She is a consummate investor relations professional and if she were older she would be the Grand Dame of the profession. She provided expertise and her hands-on experience on Sarbanes-Oxley and the SEC, then took a lawyer's pen to draft the chapter on regulation.
The Coming of Sarbanes-Oxley and the Brave New World
If numbers given to the government and investors from companies like this and others too numerous to list had to be reworded, how could an investor know which company numbers to trust? But then the events of this business revolution clearly showed that they were incapable of any real control over the integrity of the attestation function.
SARBANES-OXLEY TO THE RESCUE
And the more people who have access to the information, the bigger the change. The rapid dissolution of the budget surplus and subsequent record deficit did not help either.
BEN GRAHAM IS RIGHT AGAIN
In many ways, Sarbanes-Oxley and the enforcement of Regulation FD are redefining the practice of investor relations. The new rules are clear and redefine the practice of investor relations like never before.
This Ain’t Your Father’s House No More
Greed has always been with us, as has the hubris that misinforms arrogant individuals into thinking that they are not only above the law, but that. Never really built on a bed of wisdom, and with a perspective rarely beyond the closing bell of the day's trade, the followers of the market - the brokers, analysts, institutional investors, and so on - panicked, and as the character in the Stephen Leacock story who jumped on his horse and rode madly away in all directions at once, they led the charge to the four winds.
THE INVESTOR RELATIONS CHALLENGE
The traditional investor relations techniques—the analyst meeting and luncheons, the press releases, the annual report—have all changed, as the needs of the investor and the communication techniques have changed. It's easy to think of it in terms of the current market, or yesterday's market or the future market.
COMPETING FOR CAPITAL
It took a healthy investor relations program to keep Checkpoint stock on an even keel. A study, using membership of the National Investor Relations Institute as a valid predictor of investor relations activity, discovered that The New Investor—and What Influences the Investment Decision 15.
WHAT THE INVESTOR WANTS TO KNOW
It is the extent to which the financial performance model indicates the company's ability to continue to earn that should be projected. Are its plans realistic in terms of the industry, the market, the economy, the management skills and the financial condition of the company.
OBJECTIVES
The goals for an investor relations program naturally begin with the capital needs of the company. Obviously, the ability to raise capital at any given time is a function of the capital markets.
MEASURING INVESTOR RELATIONS PERFORMANCE
Codifying these objectives helps develop an investor relations program that is relevant to your needs as a business, and relevant to your company's pursuit of capital to meet those needs. Investor confidence shines through amid all the wailing from the Strait's henchmen (and that clue is the word "fundamentals"). And so where investor relations was once simply a useful tool applied by some very savvy corporate managers and their equally capable investor relations agents, it is now an integral part of the investment process itself: a primary pipeline of information that captures the core of the investment. forms. process.
MARKETING IN A NUTSHELL
The investment advisor—the analyst, broker, and other advisors who recommend stocks and influence decisions. The industry—the company's position in the industry, the strength of the industry itself, the company's markets, the company's plans for the future.
Rules of Disclosure—
The SEC and Sarbanes-Oxley
As a result of the flagrant and flagrant disregard for securities laws and fraud in the early years of the 21st century, new legislation—. If the Securities Exchange Act of 1934 was volcanic in its day, the Sarbanes-Oxley Act is revolutionary in this generation.
THE SEC
Thomson, Jr., president and CEO of the National Investor Relations Institute (NIRI), is moving. The regulatory concern here is primarily with the legal aspects of the distribution of that information—the Rules of Disclosure.
THE SARBANES-OXLEY ACT OF 2002
This is one of the key practices that led to a spate of corporate scandals and prompted the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act highlights internal controls and requires strict establishment and management of those controls.
REGULATION FD
At the same time, Sarbanes-Oxley, now integrated into business practice, is proving its ability to define best business practices. It should be noted that both Sarbanes-Oxley and Regulation FD place a good amount of responsibility in the hands of investor relations officers.
COMPLIANCE WITH SECURITIES LAW
On the one hand, this type of question requires thoughtful judgment by the CEO or CFO, assisted by the company's attorney and investor relations officer. When the information was finally released, the stock price fell sharply.
