Potential scammer or a call from investor relations?
July 2, 2009
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Potential scammer, or a genuine call?
I expect you’ve seen the boiler room scam warnings up on the investor relations pages of most corporate websites. Here’s one, for example, on Rio Tinto’s site.
The more people are warned about these scammers, the better their chances of avoiding losing their money, so I like to see these warnings. But then, I also go to Hoax-Slayer to check up on those sad stories that arrive in my inbox via forwarded emails, so perhaps I’m just super-cynical.
But what if you receive a call yourself?
Am I being scammed?
This morning I was cold-called by Full Circle Films, and I was very dubious. A complete stranger, calling out of the blue to offer me a special deal: a tax-break if I invested in films made by a company I’d never heard of? You’ve got to admit, that does sound distinctly dodgy. And he pushed hard:
- lots of talk about who was starring in the films, preview nights etc - trying to wow me with glamour?
- about how 3D was the next big thing - trying to wow me with technology?
- and about having a link from their site to the FSA - does he think I don’t know that putting a link on your site requires no authorisation from the people at the other end?
(Just to be clear: he was calling me as a private individual, nothing to do with Corporate Eye - I asked).
His clear goal was my email address, to send me some information that wasn’t available on the website. And here’s another warning flag in my mind: why wasn’t this information on the site if it was so important?
My thought was: why is he calling me? What has this to do with me and my life? Does he think, like all those stairlift and cruise companies that call, that because of my postcode I’m likely to be a naive, technologically illiterate, little-old-lady?
So I took a name, number and website address, and gave out nothing more than he had already.
But now I think I was wrong.
How can you prove you are genuine?
My caller is listed as a sales manager for the company, which is in turn listed with Companies House. The website looks genuine enough, though there’s no indication of the company number on site (surely a legal requirement these days). And they have an internet history that discusses their films and the setting up of the company; and I can track the individuals on the internet too. All of which makes them look more convincing.
So perhaps (perhaps!) I was wrong to be so doubtful. Not that I’m going to change my mind about investing. But I think there are a couple of interesting things that came out of my morning’s conversation:
- Is it effective — or even acceptable — to cold-call potential investors?
Based on my reaction, probably not. I have no idea how I qualified to be on their call-list, and so was inclined to be negative from the outset. Moving a cold contact from that position to being willing to hand over thousands of pounds was always going to be an uphill struggle, and may not be the most effective way of raising funds.
Perhaps it would work better if there was some connection between us already. Facebook? LinkedIn?
Or if I had some experience of the industry, or a track record of investing in this kind of venture.
Although we here at Corporate Eye like to see contact between the investor relations department and the retail investor, I don’t think that cold-calling is the way to go.
- Provide all necessary information on the website
My proposal to my caller was that instead of him sending me information, I should get it from the website. But, he said, I’d need the special pack … So here’s the thing: why not put that on the site as well? Then they might, just might, get drive-by investors. Not to mention greater credibility with people like me. Which brings me to…
- Not all potential investors are the same
I don’t really blame my caller. I’m just a name on his list - he has no idea that I regularly review investor relations sites, or am active on the internet. Though he could have found that out with a quick Google search - after all, he had my name and address already. And given that the initial investment suggested on their site is £25,000, a few minutes to Google search could easily be recouped with a more targeted script. (And, for a shot at £25,000, making the background noise less of a call-centre would help too).
Yet cold-call scripts as a rule don’t take account of the variable expertise and interests of the cold-called. Am I going to be impressed by movie stars and 3D technology? Not that much, though others might be.
How about making it more of a conversation, and less of a script? That way I’d be more engaged, and more likely to listen.
What do you think? Should I have been more flexible? Would you contact potential investors by cold-call? Do you engage them in guided conversation or run a script? Can people find out everything they’d need to know about you online?
And what can you offer potential investors? I notice that Full Circle Films offer investors the chance to visit the set as the film is being shot; to be in the film as background artists; to go to the launch/wrap parties and to go to the pre-release screening in Soho. Sound like fun?
A Look at Cadbury’s Investor Page
June 29, 2009
Continuing my visits to the investor home pages of FTSE 100 companies, I recently visited the Cadbury site. I think my decision to visit the site was subliminal - I’ve been on a diet lately, so perhaps I subconsciously thought that I could satisfy a craving for sweets by visiting their site. I didn’t lick the screen however - you have to draw the line somewhere.
