Not too long ago, I was asked to benchmark investor relations practices.  The goal of the project was to gain insights into the investor communication process, the value of  targeting strategies and evaluate the degree of C-suite involvement in IR.  This benchmarking process recalled an old graphic – pasted below – which I’ve used to explain what IR does.

IR educates, informs and influences perceptions of a company’s
growth strategies, operations and results, to achieve fair valuation
IR TempleThis involves executing strategies related to:

  • Communicate – Shaping investor perceptions by integrating financial reporting with strategic messages that put key metrics affecting valuation in context
  • Target/Engage – Leveraging knowledge of financial markets and investor behaviors and styles to develop relationships with targeted analysts, investors and other influencers 
  • Measure – Monitoring perceptions, earnings estimates, competitive landscape and trading environment to inform approach

And is built on a foundation of:

  • People & Resources – Cultivating team bench strength; building and sustaining collaborative relationships with internal and external resources
  • Compliance – Understanding and ensuring relevant regulatory, disclosure and reporting requirements are satisfied

After reviewing these foundational ideas, the discussion turned to questions like:

  • How much time should the CEO and CFO spend with investors and what is the besdt use of that time?
  • How do you prioritize who does what and when?
  • How visible should other members of senior management be in investor interactions?

There’s no one-size-fits-all solution.  Much depends on company size, industry and performance, but a general rule of thumb is CEOs should allocate roughly 15% of their time to engaging with investors; CFOs somewhat more.  This works when things are generally going well for a company and its industry or sector.  However, CEOs/CFOs at small cap companies or those going through challenging or transformational times may need to allocate more time.

As for which investors the C-suite should meet, consideration should be given to current and/or potential ownership, fit (investor style) and sentiment (is investor supportive or critical?).  Regarding venue, calls or meetings at corporate office are efficient uses of CEO/CFO time; one-on-one roadshow meetings are often highly effective while presentations at conferences are good if you need to generate interest with a larger audience or broadly deliver key messages.

Exposing other members of senior management (such as the COO, Division Presidents, etc.) is nearly always good in my view.  First, it exposes them to investor thinking which may help sharpen future strategic decisions.  Second, it can reassure investors that the “right people are on the bus” running the business.  Finally, it provides IR and C-suite some flexibility and optionality when planning for investor interactions.

For me the most valuable part of this process was asking insightful questions. The discussions that ensued helped define key goals and objectives and the means for achieving them.  This is how strong foundations are built.


Lisa Ciota
Lead-IR Advisors, Inc. 


I often feel a sense of kinship with investor relations and communications professionals who are well-versed in crisis communications.  We share an understanding of the pressures, stresses and urgencies experienced.  Another commonality is we often journal about our experience.  From simple timelines to full case-studies, journaling (even if done after the fact) stimulates the reflection critical to making sense of the situation, your role in it and lessons learned.  Such reflection is important to honing one’s leadership skills.

I’ve certainly experienced my share of crisis.  My journal has served as a resource for many of the stories and advice shared via these blog posts.  For one crisis – about a failed capital refurbishment project – I later converted my journal entry into verse, which I’m sharing below.  This story is available, along with many other case studies, on NIRI-Chicago’s website in a traditional case study format.


On the shores of a sweet-water sea,
Stood a fire-breathing furnace – the biggest in the west.
It produced materials that built our cities and industries,
Voraciously consuming fuel day and night without rest.

But the fire-breathing furnace worried about the air,
And the quality and efficiency of the fuel it burned.
With our engineers in the green mountains fair,
Our customer found a cleaner technology in which to turn.

Eager that its new technology should grow,
And the ability to meet EPA standards demonstrably show,
Our engineers designed an innovative new facility
To provide the furnace fuel and generate electricity.

The construction contractor was anxious and had much to prove.
To lay the foundation, they tried something new, guaranteeing it wouldn’t move.
But our engineers pointed to their plans,
And warned the foundation might not stand.

The new facility began to settle – the engineers were right.
Yet the company waited fifteen years to begin to fight.
We can fix this and make it better” said the new boss,
And we will no longer tolerate it operating at a loss.

