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Chapter 8 Investor Relations

Chapter 8 Investor Relations. 8- 1. Definition of Investor Relations. The National Investor Relations Institute defines Investor Relations as:

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Chapter 8 Investor Relations

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  1. Chapter 8Investor Relations 8-1

  2. Definition of Investor Relations • The National Investor Relations Institute defines Investor Relations as: • “A strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation.” Source: National Investor Relations Institute, NIRI Corporate Website – www.niri.org, accessed August, 2007. 8-2

  3. Objectives of Investor Relations • The main goal of IR is to position the company to compete effectively for investors’ capital • To achieve this, IR focuses on the following objectives: • Explain the company’s vision, strategy, and potential to investors and “intermediary constituencies” such as analysts and the media • Ensure that the expectations of the company’s stock price are appropriate for its earnings prospects, industry outlook, and the economy • Reduce stock price volatility 8-3

  4. IR Has Many Responsibilities • IR is responsible for a wide variety of investor activities, some regularly scheduled and others that arise on an as-needed basis • Regularly scheduled activities include: • Marketing the Brand to Investors • Annual Report • Investor Meetings/Conferences • Internal Valuation Models • Quarterly Reports & Conference Calls • Maintenance of Website • Event-driven activities include: • Investor Targeting • Crisis Communications • Merger & Acquisition Issues • Cross Border IR 8-4

  5. Nike’s Investor Relations Website Links to company and investor information are accessible and simple Ability for investors to customize their own page based on the info they want to see Strong use of Nike’s branding reinforces the brand image with investors Use of videos allows investors to get a better sense of senior management Recent updates are clearly highlighted Investor press releases are easy to access and up-to-date Real-time stock quote Source: Nike Corporate Website, www.nike.com, accessed August, 2007. 8-5

  6. IR Directly Impacts Stock Price • Corporate Investor Relations activity could account for as much as a 25% variance in a company’s stock price, according to a recent study • Study surveyed 243 buy-side investment professionals from leading mutual funds, pension funds and insurance firms • 82% believe good investor relations affects a company’s valuation • “Superb” IR is associated with creating a median stock price premium of 10% • “Poor” IR is associated with a median stock price discount of 15% Source: Holmes Report, “Investment Professionals Believe Communications Adds -or Subtracts- Value,” July, 2007. 8-6

  7. Investor Relations Framework • Stock Price • Cost of Capital • Volatility • Reputation 8-7

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