My 25-year career of practicing investor relations has encompassed companies of various market capitalizations. From a $200 million pharmaceutical company to a $10 billion professional services firm, and finally, to a $500 million electric vehicle manufacturing company that went public via a de-SPAC process, I have experienced the full spectrum of company sizes. In this article, we will explore the role of investor relations in both small-cap and large-cap companies, examining the similarities, and differences, in both roles and target audiences, and whether bigger is always better in the world of investor relations.

The Crucial Role of Investor Relations

First, let’s make it clear: regardless of the size of a company, the role of the Investor Relations Officer is similar.

Investor relations serves as the crucial link between the capital markets and a company, irrespective of its size. This function involves maintaining effective communication with investors, shareholders and the financial community at large. By providing accurate and timely information about the company's financial performance, operations and relevant matters, investor relations ensures transparency and builds investor confidence.

As Investor Relations Officers, our primary goal is indeed to provide shareholders, potential investors, analysts and other stakeholders with the necessary information to make informed investment decisions. It is our responsibility to develop and implement communication strategies that ensure stakeholders have a clear understanding of the company's business objectives, financial health, industry trends and competitive positioning. We accomplish this through various communication channels such as press releases, regulatory filings, conference calls, annual reports, investor presentations and events, as well as non-deal roadshows and one-on-one meetings.

Furthermore, we act as a liaison between the company's management/Board of Directors and the investment community, and we provide internal stakeholders with valuable industry and peer information, insights on capital markets and market perceptions to aid in strategic decision-making.

The Advantages of Small-Cap

Small-cap Investor Relations Officers often face unique challenges due to limited access to capital. Consequently, they must be agile, creative and possess a diverse skill set. In small-cap companies, Investor Relations Officers often take on additional responsibilities beyond their core role (e.g. communication, business development, ESG, treasury, etc.). This versatility allows for a comprehensive understanding of the company's operations, enabling more holistic guidance to investors.

Now turning to the target audience, investing in small-cap companies can offer unique opportunities and potentially higher rewards compared to large-cap companies, for the following reasons:

• Growth potential: Small-cap companies typically have higher growth potential compared to large-cap companies. These companies are often in their early stages and have more room to expand their market presence, develop innovative products or services, and capture market share. If successful, their growth can lead to significant returns for investors.
• Undervalued opportunities: Small-cap stocks are often overlooked or undervalued by institutional investors and analysts, creating potential investment opportunities. Due to their smaller size, these companies may not attract as much attention from the investment community, allowing some investors to identify promising prospects before they gain wider recognition.
• Flexibility and agility: Small-cap companies tend to be nimbler and more adaptable than their larger counterparts. They can quickly respond to changing market conditions, seize emerging opportunities and make strategic decisions without bureaucratic hurdles. This flexibility can be advantageous in dynamic industries or during economic shifts.

However, there are also drawbacks to small-cap investing, including higher volatility, increased risk and liquidity challenges. Small-cap stocks are more susceptible to economic downturns, face greater competition, and may lack established track records. Furthermore, lower trading volumes can make it challenging to buy or sell shares at desired prices, particularly during turbulent market conditions.

With Large-Cap Often Come More Resources

On the other end, working at a large-cap company often provides internal access to specialized resources and individuals with diverse expertise, including financial analysis, communication strategy and market intelligence.

In addition, large-cap companies often have greater financial stability, enabling Investor Relations Officers to employ more diverse investor engagement strategies, invest in sophisticated IR technology and hire external consulting services. They can afford to participate in more industry conferences, organize more roadshows, and hold more complex analyst/investor events, which help enhance their visibility in the investment community. They also have access to complex sets of data that enable them to implement strategies such as City Scoring in the investor relations program.

In terms of the target audience, investors who choose to focus solely on large-cap companies often do so for several reasons:

• Stability and established track record: Large-cap companies are usually well-established and have a long operating history. They often have a proven track record of generating consistent earnings and have demonstrated their ability to withstand economic downturns.
• Liquidity: Large-cap stocks tend to have high trading volumes, which means there is more liquidity, making it easier to buy and sell shares without impacting the stock price significantly.
• Lower risk: Compared to smaller companies, large-cap companies are generally considered less risky. They often have diversified business operations, larger customer bases, and more financial resources to weather economic challenges.
• Dividend income: Many large-cap companies pay regular dividends to their shareholders. Investors seeking income often favour large-cap stocks as they typically have the financial strength to distribute dividends consistently.
• Analyst coverage: Large-cap companies usually receive extensive coverage from financial analysts, making it easier for investors to access research reports and insights. This information can be valuable for making informed investment decisions.

So…Is Bigger Better?

From my point of view, the answer is easy! Absolutely not! Both have their pros and cons and each calls for Investor Relations Officers with specific and different sets of skills.

While the role of a large-cap Investor Relations Officer may seem more prestigious due to the company's size and market presence, it is essential to recognize that bigger is not always better.

My recent transition from a large-cap to a small-cap firm allowed me to leverage the wealth of knowledge accumulated throughout my career. The insights and perspectives I brought to the table were highly regarded and actively sought after. By effectively communicating complex financial concepts, providing valuable market insights, and building trust with stakeholders, I think I have made and continue to make meaningful contributions to the company's growth.

I firmly believe that the size of a company does not determine the effectiveness of an Investor Relations Officer. Both small-cap and large-cap Investor Relations Officers play vital roles in fostering investor confidence and communicating the company's value proposition. Ultimately, recognizing the unique strengths and advantages of each role helps us appreciate that bigger is not always better in the realm of investor relations.

Isabelle Adjahi, F.CIRI, is Vice President, Investor Relations and Sustainable Development at The Lion Electric Company.