This blog originally appeared on the Public Relations Global Network (PRGN) website. PRGN is a connected network of 50 public relations firms serving key markets around the world. The author is Michael Diegelmann of our German affiliate, cometis AG.
Reduced to the essentials, it is actually quite simple: investors on the capital markets want to earn money and they hate making mistakes. This principle applies universally worldwide and across all investor classes. Sometimes experience, a good nose or a so-called golden hand can help make a worthwhile investment decision. However, in order to assess the risks and opportunities associated with an investment, investors need reliable and comprehensive information. This is all the more true as today’s world has not become more predictable in times of fake news and government leaders with own agendas.
This is precisely where good investor relations (IR) make the difference. It not only meets the numerous legal requirements for communication, but also the high information requirements of the capital markets. IR professionals look at the listed company from the perspective of the investors, anticipate their essential questions and provide the necessary information.
Good investor relations thus enable investors to make a sound assessment of the current situation and the further development of the company. This transparency creates lasting trust on the capital market by explaining opportunities and risks in a factually correct and understandable manner and thus realistically managing market expectations.
However, this transparency is by no means only in the interest of investors. After all, what happens if investors are unable to adequately assess risks or identify opportunities? They withdraw their money completely, are only willing to invest with a correspondingly high-risk discount or are not willing to pay an appropriate premium. Everything with negative consequences for the potential of the share and thus for the company valuation. An appropriate valuation of a company can also result in numerous other advantages for a listed company. A fair company valuation based on facts and transparent information, for example, significantly reduces the risk of a hostile takeover. However, a fair company valuation is also a prerequisite for capital increases to be carried out successfully and for further company growth to be financed via the stock exchange.
Good investor relations therefore make a huge difference – to the advantage of investors and listed companies alike.
How do you manage investor relations? Leave your comment below.
One thought on “How does good investor relations make a difference?”
Absolutely right, Mike!
It sounds so logical and simple – and yet many listed companies still see transparent IR communication as a burden. Positive things are presented in an overwhelmingly positive way, while critical topics are presented in silence. However, this is always only a short-term view. But being public is an endurance run and not a sprint! They forget that a realistic expectation management on the capital market is in the self-interest of the listed company; and the company can save a lot of money in the long run.
My conclusion: In the interest of all parties, we need even more professional investor relations!
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