The joys and pains of the small-cap IRO

It’s rare to meet an IRO who had his or her mind set on an investor relations career from a young age; most stumble into the profession rather than choose it outright. But Patrick Möller, Hamburg-based XING’s head of IR of nine years, is an exception.

After working at Mobilcom during his studies, ‘gaining first-hand experience during the company’s IPO’, Möller joined the firm’s IR team upon graduation. ‘My decision to go into IR was a conscious one: it has always been – and still is – my passion,’ reveals the German IRO, who now boasts 17 years working at technology, media and telecommunications small caps.

‘Joining Mobilcom in 1997 was much like XING in 2007: both companies were relatively small. But Mobilcom enjoyed a lot of attention at the time as the first company listed on the new market, now known as the TecDAX,’ he continues, highlighting the challenge small caps now have in attracting investor attention. ‘By contrast, US funds first showed no interest in XING because of our small market cap, so we had to focus on continental European targets until our size passed the €500 mn ($560 mn) mark.’

Véronique Boca, Mersen

Véronique Boca, head of corporate communications and IR at French industrial group Mersen, couldn’t express her concerns better. When she started in her previous IR role at Sperian (a safety gear manufacturer that is now part of Honeywell) back in 2004, smaller companies typically enjoyed the attention of a large number of brokers wanting to take them on the road. ‘Now it’s a real challenge to get coverage and you need to solicit roadshows or even pay for research yourself,’ she says, pointing out the crucial role of the sell side in making smaller B2B firms visible, especially when targeting investors abroad and ‘knowing it won’t be the likes of Fidelity or BlackRock.’

Luckily, while companies the size of Mersen need to operate on a ‘much leaner’ budget than their large-cap counterparts, Boca had no problem making a case for paid research and US roadshows with her CEO and CFO. ‘I’m the firm’s sole IRO and working for a small or mid-cap makes you learn to be resourceful and to spend more efficiently,’ she explains.

She also stresses the importance of having a good – even excellent – relationship with C-suite members. ‘You need to have a good feeling with these people or your job can quickly become a nightmare,’ she warns. ‘Being keen on the company and the sector just isn’t enough.’

More generally, the ability to build internal relationships is the key to being a successful small-cap IRO, she says. Both natural curiosity ‘to go out and talk to people in various departments’ and good social and emotional skills ‘in order to speak the same language as the staff working in the operations you’re visiting’ are required, not to mention knowledge of what’s going on in legal affairs and financial functions such as treasury or management control.

‘I enjoy working for smaller-sized issuers as you’re in much closer contact with the teams, the executive board and the activities taking place within the firm. You’re also much nearer to the people shaping the future of the company, be it in the form of product innovation or strategic decisions,’ echoes Möller, who saw corporate communications added to his remit when working at Mobilcom.

‘My in-depth knowledge of the company’s strategy, key figures and outlook were a real advantage in my communications role at the time, while my PR responsibilities helped me hone my customer contact, product development and sales process skills, which in turn stood me in good stead for conversations with investors and analysts,’ he reveals. ‘And here at XING, the corporate communications team fosters close relationships with IR in order to ensure a uniform strategy.’

Boca admits she really appreciates wearing both hats, with 60 percent of her time taken up by IR and 40 percent by corporate communications. ‘It makes sense because of our B2B environment – ultimately, our corporate image also depends on IR communications,’ she says. ‘B2C communications would entail more dedicated resources as they follow very set rules. IR has a clearly defined yet limited audience, so the plus side of doing corporate communications as well is that you cater to different people with different expectations; you need to find new angles and develop relevant arguments. That’s one advantage of working for a small or midcap firm – you have a panel of interesting topics to tackle, often single-handedly.’

Although the job is highly rewarding, Boca wouldn’t recommend starting a career directly as a mid-cap IRO, as the role requires both general financial experience and sufficient maturity to deal with top management. She also warns of the danger of becoming pigeonholed. ‘While the scope of what you’re doing is wide, the role is quite specific and often not well known by recruiters,’ she points out.

Ambitious professionals should, therefore, beware of staying in an IR role for too long – unless their career plan is to move on to lead investor relations at a large cap. ‘After a number of years in place, you’ll find the small-cap IRO label hard to remove and it might be tricky to rebrand yourself if you want to move into strategy, finance or communications,’ Boca says.

Nevertheless, while IR experience on its own won’t be enough for those aiming for a CFO seat, having spent three to five years in the function will constitute a great asset. ‘A newly appointed CFO with no knowledge or experience of the stock markets will have a hard time getting up to speed,’ Boca notes. ‘He or she will have to rely a lot on the IR team for briefing.’

Möller, for his part, has no plan to make such a move. ‘I consider IR a career path in its own right rather than a springboard to a C-level post,’ he says. ‘And I have to say I really enjoy my work.’

It’s an enthusiasm shared by Boca. ‘When you like your job, your company and the people you work with, you can move mountains – of course, getting the share price to move in the right direction is a whole other story,’ she quips.

This article appeared in the Fall 2016 issue of IR Magazine