (IR) Provides information to investors according to regulations governed by the United States Securities and Exchange Commission (SEC). Began in l933 with the passage of the Securities Act and the Securities Exchange Act of 1934— aimed at protection of the public from abuses in the issuance and sale of securities.

15-3 Investor Relations is aimed at: Helping the firm’s securities reach their market price. IR professionals encourage stockholders to buy and hold company shares and persuade Wall Street financial analysts and institutions to take an interest. Shareholders are necessary to support management’s objectives.

15-4 The Investor Relations Professional seeks to: Win shareholder support through timely and valuable communications. Serve as their link to the organization. Provide information according to SEC regulations. Uphold ethical and professional guidelines.

15-5 Materiality Materiality refers to corporate decisions that cause an investor to buy, sell, or hold company stock. Companies must disclose information that is considered to be material.

15-6 Examples of Material Proposed mergers or acquisitions Change in dividend policy, capital investments Determination of earnings Acquisition or loss of significant business contract Major management changes Purchase or sale of significant assets Major discoveries or inventions Marketing new products

15-7 To be in compliance with the Securities and Exchange Commission (SEC) Organizations must engage in timely and full disclosure

15-8 Full Disclosure Full disclosure refers to all investors being informed quickly, fully, and fairly about material corporate information. An issue that has come up recently has been selective disclosure—that is, providing information to some investors but not all investors.

15-9 Question….. Sears acquired an organization, which was the third-largest retail acquisition in history. Investor relations went well with 95% of the organizational shareholders voting in favor of the deal. Can you name the organization? Hint: Some say they didn’t know which end was up. Answer: Lands’ End

15-10 The SEC tries to limit: Insider trading While at the same time it tries to facilitate Disclosure This way, information reaches all, not just a few who would have unfair advantage.

15-11 The New York Stock Exchange (NYSE) Governs large companies that are members.

15-12 Investor Relations Activities Corporate Investor Relations Professionals would prepare:  Annual Reports  Quarterly reports  Annual meetings  Conference calls  Media calls and monitoring  Proxy mailings

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15-15 Question…… Do you remember who resigned as Tyco’s CEO under the allegations of tax evasion? First name Hint: Mr. Wilson’s young neighbor— always carried a slingshot, hung around with Joey. Answer: Dennis Kozlowski

15-16 Investor Relations Professionals Deal with the stock market analyst  Analysts are responsible for determining the value of stock based on its current value in the market and their expectations of the company’s future earnings per share.  There are two types of analysts: sell side and buy side analysts

15-17 Analysts Breakdown Sell-side analysts research stocks and attempt to predict future earnings and place recommendations on each stock to buy, sell, or hold. Buy-side analysts work for large institutional firms, such as mutual funds, investment advisers, family trusts, and pension funds. They find stocks and their institutions can purchase them and make a profit.

15-18 Internet Investor Relations Organizations today use the Internet to reach investors. They must provide information to the investors that is honest and trustworthy.

15-19 Internet Communications: Homepage providing information Web site serves as a service to new, as well as seasoned, investors and attracts potential investors Information can be controlled through an integrated site rather than distributed randomly Investments can be done online and investors can research investments on the Internet

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15-21 Question…… Can you think of a rumor that hurt investments for an organization? How was the rumor handled? Was the organization able to rebound to your knowledge?