1. Chapter 8 Investor Relations
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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 – accessed August, 2007.
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3. Investor Relations (IR)
Provides information to investors according to regulations governed by the United States Securities and Exchange Commission (SEC).
Began in l933 with the passage of the Securities Act and the Securities Exchange Act of 1934—aimed at protection of the public from abuses in the issuance and sale of securities.

4. Investor Relations is aimed at:
Helping the firm’s securities reach their market price. IR professionals encourage stockholders to buy and hold company shares and persuade Wall Street financial analysts and institutions to take an interest.
Shareholders are necessary to support management’s objectives.

5. 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
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6. The Investor Relations Professional seeks to:
Win shareholder support through timely and valuable communications.
Serve as their link to the organization.
Provide information according to SEC regulations.
Uphold ethical and professional guidelines.

7. 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.
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8. Investor Relations Framework
Company’s IR Strategy
Investors
Institutional Investors
Individual Investors
Intermediaries
Financial Analysts
Financial & Mainstream Media
Industry Groups
Stock Price
Cost of Capital
Volatility
Reputation
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9. 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
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10. Materiality
Materiality refers to corporate decisions that cause an investor to buy, sell, or hold company stock.
Companies must disclose information that is considered to be material.

11. Examples of Material Proposed mergers or acquisitions
Change in dividend policy, capital investments
Determination of earnings
Acquisition or loss of significant business contract
Major management changes
Purchase or sale of significant assets
Major discoveries or inventions
Marketing new products

12. To be in compliance with the Securities and Exchange Commission (SEC)
Organizations must engage in timely and
full disclosure

13. Full Disclosure
Full disclosure refers to all investors being informed quickly, fully, and fairly about material corporate information.
An issue that has come up recently has been selective disclosure—that is, providing information to some investors but not all investors.

14. The SEC tries to limit: Insider trading
While at the same time it tries to facilitate
Disclosure
This way, information reaches all, not just a few who would have unfair advantage.

15. The New York Stock Exchange (NYSE)
Governs large companies that are members.

18. Question……
Do you remember who resigned as Tyco’s CEO under the allegations of tax evasion?
First name Hint: Mr. Wilson’s young neighbor— always carried a slingshot, hung around with Joey.
Answer: Dennis Kozlowski

19. Investor Relations Professionals
Deal with the stock market analyst
Analysts are responsible for determining the value of stock based on its current value in the market and their expectations of the company’s future earnings per share.
There are two types of analysts: sell side and buy side analysts

20. Analysts Breakdown
Sell-side analysts research stocks and attempt to predict future earnings and place recommendations on each stock to buy, sell, or hold.
Buy-side analysts work for large institutional firms, such as mutual funds, investment advisers, family trusts, and pension funds. They find stocks and their institutions can purchase them and make a profit.

21. Internet Investor Relations
Organizations today use the Internet to reach investors. They must provide information to the investors that is honest and trustworthy.

22. Internet Communications:
Homepage providing information
Web site serves as a service to new, as well as seasoned, investors and attracts potential investors
Information can be controlled through an integrated site rather than distributed randomly
Investments can be done online and investors can research investments on the Internet

24. 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, accessed August, 2007.
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