CANADIAN IR PRACTITIONER PERSPECTIVE

As a small cap issuer, you know that the investor relations function is important, but you don’t have much of a budget – or maybe an individual who is a full-time IRO. As market conditions fluctuate and companies suffer, an unfortunate result is that often the IRO is let go. Then investor relations falls to the CEO and/or CFO (who are also busy running the company and so cannot allocate as much time as desired to the IR role) and/or to the Administrative Assistant (who may not have the knowledge or experience to effectively fulfill the function).

Without solid and consistent investor communication, a company runs the risk of an increase in inaccurate information/perceptions in the market, reduced market awareness and difficulties obtaining attention from key financial individuals. Good investor relations assists a company in the following ways:

• Protects market capitalization;
• Attracts and/or retains investors in volatile markets;
• Ensures appropriate disclosure;
• Supports the business plan and objectives;
• Broadens investor base and increases liquidity; and
• Ensures receptive capital markets for future financing at the lowest possible cost.

So what is a small cap to do in such a situation to maximize the impact of investor relations despite budget or time constraints? How does the company get recognized? And how does it ensure that disclosure is meeting regulatory requirements?

Key Tactics for Effective Communication

When resources are tight (money and time), a small issuer needs to make best use of the tools at its disclosure in order to maximize its IR effectiveness. 

• Know your company – understand its position as a business and an investment vehicle compared to its peers and competitors. Determine its competitive advantage and communicate the message across all channels.
• Know who you want to ‘dance’ with – identify the key investors in your space (especially those who invest in your peers) and target communication to them. This is much more effective than the ‘shotgun’ approach – blasting communication out and hoping it hits the right people – and will reduce wasted time and effort.
• Consider allocating funds to a corporate profile instead of a glossy annual report.  Financial resources can be utilized more effectively by creating a corporate profile book (8-to-12 pages) that highlights the company and its investment value, which can be used on the website and as introductory material for meetings with new investors. The profile can be printed in limited quantities and updated quarterly, or as needed. 
• Utilize the website to its full potential – keep it up-to-date with relevant and new information that showcases the company’s value and potential.
• Revise the investor presentation regularly – this is a key document that investors look to for corporate strategy and information, so ensure that it is current, and revise it quarterly.
• Be proactive in your communication – reach out to investors by ‘pushing’ information to them via targeted investor lists.
• Leverage relationships with institutions, bankers and brokers to increase awareness and get introductions to key investors.

Top 10 Disclosure List

Following is a ‘top 10’ list of things to remember regarding disclosure in order to satisfy regulatory requirements and ensure you are ‘onside’ regarding communicating with the market.

1. Meet reporting deadlines – 120 days after year-end for annual documents, 60 days after quarter-end for interim documents.
2. Ensure all news releases are disseminated in a timely manner.
3. Pay close attention to forward-looking statements – be aware of what constitutes these statements and the regulatory information and explanations required with respect to them.
4. Disclose material contracts immediately – issue a news release if material change occurs and file the contract once completed.
5. Monitor insider trading and disclose appropriately – communicate blackout periods to ensure no inappropriate trading occurs.
6. Keep to publicly disclosed information – when dealing with analysts and shareholder meetings, ensure that spokespersons focus on information that has already been publicly disclosed. While it is acceptable to provide colour on your company’s operations, nothing material can be disclosed unless a news release is issued simultaneously. 
7. Control the message – determine what constitutes materiality in your business and ensure all spokespersons are aware of this. For example, talking generally about the results of a well that was drilled would likely not be material to a major petroleum company with thousands of wells; it likely is to a small cap player with few wells.
8. Don’t go quiet in times of trouble – it’s just as or more important to talk to the market when times are tough as when they are good. ‘Perception is reality’ and if a company clams up, the information void may be filled by inaccurate rumours that could further impact the situation and valuation. 
9. Consider forecasts and guidance carefully – if you provide targets to the market, make sure that they are realistic and attainable. Provide a thorough discussion of your company’s risks so that the investor comprehends possible issues.
10. Review and revamp executive compensation information in the Management Information Circular (MIC) – there continue to be increasing scrutiny and information requirements with respect to the compensation discussion and analysis portion of the MIC, so ensure your company’s disclosure is up-to-date.

With these ideas in mind, you should be able to maximize the value of your investor relations effort, despite restrictions related to company size or resources. It’s not easy, but taking the time to develop solid communication and relationships will help enhance the company’s success in good times and weather any storms that come your way.