Several resources are needed for companies to grow. One of the most important resources to fund growth is cash or access to capital. Most small to mid-sized companies rely on banks for funding short and long-term opportunities. However, as companies begin to take on larger projects, or feel the need to expand, companies can issue stock or equity in their company. When a private company chooses this option it is known as an initial public offering or IPO. Below is a link which will take you to a graph showing the number of IPOs over the last 35 years:
http://www.tradersnarrative.com/will-the-ipo-drought-end-in-february-2009-2248.html
Once a company becomes publicly traded it is extremely important that the company relays financial and non-financial information in a timely manner to its shareholders. This task is the job for representatives in investor relations.
In November of last year I was fortunate to work on a CFA society project analyzing the company Ansys. Ansys is headquartered in Pittsburgh and produces simulation software for companies who want a cheaper way to test products. Attending the meeting were the various competing groups from other local colleges, the CEO of Ansys, and the Director of Investor Relations. It was quite an opportunity to meet with these individuals and I learned a lot from their presentations.
During their presentation the CEO explained the company’s vision, strategy, and potential. The Director of Investor Relations discussed the company’s prospects, the industry outlook, and expectations of the economy. But what I thought was most intriguing about the presentation was what these two individuals could not comment or state due to regulations. There were a lot of questions regarding Ansys’s future stock valuation, and due to such regulations, both the CEO and Director of Investor Relations were unable to answer them.
Overall the experience was very worthwhile. It taught me that no matter how much research you do on a company, it is very important to hear directly from a company’s leaders. I feel that anyone who invests in a company, should try to attend a shareholder’s meeting to gain valuable firsthand insight.
By: Ted Staruch
You're right in highlighting the importance of a company availing its financial information in a timely manner, once it goes public. It is imperative for a company's leadership to realize that it now has a new and powerful stakeholder - the investor. From that point on, they must pay even more attention to what, when, and how they avail key information needed to boost investor relations.
ReplyDeleteI agree with your points and potential investors of a company should try to attend shareholders' meetings to gain firsthand insight and detail information of the company's process. Financial information is a important elements when investors considering about investing in a business, companies should report and make their financial situation available to stakeholders and outsiders in a timely manner. I think it is an important aspect for business to keep a good relationship with investors.
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ReplyDeleteWhen a company try to expand a business, it is vital to secure the capital from both institutional investors and personal investors. It is very important for companies to build long and favorable relationship with investors. Companies have to make an effort to keep their inventors holding the stock even when their business is in a stagnant situation. Establishing a relationship of mutual trust through investor relations is crucial as well as paying a dividend continually.
ReplyDeleteWhy do you think the CEO and the Director of Investor Relations cannot answer those questions regarding the future of the Ansys’s future stock evaluation? Are they trying to hide something that the investors are not supposed to know? What do you think on the investors’ side about this? In my opinion, if I am one of the investors, I will not trust this company because the CEO of the company seems like unknowledgeable about what is going on the operations and the projects as well. As a CEO, he or she should be confident and try to answer the questions as complete as possible, not just remain in silence. Do you think they have done a good job on the investor relations part during this meeting?
ReplyDeleteTalking about the investor relations and attracting investors require insight of the future business what company is going to do with the capital. Companies provide 'estimated' figures of revenues. Looking at this estimates an investor invests in the company but they do not pay much attention in from where they got this estimates, how much care has been taken reaching to this estimated thats the point where i think more transparency and regulation is needed.
ReplyDeleteInvestor relations are a key to success. Its very important that investors are kept involved.nice post.
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