SAFE HARBOR LAW
In one case, Foster Winans, who wrote the landmark Heard On The Street column for the Wall Street Journal, was found to have passed information to select brokers about the material before it appeared in the column. The court ruled that the information in the column, and the column itself, were protected—that they belonged to the Wall Street Journal.
MATERIAL INFORMATION
So it will be important to carefully review the actual text of the disclosure items once the final version of the rules is published. The final rules do not provide for an extension of the submission deadline for the new documents.
CORPORATE DISCLOSURE POLICY
An investor relations consultant, on the other hand, is charged with maintaining the client's ability to market, which means outreach and communication. However, it is worthwhile for management, its securities advisor, and the investor relations professional to work together and respect each other's limitations.
MOSAIC INFORMATION
However, the primary responsibility for complying with disclosure regulations remains with the corporation's management, with the assistance of its lawyers (not the other way around). In the area of disclosure communication, the responsibility rests with the investor relations officer, whose skills and expertise are largely based on communication with the investment community.
THE QUIET PERIOD
DISCLOSURE PHILOSOPHY
The machinery for disclosure must be well established in advance, whether it is done by the company itself or through the protection of the investor relations counsel. And while these two parallel goals may sometimes collide, and there may be a temptation to hedge the rules, it must be clearly understood that the administration of the rules of disclosure can be rigid and diligent.
THE DISCLOSURE VEHICLES
Where once a corporation's perception of its own needs (if not always accurately perceived) was paramount, now the investor is at the center, and the investor's needs for information and tools to make informed investment decisions are paramount. In addition, most of the information is real-time – updated every minute, constantly available the moment it is available.
WHAT IS INFORMATION?
All SEC-mandated document filings are now available free of charge on the SEC's website, www.sec.gov. The impact of this dynamic real-time information on the securities market is significant.
WHAT IS KNOWLEDGE?
For example, what bits of knowledge did the Wright brothers put together to create an airplane? For example, give two people the same information about a company and its investment potential, and one will choose to buy the stock and the other to sell it.
THE NEWS RELEASE
From an investor relations perspective, the new communication structure offers an opportunity to reach more investors and potential investors than ever before. From a marketing perspective, it gives a company the ability to convey its message to investors faster, more widely and more accurately than was possible in the days when the printed word was the primary medium.
THE INTERNET
CONFERENCE CALLS
MAIL TO SHAREHOLDERS
They are also useful for reinforcing a news story, clarifying a serious rumor, or sharing news of particular interest, and should be used more often than in the past.
THE ANNUAL MEETING
ISSUER-PAID RESEARCH
Do not explicitly or implicitly attempt to influence the research recommendations or pressure the analysts to produce research favorable to the company. Ensure that information required by the analyst is included in the research report distributed in whole or in part by the company.
THE SEC AND INVESTOR RELATIONS CONSULTANTS
Steps may be taken to ensure, within the confines of any investor relations firm, the best possible precautions against the dissemination of misleading or inaccurate information.
COMPLIANCE PROCEDURE FOR INVESTOR RELATIONS FIRMS
The form is then signed by the responsible company official as well as the responsible consultant. In the case of a release approved by telephone, or given by mail or fax, a variant of the form, designed for this purpose, is used and signed by the consultant who received it.
EXCHANGES AND DISCLOSURE
The value to any company of providing false information is remarkably short-lived, and the punishment, in terms of at least investor reaction, if not the law, is swift and intense. Only in highly sensitive cases, where an announcement could have a significant effect on the market and trading, will the exchanges and NASDAQ want the material before it is released.
REGISTRATION FOR A PUBLIC ISSUE
However, if the effectiveness of the prospectus is delayed and an income statement is ready, the statement can and should be published. If the prospectus has already been approved and the issue is being sold, earnings are released and the prospectus is attached adding information to the prospectus.
ACCEPTABLE DISSEMINATION OF INFORMATION
Other forms of information that could affect the company and could be interpreted as the sale of shares, however, remain questionable regarding publication. Here again, lawyers and investor relations advisors must consider each other's viewpoints in light of the company's needs and responsibilities.
