By Pratana Mongkolkul
Published on July 6, 2011
Investor Relations (IR) is a topic near and dear to my heart. I would like to share with you some tips on IR essentials for small companies.
Remember, successful IR functions provide access to sources of funding at fair valuation, enhance liquidity in share trading and increase the diversity of your shareholder base.
Typically, a small company cannot afford a dedicated IR department. So the chief executive and the chief finance officer or finance director have to assume that role. Realising the importance of IR, I still made a big mistake - as others in management did - 15 years ago, while I was working at my previous company, which was considered small at the time. My policy was to accept requests for company visits from investors, equity sales people and analysts based on my availability, rather than theirs. As a consequence, the company received the worst IR award.
Since then, I have learnt that being a small company does not mean you can afford to neglect the fundamental need for IR functions. However, it is vital to use resources wisely and set up effective IR tools.
It is most important to understand who you are and identify the appropriate target composition of investors. Small companies may be less attractive to large international funds due to limits on the size of market capitalisation and trading volume. As a result, typical investors for small companies are either local retail investors or domestic funds. Therefore, it is important to draw as much attention to your firm as possible. The best way is to pitch your story to equity sales people.
A decade ago, when Minor's market capitalisation was less than $100
million (Bt3.04 billion), I went all the way to brokerage firms, introducing Minor and breaking the growth story to sales and analysts or even to retail trading rooms. Once you capture their interest, you gain multiplier effects from sales and analysts re-selling your story to thousands of investors.
Once you have built up sufficient demand, it is then critical to establish ongoing relations. This involves being available to analysts and investors, to address their inquiries and educate them about your future growth plans and supply them with useful financial and operational information. A good venue for small companies to interact with investors is the Stock Exchange of Thailand's Opportunity Day, which is held quarterly.
Receiving feedback from investors and analysts is also essential. Since they meet hundreds of companies in different industries and countries, they are in a position to provide constructive criticism from a different perspective, which can potentially add new strategic ideas to the management of your company. For instance, several funds suggested the idea of merging Minor's three business units together. Through the synergies thus realised, Minor (MINT)'s market capitalisation is now much higher than their combined individual values.
As president of the Thai Investor Relations Club, I have seen many small companies struggle when engaging in IR activities, so I hope you find my advice useful and can adapt it to suit your business.
Pratana Mongkolkul is group chief financial officer of Minor International. Follow her articles in Hi! Managers on every first Wednesday of the month.
Source: http://www.nationmultimedia.com/home/2011/07/06/business/Hi!-Managers-Investor-relations-for-small-companie-30159556.html
