Academic journal article Public Relations Journal

How Now IR?

Academic journal article Public Relations Journal

How Now IR?

Article excerpt

How Now, IR? Intensified M&A action, disclosure dilemmas, changes in insider trading and other laws, increasingly activist shareholders...Since last year's crash, investor relations has become more crucial--and more demanding--than ever before. In fact, some are wondering how many practitioners will prove up to the challenge.

IN the infancy of investor relations back in the 1950's and '60's, investor relations practitioners spent the better part of their days setting up meetings with analysts and conducting surveys of where they stood. Today, most IR practitioners can barely remember those easy-going days, and none have time to dwell on them. Now, they're doing anything and everything that maximizes their company's securities valuation and minimizes its cost of capital.

Still, it's really only been in the last few years that the IR game has become more challenging than mastering a Rubik's Cube, as a host of issues, ranging from the complexity of a global capital market, to talk of Congressional anti-takeover legislation, to the restlessness of institutional investors, to the increasing problem of insider trading, have come to dominate the field. To get a better handle on the hot topics of IR today and to see how practitioners are--and are not--keeping up with the challenge, PRJ checked in with several leading practitioners.

Takeovers: fighting back

After the stock-market crashed in 1987, many IR professionals, along with their other corporate brethren, hoped and prayed that takeover mania had finally reached an end. But that hope proved to be short-lived indeed. Not only did takeovers resume after the few-month uncertainty period had ended; they resumed with a vengeance. In fact, the crash turned out to be good for the raiders: It beat down the price of many companies to the point of making them bargains.

"Were the market doing its job, the sum of the parts would equal the whole," says Ernie Sando, senior vice president of Georgeson & Company, a New York investor relations and proxy solicitation firm. "But it doesn't. Taking a company apart can be much more lucrative than keeping it together." Investor relations practitioners must be ever aware, Sando says, that if their company is undervalued they are a takeover target.

To help their companies get their stock priced fairly, he says, IR practitioners must construct a clearly defined message about the goals of top management for increasing its stock value and must constantly work to get this message out. For Sando, this means communicating in both good times and bad. "Companies have a tendency to clam up when times are tough," he observes. "Instead, they should explain to their investors, to the market, what they're doing to change things. You don't want to be in a situation where investors hear from you only when you need them, say in a fight for control."

Robert D. Ferris, executive vice president of Doremus Public Relations, asserts that insufficient communication, not the market itself, is at fault when a company is undervalued. "The market values a company based on its understanding of that company's communicable assets and liabilities and its prospects," he says.

More than ever, IR professionals also must have their pulse on the types of stockholders their companies have, the experts say. They must understand not only who owns stock, but also their true expectations and objectives.

Congress revving up

The unabating run of takeover fever is having an impact on IR professionals in other ways, as well. It has brought the attention of Congress to the issue, which may well lead to increased regulation some time down the pike. The House Telecommunications and Finance Committee and the Ways and Means Committee, among others, are now holding hearings to see what new rules should be put into play.

"The main thing that has Congress worried is debt leveraging," notes Lou Thompson, president of the National Investor Relations Institute (NIRI). …

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