THE SECONDARY OFFERING
Without attempting to circumvent or stretch the seven categories of information defined by the SEC, it must be recognized that not only is there considerable latitude in the amount and type of information that a company may disclose upon registration, but also both the necessity and the value of such continued disclosure. they do not decrease. The concern should be not only with the timing but also with the content of what is revealed.
IN DEFENSE OF SARBANES-OXLEY
A Funny Thing Happened on the Way to Unbridled Wealth
An honest company management – one that can project this integrity – will compete effectively and successfully in the capital markets. For investor relations professionals, this process is further complicated by the nature of information, a word whose meaning is mostly submerged, like an iceberg, and just as insidious.
THE ANALYTIC PROCESS
And what it has also done is to change the nature of the analysts themselves. For investor relations professionals, it is important to understand this concept, because clearly, investor relations professionals are part of the dynamic; is part of the marketing effort.
THE SECURITY ANALYST
Industry analysts specialize in one industry or another, not only because of their own interests, but because there may be greater market potential for companies in that industry and because of the complexity of the industry. But due to the nature of today's market with its strong institutional involvement, the boundaries are beginning to blur.
THE BROKER
Obviously, with brokers as the focal point for the client, it is almost as important for brokers to understand a company as analysts, regardless of the level of sophistication that comes with that understanding. Obviously, with brokers as the focal point for the client, it is almost as important for brokers to understand a company as analysts, regardless of the level of sophistication that comes with that understanding.
ON THE FLOOR—THE TRADER AND THE SPECIALIST
The two traditional roles in stock trading – trader and expert – are very much in the sights of regulators. Changes in the configuration of the market have in some respects changed and somewhat reduced the role of the trader.
THE SPECIALIST
Most smaller trading companies do not have a research staff, so the responsibility for keeping the trader informed must rest with the corporation. The reorganization of the stock exchanges, which began in 2003, will undoubtedly bring significant changes in the practice of stock exchange trading.
THE MONEY MANAGER AND INSTITUTIONAL PORTFOLIO MANAGER
Thus, the rise of the money manager, the portfolio manager, the mutual fund manager, the wrap account manager—in fact, more managers and experts per capita than ever before. 100 million will certainly get a better audience with money managers managing $250 million or less than it does with managers at the higher end of the spectrum.
VENTURE CAPITAL
The best approach may be to use data from the myriad sources that have emerged in recent years, as well as your own experience and contact list, to select the fund that best matches the security, in terms of size, distribution, industry. , etc. To best inform the institutional investor, examine the portfolio to determine the best approach to the manager.
PIPES
In fact, when the homemaker's shareholders learned of the deal, the stock fell nearly 11 percent. This is a minefield that needs to be navigated carefully, with accurate and careful forecasting of such an investment as necessary under the disclosure rules, and with careful control of the flow of information.
THE CORPORATE PORTFOLIO MANAGER
OTHER INVESTMENT OFFICERS
Prior to ERISA, trust investments, and many insurance investments, were limited to state-approved investment lists. Rather, it responds to the Prudent Man Rule with a much greater reliance on the investment officer to make decisions.
OTHER ANALYTICAL TARGETS
THE OVERSEAS MARKET
The financial press in Europe, for example, is truly national in each of the major markets and is more influential in most countries than it is in the United States. This is especially clear, say the experts, during mergers and acquisitions, where the importance of the press is most obvious.
WALL STREET AND BROADWAY
It's the smaller company, the one with a smaller capitalization, smaller float and lower trading volume, that needs to find the few analysts who can be convinced to follow, let alone recommend, its stock. This objective could well be the answer to the question: Talking to the financial community and the shareholder 91.
TALKING TO ANALYSTS AND INVESTORS
THE GROUP MEETING
Hostile questions should be dealt with patiently and openly and, even if the answer is negative in terms of the overall presentation, end on a positive note. Be aware that no matter how carefully you prepare your invitation list, there will always be a certain number of investors who don't really care about the company, even if they discover it during the presentation.
USING VISUAL AIDS
INDIVIDUAL ANALYST MEETING
ELECTRONIC MEETINGS
At this moment, the medium is not the message, and the content of the message must be the same as one would convey in individual meetings or group meetings. Remember that whatever medium the message is, the message must go beyond simply conveying the numbers – the metrics. The ultimate goal of all meetings with the financial world is to project management and integrity.
