Week of April 26: Global Shareholder Activism

As the world becomes more globalized, investor relations professionals must look outside of their home country for capital. Simply focusing on investors from only the United States is sure to put your company at a disadvantage. Shareholder activism is said to not be as popular amongst global investors. A reason for this may be the global investors long term investment horizon. In my opinion, I think language barriers have a lot to do with the lack of global shareholder activism. Yet, this is not necessarily the case in some countries. More activism is being seen in London and addressed in this NY Times article. Overall, I feel there will be a growing trend on foreign shareholder activism. There is no reason to believe a heavily invested global buy-side fund would not take an activist position if they were unhappy with a U.S. firms business decisions.

Week of April 19: Annual Reports

Many activist investors will look at a company's annual report to decide if management is performing well. More importantly, shareholders can gather a genuine understanding of your company's future earnings by looking at an annual report. In my opinion, annual reports are influential in investment decisions. Many investors will agree that company financial statements are the most important areas of the annual report. Although the past is not of most importance in investing, it is sometimes neccesary to help predict the future. Annual reports are costly to create and sometimes highly complex. The common break down of an annual report is as follows:

1. Letter to the shareholder
2. Highlights of the past year
3. Management discussion and analysis
4. Auditor's report
5. Financial statements (Income Statement, Balance Sheets, and Cash Flow Statement)
6. Notes to financial statements
7. Corporate information
(List Courtesy of Investment Basics Online)

To learn more about the contents of annual reports click here. There is much information that can be acquired by analyzing annual reports, which will be beneficial to making sound investment decisions.

Week of April 12: Conference Calls and Activism

As many already know, conference calls allow investors to get knowledgeable insight on a company. Investors are also able to ask top management questions and simultaneously voice their opinion. In my opinion, one of the most powerful abilities conference call directors have is the ability to decline and screen out investor questions. This is extremely important to dealing with activists effectively. To protect the well being of the firm, a company should decline to answer questions from activists as they normally stir up negativity. The best way to handle this on a conference call would be to screen questions before they are asked. When companies simply decline a question in a conference call it signals uncertainty to possible investors. This is why it is essential to be aware of activists who can prey on your company during conference calls. An interesting article referring to the power activists have and their influence on conference calls can be found here.

Week of April 5: Effects of Activism on a Corporation

During class this week we discussed the influence of news releases on corporations, investors and the marketplace. Researchers found that certain types of news releases have different effects on a company. For example, positively toned news releases had better reactions from investors, but a news release that was too positive could be detrimental to the company. Activist investors also have an influence on a company's reputation. Normally, activism infers there is a problem with the company that shareholders want resolved. Activist campaigns lead to news releases and media attention. Based on this article, the effects of activism on a company are hard to measure by researchers. What was interesting is that studies have shown no significant changes in the long-term performance of companies targeted by activists (Gillan & Starks). However, some notable changes resulting from activists are the removal of "poison pills," increased divesting and restructuring (Gillan & Starks). Researchers also have a difficult time finding a start date to measure market response to the campaign (Gillan & Starks). In my opinion, activist campaigns can have positive or negative effects on a company depending on what the activists are fighting for. I have noticed negative pressure on share prices when activists are pressuring for green peace or measures that decrease profitability.

Week of March 29: Venture Capitalist Financing

The IR department rarely has to deal with activist investors. This statement was confirmed in a recent presentation by an expert and top ranking official in the IR agency field. As we all know, lack of investor activism is normally a good thing. However, if your company is a target, have fun trying to satisfy the activists. I was recently reading an article about the continuously growing tech industry in the United Kingdom. These emerging tech companies are having a difficult time getting the financing they need and must use different sources. One pool of financing comes from venture capitalists. These venture capitalists take on the most active role as stakeholders and can be very demanding. It is a good idea for companies to have consent from venture capitalists before making key business decisions. Overall, when start-up companies require new funding, they must meet the demands of venture capitalist if they expect to receive future financing.

Week of March 22: Activities and Skills

As we all know, activist investors can be very demanding. Yet, all investors can be hard to deal with and require the utmost care in order to protect the value of your company. As we talked about the day to day activities of investor relations professionals in class, I thought it would be insightful to research some of the skills necessary to be successful in the field. Schutzmann spoke about, and listed, some of the tools necessary to succeed in investor relations in his article. He says some important hard skills are finance, public relations, economics, and accounting. This is interesting since much business knowledge is needed in this field. However, it is crucial to be able to effectively communicate with investors. In my opinion, you can know everything there is to know about business, but if you are a poor communicator, you will be terrible at investor relations. Some good soft skills to have are integrity and credibility. I think these are most important because trust is key when you are dealing with investors' money. Overall, an investor relations occupation requires a mix of finance and communication skills that are essential to the success of the firm and your career.

Week of March 15: The SEC and Short-Selling

As most already know, the SEC plays a huge role in investing practices. Mary Schapiro and the SEC recently decided to limit short-selling in U.S. markets. Is this a good idea? Some believe short-selling puts enormous negative pressure on share prices. This can cause huge losses for the average investor's retirement account. Some say it is morally wrong to bet on the misfortunes of a company. For this reason, France has outlawed short-sales in their markets. In my opinion, short-selling has a fundamental role in the marketplace and should remain. When times are bad, short-selling makes it easy for people to profit on declines in share prices. This is essential for determining a fair value of stock. Lawmakers are unsatisfied with the SEC's new rules on short selling. You can read the New York Times article here. In terms of activist investing, short-selling may make it easier for a firm to be taken over. Continued negative pressure on share price can cause companies to be undervalued and allow for an easier takeover.