Overall, I thought the Cadbury investor page was quite well done in terms of layout and the information content on the page. The left hand side of the page lays out the major sections within investor relations, enabling investors to find what they are looking for easily. My one quibble with the list of sections is the listing for RNS. Not everyone will know that this stands for Regulatory News Service, but as I say, it’s a quibble.
The center of the page presents important recent information to investors where they are most likely to look for it, while the right hand side of the page focuses on links to longer term information such as a half yearly trading update, management interviews and stock information. The layout and information presentation worked quite well for me.
Alas, I wish I could say as much for the graphic design elements of the page.
The investor page, as it should, carries over the design element of the Cadbury web site, which I find less than attractive and distracting. First, there’s the color - purple. I know that this is a confectionary company and some designer probably chose purple to signify fun and to carry through Cadbury’s signature color scheme, but to me purple printing is just plain ugly. And I say this an alumnus of Northwestern University, which has purple as one of its school colors. Secondly, the graphic elements of the page - uneven lines, ragged edges and lime green color splashes behind the photos, are distracting.
My overall impression on the design side is that Cadbury is trying too hard. Just like candy, a little bit of that stuff goes a long way.
Bond Investors are Investors Too
June 9, 2009
For many companies, Investor Relations is all about the stockholders. This focus is not surprising. Regulatory filings are generally focused around company stock, and there tend to be more stock investors than bond investors ringing the phones of the IR group.
Stock investors tend to be a more fickle bunch, especially retail investors looking for quick trading profits. Such investors are actually the least likely to ever even see your IR page, let alone examine it carefully. However, longer-term investors, and certainly institutional investors will want to devour as much information as possible about the company and its operations. Often, this research is a quest for information that others don’t realize yet, or that is being misinterpreted by the markets.
If others don’t realize just how strong the company is, or how quickly it will recover from its recent missteps, then buying now in order to wait for others to finally see the more obvious data come in can result in a tidy profit. However, finding such information means wading deep into documents, filings, and transcripts in search of uncovered stones, since just about everyone will be aware of more obvious elements like P/E ratios and earnings statements.
The quest of many IR departments is thus to fulfill the basic legal and regulatory requirements for the majority of visitors, as well as provide data and information to be absorbed by media, analysts, and those investors and potential investors who want ever more data.
What about Debt Investors?
For many years now, the IR departments of many companies have simply outsourced their bond-based Investor Relations to the various debt ratings agencies like Moody’s, Standard and Poors, and Fitch. However, with the financial meltdown came the uncomfortable realization that the ratings agencies don’t always know best.
Still, most debt investors at least start their investment research with the bond ratings provided by the rating firms. Yet, many IR websites don’t even acknowledge the company has bonds outstanding, let alone provide ratings or research. This may be a mistake, especially for companies with solid ratings.
Consider the income investor looking for, perhaps, a dividend paying stock. Maybe, for whatever reason, he decides that while he likes the company, the stock just isn’t right for him right now. But, his attention is drawn to the Debt or Bonds link on the IR site and maybe, he likes what he sees there. Purchasing those bonds would surely keep the company on the radar of such an investor and may result in a share purchase later, particularly if the stock is unfairly beaten down by surrounding events.
Likewise, a potential investor who is on the fence about a stock purchase may have already devoured all of the information provided, but still hasn’t been able to come to a solid conclusion. Upon clicking on the Debt links in the sidebar, the investor notices that the company’s outstanding bond issues are all highly rated. Even better, he notes that the bonds are all issued at low rates suggesting both the consensus opinion that the company is sound, and that it can use the leverage provided by the capital markets if the opportunity arises. Combined with the other “pluses” from the rest of the time spent on the IR site, those bond ratings turn the potential investor into a shareholder.
Providing Bond Information
Certainly, a company’s debt information can confuse an otherwise clean and solid Investor Relations web page. That is why it is often wise to create a sub-site for debt ratings and other bond information.
Old Mutual provides just such information in a clean and classic fashion. On an investor relations site filled with information, a single link is displayed. This serves both to avoid complicating the investment information sought by equity investors and shareholders, and by being the same kind of link in the menu as all the others, it also conveys that debt information is regarded as just as important by the company as the other similarly linked items.
Choosing to title the menu link as “Debt Investors” allows the company to sidestep any negative connotation regarding its outstanding bonds. This section, the title suggests, will not be an excuse for having excess debt, but rather a way to ensure that investors in such products are properly informed.
