Every year, IR magazine conducts a survey of IROs. In the last 18 months, there were 1,700 IR managers who were asked about their IR targets, among other things. The result? Investors, investors, investors!
For example, take the case of small-cap firms. According to IR magazine, a whopping 80 percent of IROs at small-cap firms said that this item was their top priority. In second place: intensifying relations with current shareholders. 46% of small-cap companies cited this as a key priority. This is almost every second small-cap firm. This is followed by increasing international shareholding, in third place. 39% of small-cap companies cited this as one of their key goals.
What is interesting is that mega-cap companies also cited these exact same goals – namely (1) addressing new investors, (2) maintaining existing relationships and (3) increasing international shareholding – as their three most important IR goals. But there is one difference: For mega-caps, the goal of appealing to new investors scores the same as caring for existing investors. And it’s no wonder. Of course, mega-cap investors already have a large number of investors – unlike most small-caps.
What routes lead to investors? Traditionally, companies attract investors via conferences, roadshows, trade fairs, forums … And in the post-corona era, of course, more and more online events. But are these the right investors to attract? The investors that will stick with and strengthen the company for years to come?
It seems sensible to think more about the “right investors” and to seek an active approach. What is the profile of the “right investor”? Investors who have already made many investments in other industry companies and thus have a good knowledge of the challenges of the industry? What typical holding period should the investor go for? What is the average investment? Is it desirable for an investor to actively participate through exercising their voting rights? What is the role of ESG? What market capitalisations does the investor invest in? Should there be a regional focus? What investment style should dominate? Value, blend, growth? What investment objective does the fund pursue and does this coincide with its own corporate objectives?
The Dream-100 strategy: this is the strategy of first defining the right investors and then addressing them in a targeted manner. It is considered to be extremely efficient and cheaper than investor targeting measures via conferences, trade fairs, forums or sell-side roadshows. The approach: first, define your 100 ideal investors. Of course, you can go for more, or fewer, depending on available capacity. It is important to be aware of the criteria you create for “your” ideal investors.
Talk to your ideal investors – or if you have the opportunity, have your ideal investors talk to you (via sell-side or via service providers). Compile 3-4 arguments for why you as a company are interesting for the investor. You can usually find information about the investor’s investment priorities in the composition of their fund.
Important: stay on the ball. In most cases, it is not enough to contact the investor once or twice. You need to contact them eight or ten times. If the investor does not respond to your email, they may simply not have time at that moment. Always contact the investor again. Tell them why you think that as an investor they are an excellent fit for your company. Is that a lot of work? Most certainly. So it can also make sense to start with your Dream-30, Dream-100, or Dream 200 list (depending on your internal capacity). The difference to the classic approach of using conferences, roadshows, and so on, is that as an IR manager, you can play a decisive role in determining how the investor base will be composed in the future.
If you have your dream list and have been able to make first contact, the trick lies in taking the desired investors by the hand and building relationships with the relevant investors over a longer period of time. This can only be achieved by means of content that represents added value for the investor in question. For example: market data. Or industry insights that a classic analyst could not offer an investor. Find out what information is important for the target investor and – if possible – offer them this information on a regular basis. There is a lot of work involved in this form of relationship building. But it’s worth it. Stay tuned!
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