In recent years, the field of investor relations has been rapidly evolving, analogous to the emergence of algorithmic trading in the late 2000s. Looking to get an edge in attracting and retaining the right shareholder, shareholder analytics plays an increasingly important role for public companies.
What do we mean by the “right shareholder”? We’re referring to one that is aligned with the company vision, is supportive of management and unphased by short term volatility. An example of a company with a large base of the “right shareholders” is Tesla - where they may not be hitting production numbers and burning through significant capital - but shareholders are passionate and the stock price has remained relatively stable. Finding and maintaining the right shareholders is critical in allowing a company’s management to shift away from quarterly earnings management and focus on long term projects to drive growth and increase value.
A strong shareholder analytics function supporting the IR team is just one way that public companies can start heading in the right direction. By keeping a clean history of all your shareholders, you’re able to better control the share price by using the information to develop targeted IR and fundraising programs.
Few companies know their shareholders well enough to accurately predict what will make an investor buy or sell more of their shares. It’s also rare that management know what shareholders think about specific potential strategies or events.
However, by leveraging shareholder data and building profiles (especially in today’s digital world), we’re able to start predicting how individual investors (both institutional and retail) are likely to react to specific news events. From there, we’re able to estimate the impact on share prices and develop targeted IR strategies to stabilize any volatility.
For example, for shareholders that are identified to typically dump stock whenever earnings targets are missed, a proactive communication or survey can be shared with that specific group to reinforce the vision, share decision-making processes or simply make them feel like that management is listening.
With this, the investor relations function is quickly transitioning into a critical strategic role. Beyond administrative functions, it will be responsible for understanding how all plans and announcements affect the company share price and suggest changes to ensure alignment between company and shareholders.
While an analytical and structured approach to investor relations and stock price prediction requires resources, companies like BHRD are emerging as critical partners for the IR, CFO and CEO. By combining innovations in technology with years of industry expertise, BHRD is a leader in data-driven shareholder management.
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