An $85 million refurbishment effort was begun.
We repaired, rebuilt and replaced – the process was no fun.
Nevertheless, we were hopeful,
And often talked about the EBITDA potential.

But two years later and $40 million over plan, the facility was still in a poor state,
The COO’s head was put on a plate.
This announcement was two weeks before quarter end,
So, a reinvigorated focus on operations was the message we decided to send.

Now faced with another earnings miss and the prospect of more of the same,
Only transparency could help save the company’s name.
Two weeks early earnings were announced,
Down nearly 20%, our stock price was trounced.

The facility was better we pleaded,
And a new test underway just might be the cure.
But we didn’t estimate the capital needed,
As we needed to see if the test worked for sure.

Post-earnings the IRO and CEO went on the road,
And spent even more time on the phone.
Before and after facility photos we showed,
But shock and anger was our investors’ tone.

Our news came at the worst of times.
Not a shred of good news could we find,
Our customers were teetering and closing plant gates,
While shareholder wealth continued to deteriorate.

It wasn’t long before we heard from the sharks,
A seat on the board was their mark.
Negotiations then ensued,
The number of activists added to the board was two.

The board decided to pursue a new direction,
And we laid out a new plan of action.
Refurbishment of the facility would continue,
But the search for strategic alternatives was on the menu.

However, in this industry there are no quick fixes,
Solutions that require perseverance are what sticks.
A few years later the stability for which we all yearned,
Was in place and business results finally began to turn.


Lisa Ciota
Lead-IR Advisors, Inc.

Wake Up Call

It began like any other day … walking into the office, cup of hot tea in hand.  The place was quiet as staff began to roll in. I had checked the news headlines before leaving home, so it looked to be an ordinary day.  But then, minutes before market open, my phones lit up and email caught fire.

Dumbfounded, I listened to the first of several messages. One of my company’s major customers had issued a press release announcing its intent to temporarily idle a facility where we were co-located.  This customer represented more than 10% of my company’s business and 100% of the co-located plant’s output.

I popped up and peered around the corner, the CEO wasn’t in yet, but I caught a glimpse the COO as he walked in the door.  Off I go to download what’s happening to the COO and on my way, I asked my communications manager to call the affected plant to see what he could learn.  No one knew – not the CEO, not the COO, not the local plant manager.  The customer gave us no advance warning.

I sat in the office with the COO as he called the customer, who reassured they would continue to honor our contract, including inventorying or shipping to alternate facilities all the output our co-located plant produced. But, of course, this information wasn’t in their press release.  Investors in my company could only assume the worst.  The stock opened down, hard and fast, and investors were calling non-stop. This was not going to be a good day.

In a crisis like this, you realize how important it is to have a history of consistent, transparent communications that provide context around your business and its operating environment.  In our case, we regularly discussed the structure and terms of our take-or-pay contracts with investors and the why surrounding them. We even filed redacted copies of these contracts with the SEC to be as transparent as possible.  As a result of these practices, investors had a baseline understanding of how we protected and mitigated commodity, operating and customer-risk.

We needed to respond and fast.  So, leveraging this existing context, we aligned messaging during a brief executive team meeting and then:

  • Issued a public statement indicating our customer’s obligations under our take-or-pay contract remained in effect, regardless of plans to temporarily idle its plant,
  • Blasted an email with this key message to everyone on our investor and media distribution lists,
  • Confirmed our CFO’s attendance at an investor conference scheduled to be held the next day,
  • Painstakingly returned all investor calls over the next several days, initially starting with the sell-side in hopes of amplifying our message faster,
  • The following week we reaffirmed annual guidance in a routine press release to further reassure the investing community.

Late the night of the announcement, I contacted the IRO at my customer company to let him know what we were saying.  It was a late night for him as well, as he quickly replied telling me he received almost as many calls from my investors as his own.

This experience highlights the importance of ongoing, consistent messaging that provide business context.  It also points to the importance of developing relationships with the IROs at customer companies.  After this, I found it useful to periodically touch base and align messaging around customer relationships and businesses with them.  This served all of us well by reducing confusion and the risk of unpleasant surprises.  You may want to consider doing the same if your company depends on a handful of customers or suppliers.

