PERSPECTIVE AND VIEWPOINT
BEST PRACTICES IN INVESTOR TARGETING AND ENGAGEMENT
Targeting new institutional investors
There are three different kinds of institutional investor targeting you can do: industry peer, financial peer and different industry peer.
Industry peer targeting (approaching investors who already have investments in your industry peers and competitors) has a poor return because institutions have already placed bets (other than you) in your group. So, you’re literally trying to get them to dump prior bets to bet on you. This has a poor return on your investment in this type of targeting.
Financial peer targeting has a much better return. There are several software applications available that compare the characteristics of your stock (revenue growth rate, profitability, etc.), against the characteristics of stocks in institutional portfolios. You get a ranked matched score against these portfolios, which you can then target. I have oftentimes found that these portfolio managers had never considered my stock. This type of targeting can be very fruitful.
One of my favorite ways to expand an investor base is to market into other industries and themes. At one company, on-demand distribution suddenly became a large focus and key part of our customer value proposition. We began talking to institutional investors who had some distribution-themed holdings.
At another company, the IPO had focused on retail consumer electronics. But, the product also had a significant healthcare use case, and we created a new effort aimed at healthcare tech (healthtech) investors and sell-side analysts.
In this way, you can significantly increase your addressable market (TAM) of investors, but also create multiple investment themes, which can provide stability against sector rotations and expand your pool of prospective sell-side coverage.
Targeting Individual Investors
Individual investors are often overlooked by B2B companies, but they shouldn’t be. Sixty two percent of U.S. households own stock, 21% directly. The growth of social investor channels and increasing democratization of information has increased individual investor participation. StockTwits, alone, has 10 million subscribers. It’s a huge opportunity, especially for quality companies to make themselves better known.
For another example, there are a number of amateur analysts who have their own YouTube channels covering stocks in specific industries. Those present a significant opportunity to expand your message. At one of my companies, there was a YouTube channel owner who covered U.S.- listed Chinese technology companies. I used to appear on the host’s channel on the first Saturday after our earnings call to answer questions from the host and his 53,000 subscribers. A lot of the questions were dumb or naïve, so besides raising awareness of my company, I was able to address (and correct) a lot of misunderstanding.
As the saying goes, every coin has a second side. In social investor channels, there is also a dark side, as there are huge amounts of disinformation being posted about companies. Some of it is naïve and wrong; some of it is purposefully deceptive. That affect was highlighted by study by the University of Colorado’s Leeds Business School published in December 2024, which is worth a read.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5078267
What that means is that besides an opportunity to promote your stock, there is also a growing need to defend it from misinformation and attempted manipulation.
As the CU study pointed out, this problem is getting bigger, as there currently more than a dozen social investor channels to monitor, post and correct information, including YouTube, StockTwits, SeekingAlpha, Reddit, X and numerous others.
Running IR on social investor channels and general social media is not something your Marketing team can do. Your IR team has to be willing and to have the financial and business expertise, and presence, to represent the company and the management team on these channels.
Engagement with investors – Both Institutional and Individual
Investors are content Pac-Men. The key to engagement is to keep them well-fed.
For institutional investors, a once-a-year investor day doesn’t cut it anymore, not that it ever did, but that’s how IR has traditionally been done. Instead, I advocate a regular supply of information. The good news is that is even easier to do than it is than the annual investor day.
For just one simple example, think about two extra fireside chats per quarter in addition to your quarterly investor call (which is basically a fireside chat).
Content is easier than you think, and this doesn’t have to fall on the shoulders of the CEO and CFO. Investors like to hear from others both inside and outside your organization.
For example, have you ever let your head of sales talk with investors about how they manage pipeline and your sales process? What about a customer? How about the head of a different region of the world? The possibilities are endless, and they all provide high-value content and education about your business.
The other key tool for investor engagement is social investor channels/social media. Do you currently post or engage with investors on StockTwits, Linkedin, Youtube, Reddit, X, etc., etc.? Did you know you are allowed to have multiple Linkedin pages? Most companies devote their Linkedin page to HR and recruiting. We like to set clients up with an additional Linkedin page dedicated to investors, which acts as a kind of a remote satellite base for much of your social-directed content.
Do you know who talks about your industry on Youtube? Do you know what’s being said about your company, your management team, business decisions and your stock on StockTwits, Seeking Alpha or Reddit?
Don’t think social media is only for individual investors. According to a report last year, among institutional investors who’ve even heard of Reddit, almost 60% have used information found there for investment decisions.
Here’s a link for a study done last year by the CFA Institute documenting the rising influence of social media channels on both institutional and individual investing, interestingly with warnings to governing bodies about the power of those channels and the consequent risks to stock valuations and orderly markets.
Coming from the CFA Institute’s Research and Policy Center, the 40-page report also incorporates information from numerous other reputable studies. It provides strong support for the idea that investor relations needs to address these channels.
For example, a study by FINRA’s investor education foundation found that as of 2022, 60% of younger investors and 35% of 25- to 54-year-olds use social media to source investment information.
Put Yourself Out There
There is a well-known business principle of making your company easy to do business with. Well, that goes for IR, as well, and that’s a key part of good investor engagement.
IR is a sales job. That means making yourself available and easy to reach. Does your company hide the IR person behind an InvestorRelations@yourcompany.com email address, with no name or phone number on press releases and other materials? That’s avoiding, not engaging.
Your IRO should be making themselves available right up front, including on social media. They’re the one who should be on social investor channels, answering questions, correcting information and guiding people to your events and your financial reports.
Video, which is booming as the preferred content of the internet, is another veery powerful way you can put the company and the management team out there.
The best news is that it’s easy to do. One of Accretive’s specialties is recording CEOs, CFOs and other key company leaders talking about the business. We can shoot a dozen of these in an hour in your own office at a very modest cost.
In addition to expanding investor engagement, videos are also a great way to save time for the CEO and CFO. For example, does your CFO have to answer the same questions about certain topics multiple times every month? Great examples are thinks like revenue recognition, or how your sales funnel and quarterly forecasting system work. If you made that answer available on video, investors could easily access them from your web site, Linkedin and other places, and save the CFO hours every month they currently waste on answering those same questions over and over.
One of the things I learned over the years is that most investors would give anything to sit down over a drink with the CEO for an informal conversation about how they see the industry developing, and the technology, customer and regulatory trends that they anticipate will affect it.
You can do that on video very easily. See our web site’s sections on video for actual recorded examples of CEOs doing that, and you’ll see why it’s so compelling for investors.
If you follow some of these recommendations, you’ll be upgrading your IR program in ways few companies have. It will make your company, your management team and your stock stand out.
And, that’s the key to getting the valuation you think you deserve.