Inside Investor Relations – Volume 1 – How a company should be prepared to communicate with investors during COVID-19
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As we are dealing with unprecedented levels of uncertainty in the market during COVID-19, many IROs and senior managements are struggling to update investors on the impact and its business outlook, especially in the upcoming quarterly release. We believe during times like these, companies that provide a more opened, transparent and proactive in communication can earn more trust from investors. But what should be communicated, and how? What would be the best answers to investor’s questions? Although the communication varies from each company’s situation (as the level/timing of the impact), there are some common best practices to follow to ensure these communications are effective.
- Communicate to the company’s plans and actions regarding the safety of your stakeholders (employees, vendors, and customers). It is reassuring to all involved that the company is looking out for the welfare of its people by following any safety-related protocols by the government. Investors should be reassured that the company has established a clear business continuity plan, including contingencies when unexpected issues happened, or recovery measures.
- Maintain credibility by owning the uncertainty, and reassure investors that the company understands the situation and is highly focused on managing through it. Remember that we are in a time of unprecedented uncertainty regarding the depth and duration of COVID-19, and that everyone is on the same boat, no investors would expect the company to know to when the pandemic will end. Don’t get caught up in the discussion of personal opinion on the impact of macro condition, or avoid taking a view on the impact may be as situations are still changing quickly.
- Re-position and make sure you know your IR narrative, and don’t offer up views on the impact to the business until the company is fully prepared to do so. If the impact is still uncertain, it is ok to convey that the company is still monitoring and assessing the situation and will share the results once they are more firmed. Investors most likely would want to know the direct impact on business, order visibility, supply-chain status, end-demand status, any operational and logistics disruptions or challenges, financial flexibility, and balance sheet strengths. Any change in expansion plan, capital expenditure, or dividend policy. If previous guidance has changed as a result of COVID-19, this would be the perfect timing for an adjustment. Remember that in uncertain time it is better to be conservative in your message, as investors’ reception of an unexpected good news is better than having to revise down high expectation.
- Reinforce the long-term goals of the business. It is possible that COVID-19 threat will eventually retreat. Hence, it’s important to reiterate the long-term goals and strategy for the business. Investor who shared your vision are likely to be with you for the long-term. For investors that do not know the company, this may also be a good time to reach out the selected targets who are the right fit for your company and potentially able to build a position. Be mindful that in an uncertain time like this, investor focus may have shifted from offensive strategy to defensive of evaluating company’s long-term prospect and earnings power. In some cases, it is possible that investors are looking for companies that are potentially long-term winners after the pandemic. Be sure to prepare tailored communications and materials when speaking to investors.
- Stay connected. Given now that physical meetings and events aren’t practical, leveraging a webcasting, virtual solution, or announcement release is the best and possibly the only alternative for communicating and engaging with investors. Nevertheless, it’s always better to keep investors and stakeholders up to date with the latest information. Reach out to brokers if a virtual earning call or investors conference option is available.
- Leverage all communication tools to make it easy for investors to assess the info. Updating your corporate website, investor presentation, or newsletter to reflect your evolved IR narrative and recent disclosures, making it easy for investors (both existing shareholders and potential new investors) to find the information they need. Assemble all COVID-19 related information and disclosures to a singular location on your site for easy access.
In summary, in a crisis like this “trust” is your most valuable asset. By handling the communication well during this pandemic could potentially help you build your credibility in the capital market. We recommend: 1) being as open and as honest as possible, including telling investors when you do not know, 2) making it easier for investors to do their jobs – have the information they are seeking easily accessible, and 3) being more transparent as possible. Strategically and thoughtfully evaluating how your IR program and narrative should evolve in this new normal can make a meaningful difference.
If you need help navigating during this complex time, QIC is here to help. We have been advising clients on investor relations and crisis management for many years. Please reach out to set up a strategy call with our team to address your questions and discuss ways that we can support your IR strategy and communications in response to COVID-19.
Contact: yvonnehuang@qtumic.com