INVESTMENT COMMUNITY PERSPECTIVE

Although the materials you prepare and distribute to the public may cost your firm a substantial amount in terms of time and capital, and your budget for these items is likely continually under review – causing you angst – the cost to the individual or potential investor is essentially free. And as with a booth in a mall handing out samples, people are happy to take something that is free. They are not above making a request, too, such as hey, this blue one is nice, but can I have an orange one? Many people are appreciative of the opportunity; some are not. In this regard, there is no difference in the investment world.

Rule of the Yacht

As time has progressed, technology has improved and ease of communication has increased. The products that IR delivers (annual and quarterly reports, investor day reports, corporate presentations, and so on) can now be distributed to current and potential investors in various ways. But as new delivery methods become available, the old ones don’t vanish; there is no ‘rule of the yacht’. The rule of the yacht is simple: in order to avoid adding weight, for every item brought onboard, an equivalent old item must be removed from the boat (one new sweater on, an old sweater off and the same goes for deck shoes or anything else). This makes a lot of general sense in life as well, but we all fail. So we all end up with a lot of ‘stuff’. Garage sales are made up of ‘stuff’ being purged en masse; a reminder of our failing the rule of the yacht. In the world of investments, reports do pile up in offices, though not like they used to in times past.

Choices, So Many Choices

Investors are pretty lucky today. They have lots of choices: hard copy, mailing of hard copy, disc, memory stick, links, websites and good old SEDAR, an electronic library depository. You are likely familiar with all of these. And investors can choose any or all of them. But people are weaning off printed material. It piles up in the office, home, file cabinets, and so on. There is no garage sale for these items because they were free to start with, so they get the ‘deep six’. You likely did some deep sixing in your office as well.

Printed Material is Slowly Dying But is Not Yet Dead

The fear is always that someone out there does not have access to a computer or Internet connection, or lacks the ability to use a computer, and may want – no, ‘need’ –  hard copy. The thinking is that everyone must have the option. This reminds me of the routine instructions from the flight crew on an airplane…how to put on a seatbelt, how to store your luggage at your feet or in the compartment above (and video about this isn’t shown until everyone has already stored luggage and sat down). Great, but who out there is old enough to fly unaccompanied and cannot do up a seatbelt? And the video is downright ludicrous; it should have been shown at the gate, if at all. I suspect 20 years from now the seatbelt demonstration will continue and the video will still play. But we might finally be rid of printed investment material, especially sent by mail. Handouts are fine to continue unless we all have tablets. Collectively we are not there yet, but soon someone may get the idea that serving Luddites should no longer be the common denominator, and we will go completely electronic. The mailman may or may not rejoice. In the meantime, it’s a waste of money on the equivalent of buggy whips in a horseless carriage world.

How Many People Even Use SEDAR?

Even SEDAR, I think, is losing its appeal for issuers and users. With electronic storage so cheap, most company websites have a complete history of all filings, press releases and corporate documents neatly catalogued for easy withdrawal. Anyone who wants a copy to scribble on can print it and doodle art it to death. Many companies now have ‘printer friendly’ documents that do not drain the ink cartridge (a thoughtful feature). To my way of thinking, SEDAR links from corporate websites are unnecessary and in rather poor taste; it is like saying we cannot be bothered to organize our own stuff so go get it yourself. Today, SEDAR should be like a form of corporate cemetery for those seeking answers to questions of lineage, or history buffs.

The bottom line is that you should make your website a one stop shop for investors. Have a friend navigate the website for ease of use and understandability. This is not rocket science; make your site simple and efficient.

We are Having a Sale, Everything is Free

If you were to ask every investor what he or she wants, the sum total of demands would equal all options offered (even Pony Express if given a chance). This is the result when all options are free. You must consider regulatory obligations and then do your own cost-benefit analysis; investors will not do this for you. If there was a price tag on every item you prepared, the sales analysis would be downright fascinating.

Investors Want All Content…But Here are Five Key Items

Content wants and needs vary as well. There are so many types of investors out there, and for those who do analysis, there is a staggering array of wants and needs. I really like the Annual Information Circular; ditto the MD&A. I sure do read the Financial Statements and Notes. But if I were to break down key wants and needs, I would categorize five key ones:

• Regulatory – you do not have a choice, so do a good job on this.
• Strategy – be sure to link your deployment of capital (human, technical, monetary, etc.) to your corporate strategy. How does management execute its strategy? And how well is it performing?
• What Matters to Management – Almost every investor really wants to know what information management looks at to manage the business. What statements, KPIs (key performance indicators), ratios analysis, and so on, are used? When management sits down to manage, what documents are reviewed?
• Industry Matters – I speak to many investors who are very interested in industry trends, threats and opportunities. They often know what these are but they want to be certain that management knows. What insights does management have?
• An Honest Report Card – Provide a balanced review of what was accomplished against plan – a balanced self-analysis. Warren Buffett gets the gold star on this. If you have not read the Berkshire Hathaway annual reports, print a few and read them. You will see honest self-analysis. I think Buffett learns a lot from this forthright review. We all learn from our mistakes.

All is not Lost, the Times they Are a Changing

For the most part, we are evolving; old ways are dying off, slowly. The modern world is catching on, even for those clinging to the past. This Internet thing looks rather promising. But remember, even though preparing materials for the public costs your company a lot of time and money, for the user it is free. When things are free, demands can grow exponentially. And all these demands lead to the obvious conclusion: investors are now drowning in material. This irony is not lost on some of us.

The Elevator Ride

In my mind, what separates an excellent IR professional from the pack is the ability to consider all the investor demands and sift through years of filings and presentation materials to select the items that really tell the corporate story. Imagine that you are in an elevator with Warren Buffett and Bill Gross; it is a three-minute ride to the top. Can you pitch the essential elements of your business in those three minutes? All the work you do, all the information you send out, all the calls you take: can you distill this into a 180-second balanced but compelling pitch? (Try it with a friend one day. It is extremely hard.) The core elements of those three minutes should be in your materials.