Lisa Ciota
Lead-IR Advisors, Inc.

Words on Paper

Is that what your company’s purpose, vision and values are – just words on paper? Or do they inform and shape your company’s strategies and actions?  Are they reflected in the everyday behaviors of the people who work there and reflected in how the company adapts as business dynamics and competitive realities evolve? In other words, are they embodied in your corporate culture?

There’s been a lot of talk about corporate culture lately.  More often than not, it’s about dysfunctional cultures where the impact is obvious and negative.  But culture has a direct, positive impact on productively, profitability and employee relations according to research which correlated data from the Great Place to Work Institute’s surveys of employees at more than 1,000 U.S. firms with market performance[1]. Not surprisingly, this research also infers that financial markets (and companies) often underestimate the value of integrity capital (inherent in corporate culture) and its only over time – as the profits come in – is its value appreciated.  This is a problem.

First and foremost, acting with integrity and treating others with respect and dignity is non-negotiable.  Second, in a world where intangible assets represent more that 52% of the average company’s market value[2], culture matters.  In other words, things like intellectual property (patents, trademarks, copyrights, proprietary methodologies), goodwill and brand reputation – things created, nurtured and optimized by culture – have a significant and material influence on valuation.  This is why some of the world’s largest institutional investors care.

So, what is your company’s culture?  How does it support and align with its mission and strategies?  If an investor asked, could you describe it or talk about where and how you communicate about it? Not easy questions.  Even boards – who are charged with monitoring corporate culture as part of their risk oversight responsibilities – have a hard time with it.

Many companies have already articulated the guiding principles of its corporate culture and continuously work to extend, reinforce or enhance them.  Congratulations if you work at such a company.  But if you don’t, not all is lost.  You may find that your corporate culture, while not formerly articulated, is reflected in your company’s position within the market place, i.e., are you a disruptor, innovator, trusted brand, efficient operator?

You may also find your corporate culture embedded in core communications like your proxy statement, annual and/or sustainability report and governance section of the website. For example, your company’s code of conduct, the compensation discussion and analysis section of your proxy statement and the charters of your board’s audit, compensation and governance/nominating committee charters all contain varying aspects of your corporate culture from behaviors expected … to compensation philosophy (including how performance is evaluated and rewarded) … to the board’s role in overseeing risk.

Use this information to create a matrix of what information is where.  Then, to help prove your culture is more than words on paper, identify the processes used to assess the current state of your culture.  This could include examples or descriptions of how your company adapts and responds to employee survey results or customer/vendor feedback, manages its compliance training program and whistle-blower hotline as well as other initiatives that reinforce desired behaviors or manages culture-related risk.  This effort will help you develop a cohesive narrative and put your culture in context when the inevitable investor questions arise.

Lisa Ciota
Lead-IR Advisors, Inc.

[1] Guiso, Luigi; Sapienza, Paola; Zingales, Luigi, The Value of Corporate Culture, 2013, National Bureau of Economic Research

[2] Dettman, Joe, Culture Ate Strategy For Lunch — Now It’s Eating At Your Value, April 12, 2019, CEO Magazine

Don’t Pass(ive) The Buck

I was having coffee with a newly-minted CFO a few months ago, when he asked, “Our advisors are telling me we need to target passive investors. What do you think about that? How would we even do that?”

I had one of those “Say what?!!” moments. Target passive investors?  Either you’re in or you’re out (of an index).  But then I realized who he had been talking to and why.

So, I explained, “A company of your size and industry is going to have passive investors regardless.  This is good. They form your core shareholder base and don’t take up a lot of your time or call often.”

“However, as essentially permanent investors, they expect boards to actively represent their best interests.  That’s why they place such heavy emphasis on board composition and governance practices.”

I advised him to talk with his general counsel about implementing a governance outreach strategy. With passive investors typically owning (and voting) 25% to 35% of a public company’s outstanding shares, this is increasingly considered a best practice.

Now governance outreach does not have to be a massive undertaking (in non-crisis situations).  The first step is knowing the strengths and weaknesses of your company’s governance principles and practices.  You should also be familiar with the governance priorities of your company’s major investors – many of whom make this information publicly available.  Also, it can be helpful to review the major proxy advisory firms’ guidelines to get a broad sense of key benchmarks, but remember the largest investors have their own independent guidelines and can be influenced.

