March 26, 2014

What Really Matters

Last week whilst (as the Brits would say) tooling on cruiser bikes past beanie baby tycoon Ty Warner’s palace on the Santa Barbara bluffs, we sighted paradise. This week we’re in Boston where we sponsor the NIRI chapter. Hope to see you there.

What if we did nothing?

In the investor-relations chair, in the 4:39 pm lull (or whenever you catch your breath), have you thought it? Suppose you held no earnings calls, went to no sellside conferences, engaged in no outreach. Would anything change?

Cold fear-sweat pops from your pores.

Don’t worry! This is just a simulation. But it would be telling to observe the impact of stopping whatever you do, for a quarter – to see who’s paying attention. I’m reading John Steinbeck’s East of Eden on my Kindle Paperwhite. It’s another I’d meant to read but hadn’t. One character is talking and seeing a lack of attention from his companions. Without varying tone he inserts two sentences of gibberish. They don’t bat an eye.

No, you shouldn’t plop a couple dabs of gobbledygook into your next earnings call or release to see if the capital-markets bourgeoisie are tuned in. (Tempting? Sure.)

That’s not the point in fact. One of our clients announced a debt deal. We said we’d track the impact on hedging. Debt offerings don’t typically prompt selling but they’ll change the cost of portfolio insurance – hedges. Our client said it shouldn’t surprise anyone since they’d said it was coming.

I said we weren’t worried about the audience that was listening, which is 14% of volume. It’s the other 86% we’ve got eyes on.

We know companies with budgets enough for every tool, from two surveillance providers to all the neat gadgets, devices, services and subscriptions. They spend hundreds of thousands of dollars. My IR budget was never near hundreds of thousands unless you counted the annual report we once printed for our hordes of retail holders. We’d do a photo shoot of employees (a big task that cost scads), hire artists to design cover artwork, and manufacture this lustrous printed opus.

It was right, for the time. Investors liked seeing quality. We cut it to a 10-K wrap. It had no bearing on share-performance because the market had moved on from when retail money set prices to where it was rolled into algorithms priced by Blackrock orders through UBS, Barclays and Goldman Sachs.

We’ve got clients who only use our analytics. There is no appreciable difference in outcomes between these, I guess you could call them paupers, and the princes of big IR budgets. In fact, using our Action Items they often outperform. What’s more, the paupers may possess something princes don’t: They understand the demographics of their equity market.

When 86% are of a sort that won’t notice if you insert gibberish because they listen less to you and more to the metrics of your sector, your government and your central bank, you want to distinguish between what matters and what doesn’t. There’s no glory in confusing busy with productive.

What matters is knowing why your shares are down 3% even though you told investors over and over to expect a debt offering. That’s one – not the only but a biggie – key to bringing value to the IR chair. After all, who else in the company will comprehend how the equity market actually works today?

As Ben Stein’s character in Ferris Bueller would say: “Anyone? Anyone?”

What counts isn’t the amount of action, but the knowledge. Because what you’re doing daily may not be enough to matter. In today’s equity market it pays to know what’s going on. Anyone can meet investors. But the best IROs manage the equity product. That’s about what you know, not who you know.

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