Job specs for IROs tend to cover the basics of IR in a ‘normal’ year: the ability to get the quarterly earnings out, to create a good set of core documents that explain your story and strategy to the Street, to compile a clear view of consensus expectations and to establish marketing plans for roadshows to meet existing investors and target new ones. They tend to focus less on the skills needed to cope with the shifts in strategy and events that arise in the course of doing IR.

Yet, in the course of 15 years of doing IR, my experience has spanned major contract announcements, share buybacks, share and debt placings, acquisitions, disposals, a dividend suspension and Board and management changes. Most recently, a strategic review process conducted by an Aimia Board Committee concluded in March 2019 with the announcements of a new strategy as a consolidator in the loyalty and travel markets, as well as a $150 million substantial issuer bid. These developments came at the end of a two-year period that has seen the company’s size and scope change considerably. And looking at the stats for IPOs, M&A transactions, activist campaigns and ongoing Board renewal at Canadian companies, I think it is pretty safe to say that I have not been the only IRO out there messaging significant changes in corporate direction and strategy to investors. 

While that is what makes the job interesting, it also requires a level of responsiveness and flexibility in the face of major change in corporate strategy/direction – and a good base built over the preceding years when it comes to relationships and investor intelligence.

Building a good base – what you can do in advance

• Think about relationships, always. As I look at the equity buybacks, dividend changes and M&A we have done over the last two years, I have learned a lot from the investment bankers, lawyers and market participants like transfer agents. Having solid working relationships with them (and our internal teams) before we even started was an advantage as we worked through the way to present a new strategy, the logistics of special shareholder meetings, the reinstatement of preferred dividends and the decisions around the launch of a substantial issuer bid. And having the number of the TMX market surveillance team programmed into my phone proved to be hugely helpful in more than a few instances!

• Solicit views regularly and keep your investor meeting notes updated. Regularly soliciting views on long-term strategy and maintaining a good set of investor meeting notes (alongside good relationships with analysts, corporate access, traders and fund managers) allowed us to understand likely reactions, those most likely to exit, identify movements in the register and better apprehend voting intentions ahead of two shareholder meetings. 

Being responsive – what needs to change

There are other elements of a change in strategic direction that have required me to think responsively and here are some of the things I have learned:

• Try and keep your core investors with you but be realistic that big changes often bring significant turnover. Strategy changes often are accompanied by changes in capital allocation, risk profile or market capitalization. In our case, event-driven changes in dividend policy and a decrease in market cap resulted in a shift in our register to more value investors who read different publications, model differently and ask different questions. Be prepared to meet your existing base as early as you can post any strategy announcement to understand where these investors stand. Start thinking about how to change your targeting once you realize who will stay and support you longer term and who is likely to move on.  

• Prep your management. Investors hate surprises and hate ambiguity. A change in strategy needs to be well signaled (if possible) and well articulated when it is time to go public. IR can play a role in recommending how and when to time a strategy announcement and ensure the strategy is ‘market ready’. Remember that you have the best insight into where existing investors and analysts are likely to probe and it is way easier for management to get the questions the first (and second and third) time from you rather than on an investor call! Also ensure you have good PR support to get the ‘so what?’ right for the journalist community, to help decide when to get in front of reporters and to make sure management is comfortable engaging them at a critical time. This is when you will get The Globe and Mail coverage that will help shape the story for some time and how people will truly understand what you are trying to achieve as a business!  

• Think through the numbers. This is where your CFA/MBA/Masters in Finance degree can help. Think about how analysts will model the change and be prepared to provide some direction as they do. In our case, the valuation of the company has shifted from a DCF-based divisional model to a NAV-based model, resulting in different questions and a different focus. The way we provide guidance has changed, as have the metrics that our investors and analysts focus on.

• Consider whether this could be a catalyst for new analyst coverage or changes in analyst coverage. A change in strategy may see research teams at banks or ratings agencies consider whether you are in the right ‘bucket’ for coverage. Do your research in advance around how to best position your company in a sector to generate maximum coverage and trading; think about who covers the sector you will fall into and whether any of your existing analysts may drop coverage. Consider time allocation with that in mind and be ready to give time to new analysts who may be ready to initiate on a change in strategy. 

• Explore your network more fully and think about who can help in your situation. Traders and corporate access can provide really valuable insight in these situations and the role of certain players may become more important. In our case, preferred share traders provided new insight into trading as our preferred shares fell significantly below their par value. A substantial change to Aimia’s future prospects in light of a major partner contract non-renewal saw our team engage differently with our lenders and credit ratings agencies around methodology than we had in our previous ‘business as usual’ interactions.

• Don’t shy away from thinking about changes to the tools you use. Not only can this be a great signal that something really is different, it may allow you more flexibility to get your message across. As we worked through the stand-alone Aeroplan strategy we announced in the summer of 2018, we produced a video interview with the CEO posted on our website to give more colour than an investor presentation alone could do – and we considered other platforms that could amplify the message. 

A shift in strategic direction requires a strong management team working together with a clear understanding of the industry opportunity and, from an IR point of view, the market it wants to address. IR is an integral part of a team effort, communicating the value that can be created for investors and it doesn’t really get more interesting than this when you are truly prepared to jump in.