When it comes to reaching out to top investors, every IR practitioner has his or her own unique take, making this area more of an ‘art’ and less of a ‘science’ than elsewhere in the profession.
For instance, Mélanie Hennessey, Vice President, Corporate Communications at NOVAGOLD Resources Inc., prizes consistency. She engages with each of the company’s top ten investors as soon as quarterly earnings are released, providing an opportunity “to touch base.” The IR function also reports to NOVAGOLD’s Board on goals, one of which is maintaining a specific number of key investors. In part, Hennessey’s own performance, as well as that of her team, hinges on how well she’s meeting quantitative outreach metrics.
That said, Hennessey also emphasizes that IR outreach has a qualitative side. When it comes to top investors, “the bare minimum is communicating at whatever frequency they prefer,” she says. And if there’s any doubt about how often a particular institution expects meeting invites, emails, phone calls and face-to-face visits, she says: “Just ask. If you don’t ask, you’ll never know.”
Susan Soprovich, Partner at Clear Path Strategies in Calgary, advocates a similarly direct approach to navigating investor outreach. When in doubt, she errs on the side of more communication rather than less.
Even when investors regularly turn down calls or visits, “I think they appreciate being on a list to get meetings upfront or to get a follow-up call,” says Soprovich. “It all goes back to maintaining that relationship.”
Defining ‘large’ investors
Precisely which investors are considered ‘large’ varies by shareholder roster.
Montreal-based Saputo’s outreach is shaped by the fact that 35% of outstanding shares are owned by the dairy company’s founding family. According to Nicholas Estrela, Senior Director, Investor Relations at the Montreal-based company, most of Saputo’s large, non-family investors “like that the operators have a lot of skin in the game.”
Questions of preferential treatment for family members simply don’t come up, says Estrela, noting that the exact opposite seems to be true. He is convinced that investors enjoy how active a role family members play in running the company. For instance, up until his retirement this August, former CEO Lino Saputo personally took large investors on very popular guided tours of plant sites.
At NOVAGOLD, Hennessey considers the company’s “large” investors its top 10. She points out that NOVA is different from its peers in that the top 10 shareholders own 70% of shares outstanding, and several have been shareholders for over a decade.
For Hennessey, what distinguishes top investors from the pack is the weight given to their opinions on the company’s future direction. “All shareholders should be treated with the same respect, but for the major ones who own more, you really have to listen to them carefully,” she says.
Another IRO for whom “large” is synonymous with “top 10” is Ashley Nuell, Vice President, Investor Relations, at Vancouver-based Westport Fuel Systems. At Westport, large investors are not exclusively institutions because the energy company has such a large retail following.
Nuell maintains a “pester list,” or a roster of names of investors whom she regularly contacts. While everyone in the top 10 is offered an opportunity to have a conversation with IR and/or management immediately following the quarterly earnings call, “it’s a mixed bag” on who follows through, she says. She also turns to her pester list with interesting press releases or whenever an article pertinent to the industry is published.
Meeting the information needs of large retail investors can require additional effort. While some retail investors are highly sophisticated and need only be filled in on analyst reports, many of which they cannot access directly, others, she says, “rely on us to help develop a perspective on our company.”
Nuell has known retail investors who want to chat every week or two, a preference she indulges. She’s also begun checking LinkedIn more frequently in response to a new trend: retail investors making initial contact via social media.
The personal touch
Over the past several years, Nuell has sensed a shift in IR outreach. Out is a preoccupation with numbers. In are open-ended conversations.
“It’s not all about the slide deck anymore,” she says. “We can have a way better conversation if we put that all to the side and just talk.”
Rhylin Bailie, Vice President, Investor Relations, at Vancouver-based Equinox Gold, agrees. “If you’re at a social event,” she says, “don’t just pitch your project. Let investors get to know you. If you’re memorable, they’ll remember your project. If you sit there blathering on about your drill results at a dinner party, nobody wants to see you – ever.”
Bailie makes mental (and sometimes written) notes about where her top investors’ children go to school and about topics of special concern within the industry. Doing so helps her stay in touch by emailing an article or other information that an investor might find helpful. “Anytime people feel you know and see them as people rather than as just a pocketbook, it goes a long way,” she says.
Having established personal rapport can also come in handy when an IRO is initiating an awkward conversation. If, for instance, a large investor is suspected of selling shares, there may be little hope for a dramatic save. Even so, many IR experts are convinced that situations like this merit frank talk.
“Reach out, especially if it’s someone you know well and talk to regularly,” says Soprovich. “Say, ‘I see you’re selling. Is there any rationale? Has your focus changed?’” She notes that even when a particular investor can’t be convinced to stay, the IRO may glean important insights for preventing other investors from exiting, as well.
Another type of awkward conversation may arise when there are signs of an activist purchasing shares quickly or in large quantities.
“If you think an activist is buying, absolutely approach them,” says Soprovich. “It’s much easier to have a rational conversation upfront about what their concerns are than to enter into an expensive proxy fight.”
Engaging is worthwhile but it doesn’t always lead to the resolution an IRO would prefer. “If the activist group is determined to fight tooth and nail, then there’s no talking. You’ll be talking to their lawyers,” Soprovich says.
Handling high-maintenance investors
Gone are the days when large investors felt entitled to ask for non-public information that others didn’t possess. The good news is that nearly a quarter century since Regulation FD went into effect, almost all investors recognize and honour the principles of fair disclosure.
Saputo’s Estrela says that in 17 years as an IR professional, “I’ve never been in the position of a larger holder expecting privileged information. They’re all professionals.”
Legal but tricky nonetheless are situations in which a large investor feels entitled to an outsized share of IR and C-suite time and attention.
While it’s perfectly natural for top investors to expect more frequent and direct access to senior management for discussions and Q&As, the time commitment can be eased with some proactive IR planning, according to Catherine Brunet, Associate Director at StoryLign, a division of Rivel dedicated to strategic investor communications. Investor days, she notes, “are particularly effective for delivering strategic updates, addressing investor questions and facilitating interaction with the broader management team.”
Should traditional IR channels prove insufficient, Soprovich’s advice is to preempt too frequent calls by scheduling face time with the CEO and CFO. “You may need to press the C-suite and say, ‘This person is very needy. You might not want to talk to them all the time, but they might call less if they had some one-on-one time with you now,’” she suggests.
Finally, Equinox’s Bailie admits she grows impatient with any institution that demands “special service because of who they are.” In fact, she sees a desire for special treatment as counterproductive because excessive time spent with any one investor is time that “should be spent running the company.”
Bailie is also a staunch advocate of giving small, retail investors their due. “I may be a different animal than most [IROs], but I think retail investors deserve just as much of my time as the institutional investors.” She continues: “Even an investor with 1,000 shares deserves time with me. He might need time with me even more because he doesn’t have a bunch of people crunching numbers for him and doing research. He’s doing it solo.”
Although top investors are inevitably the keystone to IR success, Bailie enjoys interacting with curious individuals, no matter the size of their holdings. “I always find it fun to engage with anyone who wants to learn and be accurate,” she says.