Positive or negative, unexpected news can affect stock price, shareholder involvement, and investor expectations. Mark Fasken, the co-founder and COO of Irwin, hosted a conversation with IROs at this year's CIRI Annual Conference regarding instances in which they have either surpassed or failed to meet investor expectations through a variety of circumstances, such as a change in management or revised guidance.The panel discussed their strategies for informing the Street of the change, handling the fallout, and staying on track.
Get to know the panel.
- Agnico Eagle Mines Limited's Vice President of Investor Relations, Brian Christie
- Karen Keyes, Canadian Tire Corporation's Head of Investor Relations
- Calvin Locke, Keyera's Manager of Investor Relations
- You must first understand investor expectations in order to manage them. The panel discusses strategies for monitoring investor sentiment.
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How can one comprehend the sentiment of investors
Karen explains the quantitative and qualitative methods she uses to assess investor sentiment.
From a quantitative perspective, Canadian Tire generates consensus EPS predictions for the current and next quarters. In order to understand how individuals are creating their models and to track movements using a quantitative perspective, they also conduct a consensus-gathering exercise by the sell side.
From a qualitative perspective, they often strive to interact with their analysts and investors outside of scheduled meeting cycles in order to better understand what they're hearing and what has changed.
Here are a few effective methods to find out what your investors are thinking about your business:
- Examining newsletters for investors.
- Become a peer analyst.
- Monitoring M&A in the industry.
- Go through the newspaper.
While reiterating Karen's advice to become active and interact with shareholders through meetings and various contact points, Brian explains how he follows investor sentiment using a market surveillance group that keeps an eye on shareholder movements.
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Keeping up with developments and the importance of perception studies
Understanding investor mood requires maintaining organization and being able to recall essential themes and patterns from your investor interactions. Knowing what the Street is saying and what your business needs to do is crucial.
In order to better understand their shareholder base and address those often asked questions during their investor day, Karen explained how she keeps track of important subjects that have come up during the quarter's shareholder meetings in addition to doing perception surveys.
For businesses, perception studies may be very beneficial exercises. Calvin discusses about some of the perception research results they’ve done in the previous two years. We conducted a perception research before and after our investor day in March. We were able to better craft our messaging for Investor Day because to its great effectiveness.
They want their investor day to be successful, which is why they are doing this perception survey ahead of time. They wanted to delve further to find any underlying concerns, even though they were already extremely involved with their shareholder base and understood what investors expected. Following the perception survey, Calvin and his team identified five major issues that their shareholders wanted them to solve. Following their successful presentation of those subjects on the investor day, they were inundated with compliments.
Following the investor day, they conducted a perception assessment and discovered that, on the whole, their shareholders were happy with the themes covered and impressed by the quality of the event.
How should management changes be handled and communicated
Changes in management may be challenging, particularly when they are sudden and unexpected. According to Karen, investor days are an excellent way to present your shareholders with the larger team. Should a member of your team ever assume an executive position, the market is already somewhat acquainted with them.
Additionally, Brian thinks it boils down to building strong bonds with the different banks and sales teams. "To spread the word, meet with their teams and speak with investors." It is important to be proactive.
Keyera saw a CEO transition last year. Calvin explained how they had effective succession planning and prompt involvement to ensure that their shareholders had an opportunity to meet and build relationships, which made the move very simple.
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How may investor expectations about M&A be managed
Brian talks about his company's recent public merger with Kirkland Lake. Since there was already a 70% ownership overlap between the two businesses, the merger was largely positively regarded. With the exception of one significant shareholder who voted against the merger and later chose to sell their shares, most stockholders felt secure heading into the merger. The shareholders of Brains were quite happy.
But not every merger goes as well. When you announce a merger, your share price often reacts quite quickly.
Karen explains that in order for shareholders to grasp the company's future and not be taken aback by the merger, it is crucial to properly position your messaging, concentrate on value generation, and have continuous interactions.
CGI purchased Logica, Karen's former employer. Despite operating in separate regions, the businesses were strikingly similar. As a result, the two did not have many of the same analysts or banks. Different focus was needed for the merger since it was important to tell shareholders about the history of both businesses. Most analysts will stop covering because of the lack of knowledge, and the analysts themselves become disinterested very fast.
"If you have a seat at the table during the internal M&A discussions, you have the chance to ensure that you're providing the bankers and the FP & A teams working on the deal with a reality check to ensure that the multiple being put in the forecast matches what you've heard on the street and to steer it if you think there's a disconnect."