In a recent article I proposed that the role of Investor Relations should, to a significant degree, focus on providing information that clarifies a company’s risk and uncertainty profile while not engaging in communication practices that could adversely alter that profile for investors. I concluded that this goes a long way towards supporting a fair valuation of a company’s securities. In follow-up, I’d now like to propose a method of implementing Investor Relations communications.

I’ve named the method “TACTful communications™.” TACTful communications are those that are Transparent, Accurate, Credible and Timely.

–   Transparent communications provide complete information about a company’s business (to the extent reasonably allowed by business and legal considerations), including its strategy, markets and products.

–   Accurate communications provide information that is correct and not subject to change or interpretation.

–   Credible communications are trustworthy, often borne out by reliability over time.

–   Timely communications relay information without undue delay.

These factors are consistent with established best practices. Communications encompassing all four elements, and communicated effectively in a public manner, will create an arena where investors will have equal access to information needed to make informed investment decisions.

Further, TACTful communications will support efforts to not only provide sufficient information to identify and handicap the company’s risks and uncertainties, but favorably impact its risk and uncertainty profile. For example, a company that is consistently timely in its communications increases an investor’s ability to quickly react, and generally make investment decisions based on current information. Or, consider a company that does not communicate accurately, but discloses information that ends up needing correction or clarification, befuddling the facts and confounding investment decisions. Further, where there are communications that are not credible, i.e. where the company sometimes does and does not execute consistent with its own guidance, uncertainty is created because there is no way to predict the reliability of the company’s statements.

Essentially, by communicating in a predictable manner a company can reduce the possibility of creating additional investment risk or uncertainty. These same communication practices will also support creation of management credibility, another important element that gets tallied into investment decisions. While other factors, including those external to the company such as price and economic climate, also influence an investment decision, TACTful communications—designed with an understanding around the need to address risk and uncertainty—create a basis upon which investors can more efficiently and fairly value a company.

David Walsey
David Walsey

The TACTful approach complements efforts to address risk and uncertainty, more broadly serves communication objectives, and is vital to effectively implementing Investor Relations best practices.

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Investor Relations word cloud

Risk and uncertainty are important concepts to understanding the purpose and role of Investor Relations. They are central when determining what information to communicate, and consequently important to determining a fair valuation of a company’s securities.

The National Investor Relations Institute, the leading professional organization for Investor Relations practitioners in the US, defines Investor Relations as follows:

Investor relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation. (Adopted by the NIRI Board of Directors, March 2003.)

In practice, the role of Investor Relations practitioners is often described as providing company information to the financial community to enable informed investment decisions. Or, the function of providing investors an accurate account of the company’s affairs. All with the goal of contributing to a fair valuation of the company, consistent with the above definition by NIRI.

But what type of information comprises effective two-way communications between a company and the financial community? What is an accurate account of the company’s affairs, what information enables informed decisions? To state the question more specifically: what type of information should Investor Relations communications share and what educational objectives should be served by such communications in order to support a fair valuation of the company?

This is a central question in Investor Relations and a crucial element of effective communications that deserves further thought. So, while the above overview of the Investor Relations function is accurate as far as it goes, it’s an incomplete explanation.

Some clarity on this topic is perhaps best introduced through a quote by Seth Klarman, a well-known U.S. value investor. He stated: “Risk is not inherent in an investment; it is always relative to the price paid. Uncertainty is not the same as risk. Indeed, when great uncertainty — such as in the fall of 2008 — drives securities prices to especially low levels, they often become less risky investments.”

Klarman’s statement incorporates two important points for the Investor Relations practitioner. First, that risk and uncertainty are distinct concepts. Second, neither risk nor uncertainty is inherently good or bad for any particular investment.

Despite Klarman’s statement and the insights it imparts, when it comes to investing in public companies, the words “risk” and “uncertainty” are perhaps not given their due attention as they relate to Investor Relations. In fact, they are sometimes thrown about interchangeably although, as noted, they hold different meanings. It’s important for Investor Relations, and communications with other stakeholders generally, to understand the two concepts.

The word “risk” is generally understood to refer to a quantifiable unpredictable event. It’s an event with measureable probabilities, like throwing a dice. “Uncertainty” is an event that is unpredictable and not quantifiable. As such, it is an event without measurable probability, like an event considered an act of God – such as the 2008 stock market fall noted by Klarman. While risk can be calculated and allowed for, “uncertainty” can only be taken into account, perhaps, by human instinct.

Risk and uncertainty are important concepts to Investor Relations because they are key factors investors consider in understanding the potential profit (or loss) of an investment decision – and even in how to structure an investment. An investor’s superior identification and understanding of a company’s risks and uncertainties, in fact, can differentiate a superior investment decision. Thus, knowing the events with measurable probabilities and the events with unknown probabilities is important. As is an appreciation for the possibility of unknown events with unknown probabilities.

Consequently, neglecting consideration of risk and uncertainty in understanding the purpose and role of Investor Relations is an error. In large part, the role of Investor Relations should be to focus on providing information that clarifies a company’s risk and uncertainty profile while not engaging in communication practices that could adversely alter the risk and uncertainty profile of a company, or perception thereof, to investors.


David Walsey
Author: David Walsey

This is an underlying central understanding to effective Investor Relations communications and in large part should inform what information is important to communicate to the financial community and how that information should be contextualized within communications best practices. Doing so will go a long way towards supporting a fair valuation of a company’s securities.