RUNNING THE ELECTRONIC CONFERENCE
The message is amplified by delivering it faster and more universally than ever before, and by getting a broader base of response and feedback than can be found in a smaller, local meeting. At least the impact is more urgent, and through the effect of a broader spectrum of feedback from many different participants, it may change the texture of the message.
DETERMINE THE OBJECTIVE
This assumes that you've done your homework to vet the participants, and to forward the kind of facts and figures that participants can read and refer to at ease, and that don't need to be repeated in detail by management. part of the presentation. They shouldn't be the message itself—unless, of course, the facts and figures are the point of the session.
DETERMINE THE TIMING
Negative news is sometimes held in until after the market closes, which may seem like a smart idea, but can negatively impact credibility. An analysis from the University of Chicago shows that releasing results and calling after the market closes minimizes the unusual first few minutes of overreaction that sometimes occur.
DETERMINE THE TARGET AUDIENCE
The conference call at the aftermarket close has two other benefits – it's backup if the disclosure cables don't print your release, and there are more investors available than when the market is open.
THE INVITATION
Given the increasing amount of after-hours trading being done, these classic rules may now be irrelevant, but that too is a judgment call. It should clarify who else will be on the call, both management and participants, so that all invitees have a good sense of the company they will be a part of and can prepare accordingly.
THE SCRIPT
The notice tells the reader that there will be a webcast, web chat, telephone or video conference with selected investment professionals or investors and key management and that there will be an opportunity to ask questions. For a news conference that is closely related to timely disclosure, notice must be sent urgently—perhaps even by overnight courier or fax.
THE EVENT
FOLLOW-UP
THE WEB SITE
Perhaps the most important difference between a website and the printed page, and the one that should affect website design the most, is that a website is dynamic and the printed page is not. It is true that many of the elements of a website can be found in other media.
EARNINGS PROJECTIONS
MEETING WITH INDIVIDUAL INVESTORS
There are sufficient good reasons to explain the refusal to do so if the rest of the presentation was straightforward. Individual investors hear rumors, making them good sources for the size and nature of the rumor mill.
MONEY MANAGER MEETINGS
This can help a company decide whether to respond to, or how to respond to, harmful rumors and to curb the rumors before they become too widespread. In the current configuration of the stock market, the individual investor is re-emerging as an important investor and source of valuable information.
INVESTOR INQUIRIES
It is then up to the CEO to be sure that anyone who might receive such a question is fully informed of the company's point of view, the manner of presentation and appropriate responses to questions, as well as the Safe Harbor and Disclosure Rules. At the same time, you have a great resource for learning a lot about the market for your company's stock.
RESEARCH REPORTS
In many cases, and only with the permission of the issuing firm, a positive report may be reprinted and distributed to shareholders and others in the financial community. There is also a different legal interpretation of the responsibility that accrues to the company that accepts the estimates in an external analyst's report.
FEEDBACK
THE BUSINESS PLAN
Building a Better Business Plan
Decisions regarding company policies are made, managers and board members are elected, and the CEO provides an update on the company's message. After all, the shareholders are the nominal owners of the company - rarely with enough shares to make a difference.
What Do Analysts Really Want (Besides a Crystal Ball)?
So the real problem is the analytical process itself—the complexity and difficulty of determining the value of a stock and the company behind it—in light of so many variable factors beyond the company's control. The role of an investor relations professional is therefore to ensure that those making or influencing investment decisions know, understand and see all the factors relating to the company in the correct configuration and context.
WORKING WITH ANALYSTS AND PROFESSIONAL INVESTORS
The analyst's real job is to understand the meaning of the raw data, and how each configuration of data affects the meaning of each of the other configurations of data. But it is an art that must be energetically pursued if a company wants to succeed in the market.
THE ANALYST’S VIEW
They are fully aware of and wary of the fraud hidden in the off-balance sheet filth of the companies caught up in the financial scandals. Perhaps the best description of the fundamental aspects of security analysis is found in the excellent and sustained work Security Analysis, by Benjamin Graham and David L.