Once clicked, the bond investor finds themselves on an internal landing page where at-a-glance information is provided in the form of a table. An investor, whether equity or debt can peruse the outstanding issues and their ratings. If further details are desired, links are provided both in the form of sub-menus. Each issue is also clickable resulting in the user being shown the offering circular for that particular issue.
The company also provides its overall ratings, and links to the full company report from the rating agencies. This ensures that the prospective investor will go from here to impartial third-party research rather than a Google search sending them to whatever commentator happens to have chosen the right keywords for their search engine optimization efforts.
Old Mutual goes a step further by providing a dedicated Debt investor contact for users. Any savvy debt investor knows that their is a world of difference between an equity investment and buying a company’s bonds, and it must be reassuring to see that the company understands that as well.
Investor Relations Best Practices
Consider incorporating debt ratings and bond information on your investor relations website as well. Take care to ensure that the additional details do not add to the overall complexity of the IR webpages by segregating them under their own easy to find link or menu option. However, don’t make the mistake of “burying” debt information under other seemingly related links. Bond data is not so common on IR sites yet that a bond investor will look very far to find it. Two levels deep in the menu structure virtually guarantees the user will have left the site before finding what they are looking for.
Regulatorily speaking, providing links to companies like the rating agencies are some of the safest links an investor page can make, as they are already widely regarded as impartial third-party links. However, linking to only one agency with the highest rating would be a mistake. If possible, provide links to all three major rating agencies, in addition to any other provided links.
The investor who finds what they are looking for on your official IR site will find little incentive to go elsewhere, and with the current environment that rewards company criticism over praise, that may be half the battle.
Preferred Stock and Investor Relations Websites
May 12, 2009
Does your company offer preferred stock?
Warren Buffet’s investments in the preferred stock of several companies reignited some of the interest among the general population about preferred stock. In addition, many investors searching for yield in a market where there is little to be had in bonds and Treasuries, is looking for new alternatives, and preferred stocks might just fit the bill. But, at many companies, preferred stock is the unnoticed sibling to common stock. This just might be costing you investors.
Preferred Stock Quotes and Yields
One of the major difficulties for the common investor when it comes to preferred stock is easy access to the basic information.
While many investors have memorized the ticker symbols of numerous publicly traded companies, few have the same knowledge of preferred stock ticker symbols. The lack of standardization in this arena is partly to blame, with some companies adding a PRF and others a PR or just a P. The problem is magnified among companies with more than one publicly traded series of preferred stock. If that weren’t enough, the various services that provide quotes don’t provide preferred quotes in a standard format either, with some adding a space to the symbols, while others do not recognize such symbols.
Even if quotes are found and displayed, most online quote systems have been specifically tailored to easily and quickly display robust information about a company’s common stock. Often this leads to the information for preferred stock being displayed in a less than optimal manner.
These obstacles lead many investors to the company’s IR website looking to find both if preferred stock exists, and if so, information about the yield, dividend payment history, and even the ticker symbol. However, many company IR pages don’t provide such information at a glance leaving the investor to play investor relations webpage roulette. They might find the preferred stock information, or they might not. If they don’t they may simply assume that it doesn’t exist.
Consider US company Kimco Realty. It’s Investor Relations page landing page can be commended for having a preferred stock quote easily available, that is, if you know that it is there. The quotes is displayed for access in a drop-down box whose default display is, naturally, for the common stock. A savvy web user is likely to notice the option and click. However, many users would not notice such a detail among the sea of information provided.
While preferred stock information is always available in official filings such as the annual report, it may not seem worthwhile to an investor to crack open such documents until they have at least a cursory knowledge of what they might find, or at least a confirmation that an outstanding issue or upcoming offering does indeed exist.
Investor Relations Best Practices
While information about common stock is significantly more important than information regarding preferred stock, there can still be a place for such information on the IR website.
Most investors are well aware that preferred stock is not as universal as common stock and will be obliged to dig for such information a little bit. However, since some companies offer preferred stock and some do not (and some offer preferred stock, but not as a public offering) investors will be likely to leave assuming that there either are no preferred offerings, or that there are no preferred offerings that they may participate in. As a result, IR departments would be well advised to at least display some minimal information regarding any outstanding preferred stock offerings under the typical “Stock Information” headings.
A full chart and quote is not necessary and may simply add to the clutter on a typical stock information page, but a bold heading titled Preferred Stock with a sentence or two explaining the investor’s options, either click here for more information, or there are no publicly available preferred offerings at this time, would be a welcome addition to most stock pages.
