IR Is Not One Size Fits All – A Deeper Discussion
A good amount of Capital Markets and Investor Relations advice comes from a Fortune 500 (F500) company lens.
The F500 lens revolves around the idea of taking a passive versus active approach to investor and the capital markets.
At a base level, the large the company market cap, the more passive the company can be and still engage and sustain investors over the long-term.
Larger market cap companies have the luxury of exerting very little effort and still driving investor engagement.
There are three main drivers of why larger companies can take a passive approach to investors and capital markets.
The Three Luxury Variables that Allow a Passive Approach
1. Trading Liquidity
2. Scale in Position Size
3. Index Membership
Smaller companies typically perform poorly on the above variables, which explains why engagement in and of itself, is often difficult.
Given that smaller companies screen poorly on the variables driving a passive approach, smaller companies must be more active and focus on different variables to drive engagement.
The Three Variables Required for an Active Approach
1. Balance Sheet – Cash and Debt Levels
2. Spending – OPEX and Cash Burn
3. Deeper Education: Key Catalysts, How the Business Works, and Industry / Competition
The amount of and quality of data and explanations of the business provided directly impact how a company drives and sustains investor engagement over time.
Finally, companies that are able to consistently address the key debates facing the stock through their investor materials, on the company’s terms, will always unlock shareholder value.
Wishing you an epic Saturday! Always here to help with your Capital Markets, Investor Relations, and Corporate Finance needs.
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