VARYING ANALYTICAL POINTS OF VIEW
The mutual fund analyst functions in terms of his fund's charter and objectives. The growth fund analyst is looking for substantial growth with long-term staying power.
REQUIREMENTS OF ANALYSIS
FINANCIAL DATA
Despite attacks on regulatory and disclosure policies, or any resistance to full disclosure, one overriding factor remains: the more that is known about a healthy company, the more easily it will be understood, believed, and favorably judged.
THE EARNINGS RECORD
If the handling is really adept, there's no reason to think it'll lose its Mida flair in the future. In the final analysis, he says, financial forecasting seems to be the science that makes astrology look respectable.
REVENUES
The fact is that without some significant changes in accounting practices, they cannot be made comparable. However, properly analyzed, the factors behind a consistent earnings history are a measure of elements that contribute to ongoing earnings growth and are usually a good indicator of a company's success.
CASH FLOW
Rappaport, in Creating Shareholder Value, discusses techniques for measuring fundable growth rate and affordable sales growth. He warns that growth rate must be an outgrowth of strategy, and not the other way around.
MARGINS
RETURN ON EQUITY
BALANCE SHEET
RATIOS
COST OF CAPITAL
Cost of capital and capital asset pricing models (CAPM) are increasingly becoming the focus of analyst attention. In Creating Shareholder Value, Rappaport makes it clear that the cost of capital is a key factor in determining whether shareholder value—enterprise value—is increasing.
THE INDUSTRY
Even in a climate that allows for additional capital through equity, the analyst must consider a company's cost of equity relative to its price-to-earnings ratio. Mahoney writes: "Corporate boards are increasingly focusing on reducing their companies' cost of capital, recognizing the importance of this to investors seeking to maximize returns on their portfolios." The goal, he said, is to achieve returns above the cost of capital.
CHALLENGES OF INDUSTRY SPECIALIZATION
After all, there are more companies in the broader economic sphere than any analyst can keep track of. At the same time, there are analysts who specialize in dealing with just one or two companies, especially if those companies are large enough to represent a major factor on the international economic scene.
ANALYZING ECONOMIC CONDITIONS
One of the groups affected when it was first announced that the plastic, polyvinyl chloride (PVC), was a carcinogen in PVC workers and consumers was the plastics industry. In a sense, the economy is like an ecological structure in which no event is isolated; each event affects all other principles of the system and in different segments of the economy at different times.
PROJECTING MANAGEMENT CAPABILITY
This moves it out of the realm of the economic certainty of a balance sheet, and the historical value of earnings records, into a vast world of great uncertainty. As his or her company continues to grow, the shape of the company changes, production needs change, and so do administrative needs.
THE CEO AS LEADER
At the same time, it began to become clear that most of the successful CEOs were not part of that cult. The scandals of the early years of the 21st century put a burden on the modern CEO to demonstrate that his or her company - the number of CEOs who are women is on the rise - is being run for the success of the company and its shareholders, and not just the personal reputation of the CEO.
THE SENIOR MANAGERS
The role of an investor relations professional is to ensure that the investment community understands not only the CEO's ability, but also his or her integrity. Presenting the elements that explain and define these attributes is at the heart of successful investor relations.
THE MANAGEMENT TEAM
But how can an analyst judge how that same management will function when money runs low, when competitors begin to hit the market, when a strike hits the plant, when there is a material shortage, when there is a takeover attempt by another company is, when there is price control, or when - as in the case of the transistor problem - the market becomes saturated with its product. It is the smaller company that should be better known by analysts and brokers and prospective investors.
THE BOARD OF DIRECTORS
Any management team of a powerful company has potential problems related to both the personality and capabilities of the management team. For the investor relations professional, demonstrating the effectiveness and integrity of the board, and its compliance with Sarbanes-Oxley rules, is a major responsibility.
CREDIBILITY
Some of the most striking photos of CEOs appearing in annual reports show leaders of vision and strength, obviously the kind of people in whom widows and orphans should invest their faith and savings. In fact, credibility is a function of three things - corporate performance, consistent truthfulness, and a willingness to deal directly with the public and those who analyze securities on behalf of the public.
