INVESTOR RELATIONS

Chapter Fifteen

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Investor Relations (IR)

Provides information to investors according to regulations governed by the United States Securities and Exchange Commission (SEC).

Began in l933 with the passage of the Securities Act and the Securities Exchange Act of 1934—aimed at protection of the public from abuses in the issuance and sale of securities.

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Investor Relations is aimed at:

Helping the firm’s securities reach their market price. IR professionals encourage stockholders to buy and hold company shares and persuade Wall Street financial analysts and institutions to take an interest.

Shareholders are necessary to support management’s objectives.

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The Investor Relations Professional seeks to: Win shareholder support through timely

and valuable communications. Serve as their link to the organization. Provide information according to SEC

regulations. Uphold ethical and professional

guidelines.

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Materiality

Materiality refers to corporate decisions that cause an investor to buy, sell, or hold company stock.

Companies must disclose information that is considered to be material.

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Examples of Material Proposed mergers or acquisitions Change in dividend policy, capital investments Determination of earnings Acquisition or loss of significant business

contract Major management changes Purchase or sale of significant assets Major discoveries or inventions Marketing new products

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To be in compliance with the Securities and Exchange Commission (SEC)

Organizations must engage in timely and

full disclosure

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Full Disclosure

Full disclosure refers to all investors being informed quickly, fully, and fairly about material corporate information.

An issue that has come up recently has been selective disclosure—that is, providing information to some investors but not all investors.

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Question…..

Sears acquired an organization, which was the third-largest retail acquisition in history. Investor relations went well with 95% of the organizational shareholders voting in favor of the deal. Can you name the organization?

Hint: Some say they didn’t know which end was up.

Answer: Lands’ End

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The SEC tries to limit:

Insider trading

While at the same time it tries to facilitate Disclosure

This way, information reaches all, not just a few who would have unfair advantage.

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The New York Stock Exchange(NYSE) Governs large companies that are

members.

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Investor Relations Activities

Corporate Investor Relations Professionals would prepare:Annual ReportsQuarterly reportsAnnual meetingsConference callsMedia calls and monitoringProxy mailings

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Question…… Do you remember who resigned as Tyco’s CEO

under the allegations of tax evasion?

First name Hint: Mr. Wilson’s young neighbor— always carried a slingshot, hung around with Joey.

Answer: Dennis Kozlowski

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Investor Relations Professionals

Deal with the stock market analystAnalysts are responsible for determining the

value of stock based on its current value in the market and their expectations of the company’s future earnings per share.

There are two types of analysts: sell side and buy side analysts

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Analysts Breakdown Sell-side analysts research stocks and attempt

to predict future earnings and place recommendations on each stock to buy, sell, or hold.

Buy-side analysts work for large institutional firms, such as mutual funds, investment advisers, family trusts, and pension funds. They find stocks and their institutions can purchase them and make a profit.

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Internet Investor Relations

Organizations today use the Internet to reach investors. They must provide information to the investors that is honest and trustworthy.

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Internet Communications:

Homepage providing information Web site serves as a service to new, as well as

seasoned, investors and attracts potential investors

Information can be controlled through an integrated site rather than distributed randomly

Investments can be done online and investors can research investments on the Internet

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Question……

Can you think of a rumor that hurt investments for an organization?

How was the rumor handled? Was the organization able to rebound to

your knowledge?