A recap of three case studies told at CIRI’s recent roundtable
Material changes, whether good or bad, will inevitably affect a company’s stock. Investor reaction ultimately depends on how the information is presented. So what’s your communication game plan?
Three senior investor relations officers talked strategy and gave us a sneak peek inside their IR playbooks at a Business Wire-sponsored CIRI roundtable discussion on April 1 in Calgary. We learned that even with a plan of action, the Street’s response can still be surprising ‒ so keep the following tips in mind when plotting your strategy.
Be prepared
Chris Legallais, senior vice president of IR at Pacific Rubiales Energy Corp, was faced with communicating a $1.6 bn acquisition of a competing oil company in Columbia. This was no easy feat given that mergers and acquisitions are fairly uncommon in South America.
‘[Acquisitions in South America] are looked at with a certain amount of suspicion,’ Legallais said.
Anticipating some backlash from investors after the news release was distributed, Legallais was prepared for battle. His armor came in the form of a robust key message document that had been developed carefully over the weeks leading up to the acquisition announcement. The document contained a list of the toughest questions the media might fire his way and how to defend against them with back-up data, facts and figures on the assets of the acquisition. His answers had to be tailored to the South American business and compliance culture. Eventually the deal went through without any major hiccups, thanks in large part to Legallais’ thorough preparation.
In these situations it’s good practice to turn the tables and take on the investor’s perspective. When drafting a material change news release, consider how someone who lacks your specific knowledge of the situation will interpret the information.
Be transparent
Penn West Petroleum investors were frustrated with the frequent changes in senior management and an overall decline in production at the oil & gas conglomerate. Investors felt they were being left in the dark as prior management had had a revolving door of corporate strategies.
Under new management, the company developed a long-term plan to turn operations around. It was up to Clayton Paradis, manager of investor relations at Penn West, to make the plan resonate with investors. Penn West wasn’t typically known for transparency but the new strategic plan helped to break down the wall between management and the investors. Paradis ensured there was an open dialogue and active engagement with the investors. The message is simple: keep your investors informed.
Be succinct
When Chaya Cooperberg knew Progressive Waste Solutions’ earnings were lower than analyst expectations, her natural inclination was to provide a lengthy explanation as to what went wrong. But she found ‘the more explanation, the better’ mentality wasn’t doing her any favors.
‘We talked too much,’ explained Cooperberg, vice president of investor relations and corporate communications at Progressive. In fact, just the opposite approach was well received. Shortening the ‘script’ for the conference call provided extra time for Q&A. Turns out the investors appreciated the company’s less-is-more approach. The abbreviated script and extended question period communicated that Cooperberg’s team had a clear understanding of the situation. Investors preferred clear and concise messaging over long, drawn-out speeches – and this sentiment was reflected in the share price.
To get analysts on her side, Cooperberg started providing a slide deck that included metrics and data to help visualize why Progressive was missing earnings targets: adding multimedia content can help simplify complex information quickly without requiring a long explanation.
There are no hard-and-fast rules for communicating a material change to investors, but getting feedback will help you determine the best approach for your company. Investors will be more understanding of the news if you are prepared to answer the tough questions, adopt a transparent approach and deliver the information as clearly and concisely as possible.
As Cooperberg said as the roundtable wrapped up: ‘The Street will appreciate the effort, even if it’s not the perfect device.’
Zara McAlister and Ciaran Ryan are both newsroom editors for Business Wire Canada @BusinessWireCA
