Getting the opinion of investors can be very profitable
Every company needs capital. It is therefore all the more important for the management to know why investors are investing in its company and what they expect from their investment. Investor perception studies are a proven tool for gaining an idea of investors’ attitudes. They usually focus on the company’s most important investors. They are often institutional investors such as fund or investment companies, but also major shareholders. Ideally, potential investors and analysts will also be included in the survey – on the one hand, because you draw attention to yourself and may end up on the “purchase list” of new investors, and on the other hand, there is no harm in finding out what external capital market participants think about the company.
Knowing how investors “tick”
Investor perception studies typically include four areas of enquiry. The first deals with questions about the core strategy, business model and management performance, the aim of which is to determine the awareness, understanding and expectations of investors with regard to the basics of a company. This allows the management to see whether investors are satisfied with the company’s strategy and to what extent they support management in implementing it. Where do they see the strengths of the company and the weaknesses? How satisfied are they with the management? All this will be looked into here. For example, there may be certain areas within the overall strategy that investors disagree with. The company management can take this as an opportunity to rethink their own approach.
How happy are the investors with their investment?
The second set of questions has to do with the performance and valuation of the share. This area is mainly about investor satisfaction and assessments of the price development, but also about the “story” behind the share. For example, if the company management believes that the shares of their own company are undervalued, the question to ask here is whether investors see this as well and what, in their opinion, the reasons for the undervaluation are. In this way, management gains important insights into why the performance leaves a lot to be desired and which “areas” need to be improved. For example, if many investors point to a lack of growth potential, then perhaps the management should think about entering new markets.
How does the communication work?
The third section often contains questions about investor relations work. This allows communication and transparency deficits to be detected and corresponding improvements to be made. In the fourth and last category, special topics are usually examined. How do investors feel about larger projects or any merger or acquisition plans, for example? It is not uncommon for a major project to be cancelled or postponed to a later date if the results of the investor perception study are very negative and contradict the original plan. However, the relevance of trend topics such as ESG and diversity can also be queried here.
Last, but not least: following up on the survey
As we have seen, investor perception studies provide valuable insights on several levels. Those listed on the capital markets should seriously think about using them. Investor surveys not only serve to uncover weaknesses and deficiencies, but they also provide valuable impetus by revealing points that the company management may not have been aware of before. The most important point in conclusion: an investor perception study must never be an end unto itself. It must be carried out by those responsible out of real conviction and should be the starting point for internal discussions and self-reflection. Also very helpful: perception studies as the basis for a first-time strategy or for correcting your own IR strategy. In this way, the money for the study is well spent.
Costs: investor perception studies are offered by consultancy companies and research houses, among others. The costs are usually between 10,000 and 100,000 euros, depending on the scope. Dr. Reuter Investor Relations also offers perception studies. They are offered primarily as part of the retainer for investor targeting services and serve to continuously improve the target services.
Are you interested in the topic of perception studies or investor targeting? Then get in touch with us via Dr Eva Reuter at e.reuter@dr-reuter.eu