Next, during the off-season initiate brief introductory calls, establishing points of contact and understanding of investors’ approach and priorities.  Depending on tone of such calls, you can evaluate if offering certain investors meetings or calls with directors is appropriate.  Another option to consider is to ask portfolio managers or analysts at targeted firms to invite their governance contact to attend non-deal roadshow meetings with your CEO.  This is something I did with good effect when leading an outreach campaign several years ago.

Another opportunity to build relationships with governance professionals is to attend the Council of Institutional Investors (CII) conferences.  This will give you the opportunity meet with and understand investor perspectives in a more neutral environment.

These basic steps can create a strong foundation if you’re ever in need of a full-court-press on governance matters. To prioritize your efforts, evaluate your shareholder base in view of the matters at hand, your governance strengths and weaknesses, the quality of your investor relationships and the support you need, then schedule meetings accordingly.  Directors, particularly the lead independent director and relevant committee leaders, should be prepped for these discussions.

When it comes to governance outreach, don’t pass the buck.  In my view, Investor Relations is best positioned to provide context around investor perceptions and behavior and “owns” the investor relationship.  Such insights can help secure the space for boards and management teams to execute their strategies.

Lisa Ciota
Lead-IR Advisors, Inc.

The Beat Goes On …

The beat goes on … the drums keep pounding rhythms to the brain …
Sonny & Cher, 1967

Yes, the M&A beat goes on.  Worldwide M&A activity totaled $4 trillion in 2018, up 19% versus 2017.  And, with more than three-quarters of corporate and private equity executives anticipating the pace of M&A to accelerate in 2019[i], the M&A drums keep pounding rhythms to the brain.

M&A is exciting.  Almost instantly it seems the company becomes bigger with access to new customers, products, brands, services and markets.  Increased industry dominance can produce opportunities to gain scale, leverage efficiencies and create synergies.  No wonder many bankers, reporters and investors seem to egg-on the process.

However, too often M&A deals don’t reach their full potential.  Sometimes merger objectives aren’t well-thought out, are too narrow in focus or don’t anticipate industry/market changes.  Sometimes integration efforts fall short or cultures don’t mesh.  Sometimes underlying business issues aren’t identified until after close.  So not surprisingly, not everyone is thrilled with M&A.

When M&A is successful, its typically because the acquiring/surviving company recognizes the beat goes on.  In other words, both the buyer and target companies know themselves and bring business competencies that complement and expand upon each other’s capabilities and opportunities. Further, throughout the diligence process (not just during the deal stage), the strategic vision for the union is continuously validated.  Importantly, there’s an ongoing effort to develop, refine and execute an integration plan that balances driving organic growth with achieving cost-cutting synergies.

Given the robust interest in M&A, investors will inevitably ask about M&A strategy. Investor Relations should be prepared to respond while keeping the sound of the beating drums to a dull roar.  Often this means repeatably articulating the company’s broader growth strategy and how M&A may (or may not) fit into that.

To that end, companies should have a M&A framework to provide organizational focus and discipline.  Such a framework should be grounded in strategy and consider questions like:  What are the risks and opportunities of growth via acquisition versus organic growth? What are our strengths and weaknesses and how does an acquisition/divesture address such? What options are most viable in view of our current situation and desired strategic direction?

When the hypothetical becomes real and a deal is announced, Investor Relations should be cognizant of disclosure limitations and work to ensure internal and external messages are aligned.  At best, everything is preliminary until close so when it comes to setting expectations “less is more” should be your mantra.  This is particularly important because not everything gets revealed during the due diligence process and confidentiality agreements may limit what is discoverable until after close.

During this time, think about what your investors will most want to know, what metrics and milestones will be most important for measuring integration progress and merger success, how you will breakout the reporting of same and how your guidance practices will or should change.  Inasmuch as deal structure or size may impact the company’s financial flexibility and go-forward growth strategy, consider how your investor base may change.  For the next 1 – 2 years, your answers to these questions will serve as a roadmap for managing this change because, of course, the beat goes on.