Furthermore, while it should be intuitively obvious that a company paying common stock dividends is also paying full preferred stock dividends, a dividend history of payments for preferred stock, or a simple paragraph stating that since issue all preferred stock dividends have been fully paid could provide a welcome confirmation an investment in your company’s preferred stock has been a solid one from an income standpoint.
As always, the more information that can provided in an easily accessible manner for investors and potential investors, the better. With preferred stocks, many companies would do well just to acknowledge their existence. Then, investors may be more willing to dig into the annual report to find details.
Setting The Debate Tone Via Investor Relations
April 23, 2009
There are varying schools of thought when it comes to dealing with potentially unfavorable information. One school advocates simply ignoring such information, or at best, only reporting or mentioning it when absolutely necessary. Another school holds that sooner or later such information will find its way to the right (wrong?) people and blow up anyway.
Considering the rate at which information moves these days, the idea of simply hoping for the best is becoming ever more quaint. While certain facts may have been known for a long time, there is a difference between “out there” and being widely publicized by important media outlets or public figures. Even worse is the fast word-of-mouth spread of information that may or may not be correct, all with no single person or entity to point to with corrections or defenses. In these instances, often called “viral news”, companies are left with no way to counter either misinformation, or just out of context inferences.
Much like vaccines that only work before one is infected, information to counter the various types of “viral” dissemination can only be effective if it exists before the negative information starts to spread. A contrary opinion, useful fact, or even just an acknowledgment of something as a problem, but not one you are concerned about can be enough to nip such PR blow-ups in the bud.
IR and the Corporate Information Castle Defenses
Consider the recent failure of US investing giant, Lehman Brothers. Subsequent investigations and reporting have shown that the failure of Lehman Brothers was caused by the refusal of lenders to extend their traditional overnight lines of credit to the company as the banks had routinely done prior for Lehman Brothers and other investing companies. The reason for this refusal was the fear that Lehman Brothers was running out of cash. Ironically, from all available evidence, it seems that no such shortage ever existed. Whether bad sources, mistaken calculations, media failures, or poor company response caused the rumor is up for debate. What is not, is that in the days the firestorm grew, nothing Lehman said was worth anything because it was too late to counter the whirlwind.
While Lehman Brothers is an extreme example and no amount of IR information may have made a difference, it is certain that stopping bad information from starting is the best strategy.
CONSOL Energy, a large US energy provider, and mining operation, has conspicuously posted its “Risk Factors” in plain view on its website. Each risk, ranging from current economic conditions, to the impact of various government action, is delineated and then given a frank response by the company.
While each of these items is properly titled a “Risk Factor” what they really are, are possible investor concerns, raised either by the investors themselves, or by some outside source. A happy CONSOL Energy investor living in California, for example, may have no idea that the state of Pennsylvania is considering a severance tax on natural gas. But, a single forum post, or investor group comment might cause the investor considerable distress.
However, instead of having to rely on any unverifiable information floating around the Internet, or on whatever info comes out of the brokerage house, the investor could simply scroll through the list of risk factors and determine that while such a tax could impact the company’s operations, the investor might take solace in the information that 12% of production was from Pennsylvania.
While not an insignificant number, it may be much less than any viral report declares the percentage to be. Indeed, if our intrepid investor were to perhaps reply to the same forum post that caused him so much worry, by saying that although such a tax would be a concern, the fact that it affects just 12% of production made him comfortable with keeping his investment. Such information injected at the beginning of any potential blow-up might nip it in the bud as 12% is nowhere near as dramatic as say 33% or even 50%! Thus, IR averts a PR problem without even knowing it existed.
IR Best Practices
While it may be impractical for IR to respond to every possible concern, or even to go to the level that CONSOL Energy has managed to do, it is feasible for companies to address their investor’s biggest concerns and potential concerns in an easily accessible and retrievable format instead of relying on the text buried inside of last year’s annual report to provide solace to the concerned.
Additionally, placement on the company website adds an important dimension to the information, linkability. On the Internet, nothing is worth the screen it is displayed on until it is linked. An investor citing the company response in an annual report might be met with an “I’ll believe it when I see it,” attitude from skeptical users, while the same investor who is able to cite a particular web address might be given more benefit of the doubt.
As always, the more public information that Investor Relations can provide, the better. Consider adding a Risks or Concerns section to your IR site. Include a form or link that investors can use to contact you about these concerns or other concerns. If the number of contacts from such a form is significant, you’ll know that you’ve hit the nail on the head.
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