IR is a strategic management responsibility to communicate effectively with the financial community by integrating: finance, communication, marketing, and regulatory rules and compliance. It is important in attracting investors to invest in the stock and analysts to cover the stock, giving long, healthy, steady growth and strength to the stock, which eventually reduces the cost of capital.
An earnings call is a conference call between the management of a company and the investor community, including analysts and investors, where a discussion will be held on the financial performance of a company over a given period. This should be carried out periodically, ideally quarterly to give regular updates on performance. It is essential this be carried out, in both good and bad times.
An investor’s day is a public meeting, hosted by senior management of a company, where presentations are made in person to the investor community. The purpose of the meeting is to keep the investor community updated on performance and the direction in which the company is headed.
A roadshow is a series of presentations made in a number of locations to the investor community and is used as a sales pitch to attract investors to a stock. This can be carried out in both the IPO stage, as well as to continue to attract new investors. A roadshow allows a company to talk with both current and potential investors. These may be referred to as deal and non-deal roadshow. What is good about organizing roadshows is that you can target not only the equities market but also the fixed income market as you can also use them to sell debt instruments.
An investor conference is an event where investors, analysts, portfolio managers, and companies are present, and allows for a heavy concentration of meetings between companies and the investor community within a short space of time, allowing companies to present information on their companies and performance.
An annual report is a comprehensive review of the company’s performance in the previous financial year. It is an essential communications tool to outline to the investor community not just the performance of the company, but also the company’s activities, strategy, and outlook.
Environmental, social and governance refer to the three central factors in measuring the sustainability and societal impact of an investment in a company or business. It is important because it allows investors to evaluate and measure investment opportunities from sustainability and ethical point of view prior to making an investment decision, whilst also seeing how responsible the company in question is. It has become a very important mandate from the United Nations for listed companies to have an ESG policy.
This is the process of seeking feedback from the investor community after a company’s interaction with them. Taking a sample size from those interacted with; a 3rd party will ask a number of both qualitative and quantitative questions. The importance of having a 3rd party carry this task out is that the answers given will remain confidential, giving the participants the feeling of being more comfortable to be as honest as possible. Once all answers have been collated, the 3rd party will analyze the responses and will provide recommendations moving forward of what can be done differently by the company in the future.
Having an institutionalized shareholder base provides stability to your stock. Institutions are more likely to hold stock over a period of time when they see the value, and unlike retail investors, are unlikely to ‘flip’ a stock, where an investor buys and sells regularly over short periods of time.
This is done by implementing a number of policies and procedures and being proactive in working towards your goals. This includes ensuring you have an IR strategy in place, you have internal guidelines and manuals, you have an up-to-date distribution list, a well trained IRO and KPIs which are tracked and monitored. This will allow you to build and develop relationships with investors and analysts, both currently invested in your stock and those interested in your sector.
Simply put, this is done by building relationships with different analysts by being proactive in your outreach. This can be done through a number of different means, including spending time with analysts, regular correspondence with them, and being consistent. But remember, always look to target analysts covering the sector in which you operate. Another key factor is senior management engagement; the investor community wants a senior management team who are easy to approach and are willing to interact regularly. Of course, let us not forget that company performance is of course also an important factor.
This can be done again by being proactive. QFIs are Qualified Foreign Financial Institutions who are allowed to invest in Saudi listed companies. You can increase your QFI holding by reaching out, attending international investor conferences, and targeting institutions that cover your sector.
As described by the CMA, increasing institutional investors helps stabilize the market, and QFIs allows for the transfer of knowledge and expertise to local investors and institutions. It also helps to increase efficiency in the market and strengthen the Saudi Market position to become the market of choice in the region.
There are many ways this can be done. Of course, Annual Reports, Earnings Presentations, Earnings Calls, and periodic reports form the fundamental avenues. But the key to all of this, is your proactive outreach in attending investor conferences, locally, regionally and internationally, arranging roadshows, investor days and allowing investor meetings to those requesting one. Finally, there are many communication platforms available to listed companies, providing a global outreach at the push of a button.
Transparency is key, and the information given should be consistent. The main items to include are the key financial metrics, guidance, performance vs guidance, strategy, and outlook (including macro). A key element to ensuring the correct information is communicated is by regularly seeking investor feedback and analysis from a 3rd Party provider to regularly update and evaluate the information being communicated is concise and relevant to what the investor community seeks. Also, it is worth mentioning that carrying out periodic peer comparisons and benchmarking ensures best practice standards are met and you are constantly evolving to the needs of the investor community.
All announcements should be made in both English and Arabic to allow foreign investors to understand the contents of your announcement.
Yes, a quarterly earnings call is an essential element to your proactive investor engagement. It is a very easy item to organize; a 3rd Party (for example an investment bank) will host the call. In attendance for the Company will be their IR Manager, CEO and CFO (or other senior executives involved in the company’s IR), while the hosting party will distribute regular invites to the Company’s distribution list. It is worth noting that you should fully prepare all members of senior management who will participate in the call by having dry runs and researching frequently asked questions you may face from participants.
In short, as often as necessary to meet their needs. Avoiding meeting with investors, especially in bad times, can lead to negative sentiment, which you should avoid at all costs.
This depends on your internal targets, the number of conferences, and attendees of those conferences. It is essential to research attendees of each event/conference in order to ascertain which one is best for you to attend. The best way to decide is to sit down at the beginning of the year and research conferences along with possible attendees to each.
This coincides with what is contained within your IR Corporate Disclosure Policy. Usually, CFO and IRO attend most meetings and CEO would join in larger events to cover as many meetings with a large number of investors. It is worth noting that for local conferences, it may make sense to shuffle which managers attend so the investor community can meet with multiple executives to go into more depth for different business segments.
The main documents that should be available on the IR section of your website include Earnings Presentations, Earnings Releases, Factsheets, Financial Statements, and Annual Reports. It is also worth noting that you should, as a best-practice guideline, incorporate some IR tools into your website.
An ESG report either outlines the environmental, social and governance of a company, allowing investors the opportunity to evaluate the sustainable and ethical nature of a stock they are interested in investing in or are invested in, by reviewing its environmental, social and governance and seeing how ethical their investment is or may be.