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IR and communications
Based on these findings, the company
can tailor messages—and, in some cases,
the actual financial disclosures—to
move perceptions closer to the desired
state. Once refined, key messages should
permeate all communications, including
presentations, fact sheets and websites,
targeted to investors.
Disclosure guidelines and processes:
As the visibility and sponsorship of the
company increase, the volume of incoming
inquiries and demands on management
time and attention will likely escalate. It is
important to understand that all audiences
are interconnected and information flows
freely among them and that investors may
act on information or perceptions that
exist in any domain. This argues for close
coordination among all people charged
with speaking to the public.
To ensure consistency of message and
protect against improper disclosure, it is
strongly recommended that management
establish at the very beginning a formal
disclosure policy and protocols to manage
incoming inquiries about financial and
investment topics, as well as the flow of
outgoing information. This policy should
include guidelines on when the company
will speak to investors, what information
is allowed to be communicated and
which members of management or the
investor relations team are authorized
to speak for the company. All employees
should be made aware of these guidelines
and of their obligations to maintain the
confidentiality of material nonpublic
information. The guidelines should be
reviewed regularly.
Importantly, disclosure policies should
be designed not only to manage the flow of
information but also to ensure its quality,
accuracy, consistency and timeliness. In
addition to ensuring reliable, rigorous
communications, this will also help to
reduce the risks of liability that can arise
from any materially false, misleading or
incomplete public disclosures.
Setting expectations: The company’s
success will be measured by execution
against expectations, whether those are set
through formal guidance, analyst estimates
or metrics disclosed during the IPO
process. If the company provides its own
guidance, these expectations need to be
sufficiently ambitious so as to demonstrate
a robust business, yet achievable and
realistic so they can be met consistently.
Expectations can be established by
providing quantitative and qualitative
guidelines such as growth targets, margins
and market share over varying timeframes,
depending on the visibility into and
predictability of the business. Once these
parameters are established, the company
must carefully consider whether a variance
from expectations is material enough
to warrant proactive disclosures and, if
so, what constitutes the proper timing
of the announcement and the forum for
discussing it.
It is important for newly-public
companies to understand that results
outside the anticipated ranges—be it
on the upside or the downside—can
significantly impair management
credibility for effectively communicating
with Wall Street and potentially lead to a
misperception that the company’s results
will be unpredictable or volatile, neither
of which is constructive for the stock’s
valuation. Although many companies
mistakenly believe that earnings that beat
expectations will propel their stock price
forward, the benefits are often short-lived,
as they encourage shorter-term investors
to bet on the company’s ability to beat
sell-side analyst estimates, rather than
focusing on the long-term strategy and
value creation.
Forums for communicating with investors:
There are a number of important forums
for conveying the company’s investment
and business propositions and maintaining
an ongoing dialogue with investors:
• Quarterly earnings—reporting
earnings to investors is perhaps the
most important medium for providing
commentary about the business to
the financial community. The typical
earnings process includes a press
release with financial data, or an
advisory directing investors to the
company’s website for details, as well
as a conference call and Q&A with
sell-side analysts and institutional
investors. The related SEC filing—
Form 10-Q or Form 10-K—is more
formal and much more extensive; some
companies file it concurrently with the
earnings release, while others file it
later (particularly for year-end results).
These important communications
provide an opportunity to demonstrate
openness and candor through the
way that management speaks to the
company’s successes and challenges,
how its strategy is succeeding and
what investors can expect in terms
of future performance. Effective
preparation is critical to ensure that
management has anticipated investor
questions and can either proactively
or reactively address issues, as
appropriate.
For many IPO companies, the
initial earnings period brings unique
challenges as they find themselves
reporting results for the first time
while still in a quiet period. It is critical
to effectively balance quiet period
restrictions with the desire to set a
strong precedent for transparency and
good corporate governance.
• Investor meetings—there are multiple
forums in which management can
personally engage investors:
• nondeal roadshows, where the
company meets with institutions in
one-on-one or group meetings;
• sell-side brokerage firm and
investment bank investor
conferences, often with a group
presentation, followed by oneon-one
or small group breakout
meetings for more detailed
discussions; and
• company-sponsored events such
as analyst/investor days on-site
or group meetings at company
headquarters to showcase the
broader leadership team and
company facilities—with companies
increasingly using webcasts at
large-scale analyst/investor days
to expand the live and on-demand
global attendance at such events.
Regardless of the format, these
meetings provide valuable opportunities
to contextualize financial results,
explain growth strategies and develop
relationships with investors. Yet even
under the best conditions, management
cannot meet with all the best firms and
the best contacts at any one event. As
investor relations teams work to establish
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