Until late last year, I had enjoyed a 15-year career on both the buy side and sell side of Wall Street. Today I work with an organization whose mission is to prepare corporate leaders for the future new normal. Prior to joining CECP’s CEO Investor Forum, I worked at UBS advising Investor Relations Officers (IROs) on their investor access programs. Two years ago, I noticed a transformation, a shift in focus toward the long-term, beginning to take hold within the capital markets. Eager to help accelerate this transition on a larger scale, I left Wall Street for CECP’s CEO Investor Forum to help companies communicate their long-term value creation plans to the institutional investment community.
Now, as the world faces a pandemic and an economic crisis, my conversations have changed. Understandably, the focus has reverted to the short-term as a company’s primary focus in the wake of this crisis is to stabilize its business. However, regardless of how challenging times may be, as companies execute their short-term strategies, they must simultaneously consider how their short-term decisions fit into their long-term plans in order to truly emerge from this crisis.
Navigating the Short-Term
IROs are laser focused on maintaining the confidence of existing shareholders. I’ve created a list of resources with my takeaways to provide IR professionals a reference point for how to shore up investor confidence in the short-term as its senior leaders take actions to stabilize their businesses.
- NIRI Webinar Replay: Maintaining an Effective IR Program through the Covid-19 Pandemic
- Protect C-Suite’s time: The C-Suite’s first objective is to stabilize the business in a crisis. Prioritize and limit C-Suite-investor interactions, with you and your IR team taking on most of these investor interactions. Most investors will understand and respect this approach right now.
- Consolidate Covid-19 materials on IR website: Consolidate everything your company has said and done in relation to Covid-19 (e.g., press releases). This will make it easy for your shareholders and other investors to find what they need on the topic. Ford has done a great job of this (see top section of its IR website).
- NIRI Twin Cities Webinar with IHS Markit: Covid-19 – IR Update on Current Environment
- Lever technology for virtual investor outreach: One of the biggest takeaways from this webinar is to be nimble and adjust how your IR program engages with investors. There are several technology platforms that can support a virtual IR program.
- NIRI’s Covid-19 Crisis Resource Library
- This is a comprehensive resource center for IROs including health resources, Securities Exchange Commission (SEC) responses and guidance, crisis communication recommendations, law firm memos and alerts, and other news articles and commentary.
Driving Value for the Long-Term
Because the stock market is a discounting mechanism of future cash flows, institutional investors at some point will eventually begin kicking the tires on ‘mispriced’ or undervalued equities that they believe do not reflect fair value of the underlying businesses’ long-term potential. It is very likely that most institutional investors will generate negative returns as the economy contracts in the coming months and quarter(s). As a result, institutional investors will likely be even more focused on de-risking their long-term investment thesis on your company coming out of the likely Covid-19-induced recession. They will require a deeper understanding of how your CEO plans to manage the business for long-term value creation.
Fortunately, there is precedent in the marketplace for communicating long-term business plans. In fact, 35 large and mega cap CEOs have already communicated their company’s Long-Term Plan by leveraging the expertise of the CEO Investor Forum and its market-tested, long-term investor communications tool. The CEO Investor Forum’s Long-Term Plan focuses on 9 themes that empower CEOs to speak to the short-term while also sharing decision-relevant, forward-looking disclosures (3-5 years out) with investors.
The best advice I can offer IROs in the short-term is to be your company’s Chief Confidence Officer. In your new role, you can be the calming influence your CEO, CFO, and existing shareholders need right now. While this is everyone’s first time living and operating in a pandemic, you are the company’s resident expert on both the capital markets and communicating your company’s story to investors. This expertise is your currency with your executive leadership, even more so today. I would encourage you to use this currency to ensure your company’s decisionmakers remain calm and measured in the short-term to minimize the negative impact to your company’s long-term value prospects.