PROJECTING MANAGEMENT AS CREDIBLE
PROJECTING THE FACTS
ANALYZING PLANS
They may find the management of a company charming, sincere, bright, intelligent, highly motivated, ambitious and trustworthy. But as analysts, they must make an assessment of how these virtues will be applied to add shareholder value.
WHAT PLANS MEAN
The stock was selling at a reasonable multiple, and there was enough available at the right price for a significant amount of it to be used as currency for the acquisitions, and the banks and institutions were in a mood to be generous. It worked very well for a while, and every analyst following the company could visualize the successful combination of both tangibles and intangibles.
THE CAUTIONS OF CORPORATE PLANNING
It had to sell some of its properties to revive its balance sheet and make payments on its debt, and eventually went bankrupt. In other words, when General Electric, or any company of comparable size, develops a one-year or a five-year or a ten-year plan for its growth, it does so with infinitely more certainty than one applies to the planning of next Sunday's picnic.
THE SMALLER COMPANY
It is precisely these elements that the analyst must assess as part of the job to determine the company's ability to generate a profit on the invested dollar in the near, medium and long term future.
COMMUNICATING THE PLAN
And finally, you can recognize the fact that what you are really looking for is not simply to outline your plans, but to give analysts and investors a sense of the directions in which the company is going; a reason to believe in its future as a tool to appreciate the investment dollar. Many of these approaches are valid for anticipating and trying to avoid litigation as well. It showed investors he wasn't afraid to take bold steps to put the company on a new growth path.
MODERN PORTFOLIO THEORY
In the details of the plan, as announced, there was nothing to favor rivals. The term alpha is used to denote the average rate of return over the same period, independent of the market return.
LIVING WITH THE ANALYTICAL PROCESS
Two main elements of risk are taken into account - the risk in the individual stock and the risk in the market itself, bearing in mind that not all stocks react or perform in the same way in response to the market at any given time. It does not bode well for eliminating all analysts and replacing them with computers in the foreseeable future.
On and Off the Record to Get It Right
For those who have lost jobs or life savings, the business news is no longer academic. In the old media world, just a decade ago, outlets for business news were limited to a relatively few business publications, and to a much smaller one.
THE NEW BUSINESS JOURNALIST
The growth in stock ownership, the continued prosperity of the 1990s, and eventually the new business news channels changed all that. And it is no longer necessary to sit in a brokerage office for the tire.
THE COMPETITION FOR NEWS
Katie Vukas of the international public relations firm Cubitt, Jacobs & Prosek, calls it disintermediation, which puts a new twist on investor relations, especially for high-profile companies. News of an earthquake in another part of the world or the marriage of a movie star spurs few people into action.
HOW NEWS AFFECTS THE STOCK MARKET
Both books deal with time lag—the time between the reporting of news and the reaction to it in the stock market—an extremely important factor. Malkiel dealt with the efficient market theory, the basis of which is that the entire market is familiar with the same information and therefore reacts accordingly as one.
THE SALUTARY EFFECTS OF NEWS
The company issues a quarterly release that shows earnings lower than those of the same period for the previous year. This is why news, and its distribution, is such an important part of the investor relations process.
HOW NEWS IS RECEIVED BY THE FINANCIAL COMMUNITY
Or it could mean that forces outside the company could adversely color the meaning of the news. And if an action is taken as a result of the news (eg a share is bought or sold) the meaning or essence of the original news is changed.
WHAT IS NEWS?
The real nature and meaning of news can ultimately be elusive – even phantom – in its tendency to change form and meaning. The important consideration for the investor relations professional is that when reporting a fact, the context, perhaps more than the fact, makes the news.
THE AUDIENCES FOR NEWS
The news release may be required by the SEC's disclosure rules. With publicity material, the fact of editorial judgment comes into play - and this remains the purview of the editor, not the subject of the news.
SPINNING OUT OF CONTROL
There is no effective external force beyond this, and the judgment of the editor who must serve the needs of his readers is paramount. It should also be noted that while news is significant in supporting a stock and the company behind the stock, the news itself is rarely what will move a stock.
THE EXPERTS’ ADVICE
