Monday, December 14, 2009

Investor Relations 2.0 -- Is the Answer?

(Disclosure: I’m one of the core group who built I launched the China Stock Blog in 2004 (now Seeking Alpha China Stocks) and subsequently worked on product development. I’m no longer affiliated with the company. All opinions are my own.) (“SA”), the financial blog aggregator, recently launched its latest effort to target investor relations (“IR”) firms, their public company clients, and investor relations officers.

According to its November 9th press release, SA launched a:
“social/business media pilot program exclusively geared towards the needs of companies and IROs. The new platform will clearly identify (and certify) a user as the IR representative of a company on the site, therefore allowing direct communication with investors.

By offering a set of tailored social media tools to IR professionals, Seeking Alpha is reducing the pain points of general social media tools by cutting out the static of general platforms and focusing exclusively on the business/investment community. Through tools such as StockTalks (a Twitter-like feature), Instablogs and Followers/Following, Seeking Alpha gives companies the chance to build and communicate directly with a loyal and valuable following.”
The message is clear:

(1) If you’re employed in IR, make SA your social media home.
(2) Forget Twitter. Use SA's real-time investor platform along with other serious investors.

SA’s renewed effort to become the social media home for IR would seem to make sense. A recent survey suggests that public companies are increasingly using Twitter for IR purposes. And, assuming these survey results represent a trend, this demonstrates a stark departure from IR’s history of doing little online outside of their own corporate websites. SA might be aware of this or is simply hoping to become the real-time investor platform of choice before Twitter (or StockTwits for that matter) gains too much traction in IR/investor circles.

From an IR perspective (assuming you have the resources), I’d suggest experimenting using all of these platforms. But, in general, there are so many things SA could be doing to benefit IR with a clearer ROI, it’s difficult to get excited about this so-called “pilot program”. I’m guessing that IR feels the same way since these SA tools have been available for quite some time, and few, if any, IR professionals seem to be participating.

What else is SA currently doing for IR?

Well, SA’s CEO has been courting IR for years (since my departure) as you can see here (sub req) and here (sub req). My guess is he started talking to the IR Web Report (a must-read for anyone in IR) after the editor penned a series on how useful StockTwits and StockTwits Desktop can be for IR professionals.

In his post on using SA for IR purposes, IR Web Report’s Dominic Jones recommends the following:

(a) Advertising;
(b) Contributor outreach;
(c) Becoming a registered user (profile, follow list, comments, instablogs, stocktalks).

While I wouldn’t recommend advertising (ROI unclear), Dominic’s suggestions for identifying bloggers who could potentially write about your company is a great idea and a no-brainer.

Similarly, I’ve always recommended that IR encourage their institutional investors to contribute articles to SA. Institutional holders know your story, they’ve done extensive research, they can articulate your stock moving catalysts, and, if they’re still standing post-credit crisis they might engender some respect from fellow SA readers. I have enough anecdotal evidence to suggest that contributions from institutional holders can lead to attracting new leads and in some instances new investors.

And, now, for some more ideas about what SA can be doing for IR:

1. Question & Answer Sessions – General Company Discussion

A couple of years ago, while at SA, I introduced Question & Answer sessions (Q&As) with public company IROs and CEOs in partnership with a number of forward thinking IR professionals including David Collins (Jaffoni & Collins), Jacob Eisen (Capital Insight Partners) and others.

Based on the number of questions received from the SA community (90+), the Q&A with Wave Systems (WAVX) CEO Steve Sprague was the most successful. The SA audience was engaged for three consecutive days peppering the CEO with questions about his business. David Collins of IR firm Jaffoni & Collins made sure that there were no violations of RegFD and we made ourselves available to remove any inappropriate comments (of which there were none). The high quality of questions posed was a testament to the SA community. IR Web Report called the Q&A session: "the future of IR".

After concluding the Wave Systems (WAVX) Q&A, I received an email from one of the company’s institutional holders employed by a prominent investment bank boasting about the results and boldly suggesting that this was the future of conference calls, especially for small-cap public companies. I continue to agree with his assessment.

For a variety of reasons the SA Q&As eventually lost steam --- but NOT because public companies weren’t interested. There’s no reason this service can’t be re-launched, assuming, of course, you have the proper partner at SA.

For those concerned about RegFD, issuing a press release announcing the Q&A, including a legal disclaimer, and acting as careful as you always are about not disseminating non-pubic information should be sufficient. But, checking with your legal counsel is an obvious move to cover your bases.

2. Question & Answer Sessions – Specific Issue Discussion

Question and answer sessions can also be useful for companies looking to address a specific issue. Shortly before I left SA, I was in discussions with an IR professional who wanted us to host a Q&A so his CEO could address negative rumors impacting his stock. Rather than hosting a conference call, he and I figured that exposing his CEO to the SA audience in an open (but controlled) environment of sophisticated investors would be a more effective and transparent course of action.

Q&As addressing specific issues should be especially appealing in the near future as shareholder activism increases (as is expected partly due to certain upcoming rule changes). While Target (TGT) was able to fend off Pershing Square’s Bill Ackman, by leveraging the consistent flow of shareholder traffic to its corporate web site, other companies aren’t so fortunate. Companies with limited site traffic will be forced to use other platforms to fight shareholder activists.

(While heavyweight Bill Ackman may be a far-fetched example for most companies, consider Ironfire Capital’s Eric Jackson who took on Yahoo! (YHOO) management despite owning fewer than 100 shares of stock. This could happen to you.)