Lisa Ciota
Lead-IR Advisors, Inc.

[i] Deloitte, The state of the deal – M&A trends 2019

Reading the Tea Leaves

A while back a friend lamented the decline in his company’s stock despite reporting solid quarterly earnings.  My friend’s company had been the target of an activism campaign during which the activist gained board seats.  This led to a transformation at the company, with a new CEO being named and the departure of several of the old senior management team.  Of course, the company also divested assets and cut staff.

These strategic moves appeared to be generating positive momentum for the company but not apparently for the stock.  My friend – a survivor of the turmoil – was puzzled why the stock was languishing.  So, I took a look at the company’s trading.  Their stock price was down, but what piqued my interest was the elevated trading volumes.

Now, trading volume has a story to tell, you just have to read the tea leaves.  The company’s 30‑day trading volume was roughly 35% higher than both its 90- and 180‑day average trading volume. Neither the S&P 500 rebalancing nor an industry disrupter buying a prominent distributor could explain the sustained higher volumes.  I suspected a major holder was taking their position down. Trading bots, sensing the increased liquidity, were trading the same shares over and over, keeping volumes elevated.  Meanwhile it appeared fundamental investors were on the side lines as the stock drifted downward over the next several weeks and trading volumes returned to historic norms.

My suspicions were confirmed later in the fall after the 13F/G/D filings came out.  The filings showed that the activist investor had reduced its position by roughly 60%.  The company’s stock price firmed a few weeks later when the CEO presented at a high-visibility investor conference.  Essentially, fundamental investors appeared to have woke up and began setting price again.

Hindsight is 20/20, but I think this example illustrates how an understanding of investor and market behavior could inform investor relations strategy.  It’s hard to say as so many internal and external factors play a role, but I wonder if a more active fundamental investor outreach program during this time would have mitigated the decline or shortened the time the stock was drifting.


Trust in Value

A cynic is a man who knows the price of everything and the value of nothing.
Oscar Wilde (Lady Windermere’s Fan, 1892)

Are you a cynic?  How important is price?  How do you define and measure value?

The latter was a key question raised in University College London economist Mariana Mazzucato’s book The Value of Everything: Making and Taking in the Global Economy.  Mazzucato outlined the evolution of how theories of value have evolved since the late 1600s.

Defining what creates value and measuring it is not as easy as it sounds.  For example, in the late 1600s and early 1700s, there were different schools of thought as to how much value creation should be attributed to the land (or land owner) versus the farm laborer and whether import/export merchants were value creators, or simply people who moved goods around.  The political culture of the times largely influenced the definition and measurement of value.

Fast forward to today, and virtually anything that can have a price associated with it is deemed to create value regardless of the energy or resources expended, the real risk involved or benefits delivered.  In parallel with the rise of this theory of value, so has the theory of shareholder primacy gained ascendance and with it came the nearly myopic focus on metrics like earnings, cash flow, margins, market share and stock price.

It seems we’ve forgotten the dichotomy inherent in the definition of value.  The Oxford dictionary defines value as:

  1. The regard that something is held to deserve; the importance, worth, or usefulness of something.
  2. The principles or standards of behavior; one’s judgement of what is important in life.

People are rejecting the idea that you can divorce value from notions of principles and standards.  That’s why there’s increasing investor focus on corporate purpose and culture.  Don’t believe me?  Read BlackRock’s or State Street’s annual letter to directors and review the Edelman Trust Barometer survey of institutional investors.

Today, business is being viewed in a larger social context and trust is an essential part of that.  Business has higher trust scores than government and media and is increasingly expected to take a lead in addressing societal issues from cybersecurity to income inequality to workplace diversity and more, according to the Edelman report.

Investors have expanded their focus, seeking more information on how companies conduct themselves, advance their corporate culture and evaluate and manage environmental and social factors. So, when communicating about your business, create context by talking about your company’s purpose, culture and operating environment. You’ll build trust and gain value.

Lisa Ciota
Lead-IR Advisors, Inc.