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David_Megan_NancyIt’s been an exciting month as BrewLife continues to grow in leaps and bounds.

We’re pleased to welcome David Walsey and Megan McCormick on the corporate communications side, as Managing Director and Account Manager respectively, and Nancy Hester as Executive Assistant to Brewlife president, Paulo Simas.

David will provide senior communications and investor relations counsel to BrewLife clients. He is well suited for the role with more than 15 years of experience leading communications functions for biopharmaceutical companies and 10 years as an attorney in private practice. David was most recently VP of Investor Relations and Corporate Communications at Optimer Pharmaceuticals.

Megan comes to us from Cytori Therapeutics, a global company focused on adult stem and regenerative cell therapies, where she was a Communications Specialist. Nancy brings skills honed at renowned enterprises like Novartis and Bayer, and will be located in our San Francisco headquarters.

BrewLife San Diego
BrewLife San Diego

Megan and David are lucky enough to be based in our brand new San Diego office at 888 Prospect Street. (It’s a stone’s throw from the water in La Jolla, in case you’d like a ‘business lunch’ at the beach.) This sunny outpost will strengthen the W2O Group’s presence in a market key to the growth of our health and technology businesses, and also reinforces BrewLife’s strong commitment to only open offices in cities with good tacos.

But wait, there’s more… If you linked directly to this post from social media, be sure to check out the rest of our revamped website. We’ve added robust case studies and more detail about our capabilities. It all just launched and still has that attractive new-site-smell. Please leave comments below to tell us what you like about it, what you don’t and what you have questions about.


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Kalobios, LIpoScience and Omthera.
Chimerix, Enanta and Stemline.

All six companies made their IPO debuts in 2013, but only the latter three have stock prices now that are greater than their IPO price. To be sure, the impact of clinical data, competition or regulatory decisions on each company’s products cannot be perfectly predicted – things always look clearer in the “retrospect-o-scope”. Who would have predicted that Kalobios would be off 27% in less than four months? Similarly, did anyone expect Chimerix to be up more than 40% just a month after the stock’s first trade?

NASDAQvSupporting the IPO effort requires coordinating many tactical initiatives: selecting the right underwriters, managing the writing and filing of the S-1, targeting the ideal institutional investors and preparing the roadshow slide deck (and your team for every possible investor question). Let’s also not forget ensuring that the corporate website is compliant with the language in the S-1. And that once the stock starts trading, the website will need an SEC-compliant Investor section which can take at least 6 weeks to build. I highly recommend that pre-IPO companies investigate the IR website offerings of NASDAQ. For free, NASDAQ will build, and maintain for two years, the Investor section of your website as long as you IPO on the NASDAQ Global Market.

Now, turning to post-IPO readiness, successful companies strive to simply be more proactive and less reactive. Beyond that, experience suggests that a well-oiled Communications function can also support your valuation after the IPO.

So what’s in store for your post-IPO communications efforts?

build1Build the Story
: If you haven’t already built a story around your company’s prospects that meets the needs of a broader audience than just institutional investors, it’s time to develop one that resonates with reporters, advocacy groups and potential customers (e.g. patients and physicians). Once the story is clear, set up a corporate calendar to identify and prioritize publications, industry and investor meetings, key milestones and financial reporting (whether you choose to actually hold regular quarterly conference calls is another consideration, along with your overall disclosure policy). Determine what communications tactics make sense around each event on your calendar—press releases, media outreach, investor events, etc.—and then execute smoothly.

storytellersPrepare the Storytellers
: Of course your management team is good at telling the story – after the IPO you can all do it in your sleep. But media will want to chat with your clinical investigators and they may even call some advocacy groups to see if your drug’s product profile is interesting to them. You’ll want to make sure these “ambassadors” understand your strategy, what they should and should not say, and that they essentially deliver the same messages that you do. For advocacy groups, ensuring they understand your positioning within the broader range of treatment options will be helpful to them and will ultimately enable them to tell your story if asked.

current2Keep the Story Current
: Build and leverage media relationships to keep your company in the news and ensure your company is included in general industry pieces. Just as you have generated a target shareholder list, you will want to create a target list of reporters that write about companies and products like yours. You will want to proactively educate these reporters about your company so that when your key milestones occur (or those of your competitors), reporters are ready to write your story in the right context and, ideally, with your key messages. Essentially, you’ll want to position yourselves or reporters will do it for you.

easure the Impact of Your Story: We all love data – and now the ability to measure your company’s online share of voice, or awareness, is at your fingertips. But who cares about social media, right? I admit it, for highly regulated biotech companies, I was skeptical at first too but now I’m a much bigger believer in online audiences. The reason is easily the topic of another blog, but suffice it to say that your constituents use and follow social media – investors, patients and advocacy groups. Increasingly, you need to watch and understand who is influencing the online conversation about your products. Someday you may even influence the influencers.

changesWhen th
e Story Changes: Planning for different scenarios can be useful both in terms of getting your management team to agree what the scenarios are in advance, and what to do under each one. While we prefer to plan for success, sometimes planning in advance for the less desirable outcomes can be a significant relief to your management team (and your attorneys).

None of this story building and story telling is rocket science, but external communications done well takes strategic thinking, planning and execution. The rewards of doing it well, however, can pay-off in terms of gaining operational confidence (are we following best practices), preserving corporate reputation as well as enhancing your team’s interpersonal dynamics.

So go ahead, after the IPO, continue to brew life into your story.

 Images from Sebastian Bergmann, IconFinder

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