By Sandra Rogoza
Prior to presenting our investor relations services to a prospective client, I frequently engage my peers in the financial community for feedback. Some of the questions I ask are:
“Would you invest in this company?” “Why or why not?”
“What is your understanding of the company’s message or story?”
“What is your understanding of the company’s business model?”
“Does this company’s story, or value proposition, have enough sizzle for you and your clients as a short or long term investment?”
The prevailing response I receive to the above questions is, “I don’t understand what the company is about.” Surprisingly, this response is the same for micro to large capitalized companies.
Developing a simple and easily understood spoken and written message is a communications technique that companies often overlook when reaching out to prospective and existing investors. Not all investors know your business as well as you do and that includes the related industry jargon, abbreviations, technical terms, and legalese. Regulators, brokers, and investors are demanding clear and concise communication, ranging from investor presentations and fact sheets, to annual reports and websites; from press releases to prospectuses, and from proxy materials through to regulatory disclosure.
The move to plain or simple language disclosure is gaining worldwide momentum. At a recent symposium at the Centre for Plain Language on October 12, 2007, Christopher Cox, Chairman of the U.S. Securities and Exchange Commission, stated, “Most importantly, when investors and analysts can use their time more productively and when information is presented clearly, every market participant will be able to make better decisions. Overall, price discovery will be more efficient. The more direct sunlight that shines on every public company, the more honest our markets will be, and the stronger will be investor confidence.”
Some of the clear benefits of using plain language are that it:
- minimizes the risk of your information being misunderstood
- reduces questions from your investors
- is simple for you to review, administer and update
- is cost effective for you to produce
- helps investors to easily understand your business strategy, investment value, and your company’s distinguishing investment characteristics.
“Is my time valuable?”
“Is my reputation important?”
“Do I want to be trusted?”
If you have answered “Yes” to the above questions, in all likelihood your stakeholders have too – from the regulators, financial community, to the individual investors.
Verbose, overly technical, and excessive legal language wastes the time of your audience. Getting and keeping the attention of investors is challenging – especially when there are hundreds of thousands of other publicly traded companies competing for the same investor attention. How will you stand out from the crowd? Know your story inside and out, get to the point of your message, and stick to the facts. If investors cannot understand what you are communicating, they will either not invest or eventually disengage and invest elsewhere.
A good reputation is an inestimable asset. It gives you competitive advantage. Having and maintaining a good reputation helps to establish and reinforce your reliability, trustworthiness and responsibility. Quoting George Orwell, “muddled language is both the result and the cause of muddled thought”.
And sometimes, kicking a lot of dust up in the air is exactly what cover-up artists intend to do. One need look no further than the most notorious corporate scandal of our time, Enron, to find an example of legalese and jargon being used to hide “wrongdoing in plain sight”. Be clear in your verbal and written communication. This helps to develop confidence in your company’s investment proposition for the short and long term.
Respecting your audience builds trust. Trust is a measure of belief in what your audience knows about you. Tell your situation, your story the way it is – without hiding behind the veil of eloquence and jargon. Having a relationship of trust with all your stakeholders will also help them weather any downturns in your performance due to industry, market and economic conditions.
Being a leader in clear and concise communication will set you apart from your competitors. Your stakeholders want the straight facts. Regulators want to be assured of factual and timely information. The financial community needs to appreciate your investment value, quickly. Investors want to understand your story to make an intelligent investment decision. Keep your message and story simple and clear by using plain language. The success of your business depends on it.
Sandra Rogoza is Vice President of Christensen, Calgary. Christensen is a capital markets advisory firm assisting global, national and small to large capitalized companies to achieve fair market valuation and strengthened brand recognition in the global financial markets. She can be reached at: 403-276-4410 or [email protected]
Since 2005 ITB Solutions has provided listings development services to stock Exchanges in Canada such as the Canadian Securities Exchange. ITB Solutions currently provides New Listing Services to the NEO Exchange. We assist companies with the listing application and managing the process to become publicly tradable in Canada, as well as offering advice on how to make the most of your public listing. You can reach Jeffrey Stanger at 647-500-0492 or by email at [email protected]