Oops, I Did It Again

Old Britney Spears songs are not normally a source of inspiration for me, but this one feels especially apropos right now.  You see, after being chastised by the SEC for certain tweets last year, Tesla’s CEO Elon Musk is  – oops, doing it again:

Musk Tweet 2.19.2019 - 1

This tweet was about material information for Tesla – annual vehicle production, a figure for which it provides guidance.  The tweet implied guidance different from that provided just a few weeks earlier in fourth quarter 2018 earnings, when Tesla said it was “targeting annualized Model 3 output in excess of 500,000 units sometime between Q4 of 2019 and Q2 of 2020.”  Well, somebody must have said something to Musk, because a few hours later he corrected himself, tweeting:

Musk Tweets 2.19.2019 - 2

This situation is problematic from at least two perspectives:

First, while Twitter can be a useful communication tool, as discussed in a previous post (Loose Lips Sink Ships, August 15, 2018), one tweet on a material topic can rarely, if ever, contain enough information or context for a reasonable investor to make an informed investment decision.  That’s why it’s considered a best practice to issue a press release and/or file an 8-K and refer to or link to that more fulsome source when tweeting on a material topic.

Second, and more specific to Tesla, it points to the need to have a process to vet communications about a company to determine a statement’s accuracy and/or completeness, its materiality and any relevant SEC disclosure requirements.  Setting up such a process is exactly what Tesla agreed to as part of the company’s settlement of securities fraud charges with the SEC last fall, and Tesla’s Board was tasked with overseeing its implementation.

This incident makes me wonder “how’s that working out?”  I guess the news that Tesla’s general counsel – the person who helped negotiate this SEC settlement – is leaving the company after just two months, partly answers that question.

It seems when it comes to Musk and Twitter, Britney’s line from this song: “… to lose all my senses that is just so typically me” appears all too true.

Lisa Ciota
Lead-IR Advisors, Inc.

A Terrible, Horrible, No Good, Very Bad Day

That’s what a short attack feels like.  I know.  I’ve been there. (To read about my terrible, horrible, no good, very bad day, see my case study here.)

By way of background, a short attack is when short seller(s) actively seek to profit by driving a stock price down.  Just about any company can become a target of a short attack, but those with complicated corporate structures, in regulated industries or with low liquidity or low float are most vulnerable.

Short attacks can be launched by well-known activists or anonymous bloggers operating out of their basement.  Such an attack can come swiftly in the mainstream business media and/or private investor forums like Value Investor Club.  One thing for sure is the market reacts before ascertaining the facts, so during a short attack a company is immediately forced into a defensive position regardless of the merits or accuracy of the short’s thesis.

What is particularly frustrating is the SEC historically has been skeptical of allegations against short sellers. When complaining about shorts, companies are often viewed as whiners and are rarely successful litigating claims against them.  Still there’s a glimmer of hope this may be changing. For the first time in recent memory, the SEC prosecuted a hedge fund last fall for its part in making demonstrably false and misleading statements during a short attack according to a Vinson & Elkins insight post.  This action will hopefully serve as a deterrent to the more egregious attacks.

Still, short attackers are not likely to go away anytime soon, so its best to be prepared.  Begin by assessing your company’s vulnerabilities.  A good resource to help you develop a short attack defense strategy is a primer put out by Ropes & Gray in late 2017.  In addition to this primer, here are some thoughts based on my experience:

  • Keep your ears to the ground. Be alert when seemingly tangential or even inconsequential questions begin to crop-up. Engage with investors, especially hedge funds, as they may catch wind of something before you do.
  • Assess your company’s risks and vulnerabilities and be familiar with common short seller tactics. This will help you be better prepared because once an attack begins, you may not have time to analyze the attacker’s playbook.
  • Aggressively monitor changes in short interest via your stock surveillance firm or retain a market structure analytics provider for timely updates. Know what’s normal for your company.
  • Don’t assume a short seller’s blog reaches a limited audience. If your stock is reacting and investors are calling, the game is afoot.  Focus on the best way to respond based on the merits of the short seller’s thesis and company vulnerabilities.  Regain control of the narrative and don’t engage in a public tit-for-tat.

My top recommendation is don’t get angry or distracted – focus your energies on defending and protecting the company.

Lisa Ciota
Lead-IR Advisors, Inc.