Again, this is another case where SA can play a role in supporting IR by providing a platform to respond to shareholders.

3. Questions for Earnings Conference Calls

Many micro-cap, small-cap, and mid-cap companies struggle to attract participation in the Q&A portion of their earnings calls. This has become an ever-increasing challenge due to the decline in sell-side coverage. With few, if any, sell-side analysts participating on calls and most institutional investors avoiding them altogether so as not tip their hand, IR can be tempted to take live questions from investors who haven’t been screened properly. This can lead to a variety of problems as I’m sure many of you have already experienced.

Some companies are attacking this issue of limited earnings call Q&A participation by reaching out to investors online. According to the WSJ, “in March, digital display maker Microvision began using its corporate blog to solicit questions from retail investors for its quarterly call, in effect opening the call up to any interested party with a computer. Matt Nichols, the director of communications for Microvision, says that shareholders that frequented the company’s investor-relations blog had asked for a way to participate in calls”.

While Microvision was fortunate to enjoy an active investor base eager to participate, many companies aren’t so lucky. Many don’t have corporate blogs or they have blogs that don’t attract much traffic.

That’s where SA comes in. It should be easy enough for SA to appeal to its investor audience for questions prior to a company’s earnings call. SA has already demonstrated the ability to generate tons of high quality questions for Q&As. Questions for earnings calls should be no different. And, because SA is organized into individual sector sites, IR has the ability to target investors already interested either in their respective companies or companies in their space.

Taking this one step further, SA can also help public companies by soliciting questions for annual meetings. According to the WSJ, “In May, Intel Corp. became the first major company to allow shareholders on the Web to vote and submit questions as if they were on the floor of the annual meeting. Moreover, a handful of small companies, including furniture seller Herman Miller Inc. have saved money by switching to virtual shareholder meetings instead of renting halls…”.

4. Investor Conferences

As sell-side analyst coverage declines, investor conferences should become (assuming they aren’t prohibitively expensive) a more important outlet for public companies (especially micro-cap and small-cap) to tell their stories. The reasons to attend are obvious. But what most companies miss is the larger opportunity to capitalize on their appearances once their conferences have concluded.

While at SA, I introduced the investor conference transcript service. Having SA transcribe and publish a transcript of your company’s conference presentation drastically increases the number of investors exposed to your company’s story. And, thanks to Zack Miller (formerly in charge of business development), those transcripts not only show up on SA but also on Yahoo! Finance. The beauty of conference presentations is that companies tell their stories in a short, concise, and substantive fashion due to the limited time they’re allotted.

For investors looking for new ideas, this is exactly what they’re looking for. Investors are not likely to listen to a webcast of your conference presentation. They’re also not likely to really understand your business from reading one of your earnings call transcripts. But, they just might read a short transcript of your conference presentation if you make it freely available and accessible. And, who knows? If they’re reading SA they might also be a blogger (or, in fact, an SA contributor) looking for new ideas for companies to write about. And, soon enough, you might have bloggers writing about your company because you’ve given them a critical tool to do so --- your story in brief.

While at SA I partnered with a number of the afore mentioned IR firms and others including Zack Noory (Nexus Investor Relations) to have their conference transcripts show up on SA (and, of course, Yahoo! Finance). I also partnered with The Wall Street Analyst Forum to do the same for its public company attendees. Even if transcripts are delayed for a couple of days so as not to threaten the “sanctity” of the conference, public companies should expect this transcript service as required in this age of social media. With webcasting a traditional part of the conference package, so should online transcripts be too.

While I’m aware of many in IR still interested in this service, it no longer appears to be available through SA. With transcript providers on call (to transcribe earnings calls), SA should have no problem rolling this out once again.

5. Road Show Investor Meetings

As Dennis Walsh, social media guru of IR firm Sharon Merrill Associates pointed out in a recent interview:

“It is challenging for micro-cap companies to identify potential investors willing to take the time to meet with management and consider making an investment.”

This is yet another opportunity for SA to support IR. As mentioned previously, SA has a substantial readership of sophisticated investors, sector specific websites allowing companies to target investors interested in their space (if not their company), and, of course, geographic reach throughout the US and abroad. Thus, companies could promote upcoming investor meetings on SA and then carry out due diligence on those interested parties in order to determine those suitable to meet with.

While SMA's Walsh specifically cites “micro-cap companies” as being challenged in this area, no doubt many small-cap and mid-cap companies suffer from the same issue as well.

With a basic service SA should be able to help alleviate this problem.


While IR would love to use their corporate websites to fulfill all shareholder needs, the fact is that many sophisticated investors are found elsewhere. As a result, IR must explore new platforms to expand the reach of their message, build trust, address issues, fight activist campaigns, etc. Furthermore, the forward thinking IR professionals I mentioned above have already paved the way with remarkable results (without violating RegFD).

“Despite the challenges, Barbara Doyle, VP of IR for Lawson Software, recognizes the necessity of using social media. ‘As a $1 bn small-cap company, we need to consider every ... viable channel to get our message out. As a technology company, ... it’s a part of our culture. And our customers, employees and investors are increasingly using these channels to get information, so it’s simply not a choice, not an option,’ to ignore social media.”

Soon enough, an investment site will step up and respond to the needs of IR. SA is doing some things to address this issue. But, as I’ve presented here, there are many more interesting things they can be doing with a clearer return of investment. While I believe that SA is best positioned to address the many IR needs, there’s no reason why another company in its space can’t step up and do so themselves.

I can be reached at ezra dot marbach at gmail dot com

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