After many hours of research and writing on the Goldman Sachs lawsuit, I better understand the allegations being made by the Securities and Exchange Commission. This lawsuit is closely related to the topics of disclosure and transparency which have been significant parts of our Investor Relations class this semester. This case helps to better understand the federal regulations about disclosure and which action can be taken to punish businesses that do not participate in proper disclosure, or do not provide significant information to their investors.
When trying to understand the case, I viewed various documents from the Securities and Exchange Commissions, along with the various responses put out by Goldman and Sachs in their defense. An article put out by the New York Times on the day that lawsuit was filed was helpful in understanding difficult concepts related to the case. The story, written by Louise Story and Gretchen Morgenson explained how the SEC complaint against Goldman Sachs is the first important action being taken in response to the 2007 financial crisis.
The New York Times briefly described the federal actions being taken, the market reactions and the response of the company. It states that, Goldman Sachs is being accused of creating and selling mortgage investments that were intended to fail. While those that invested in the securities lost upwards of $1 billion on the transaction, hedge fund Paulson & Co. profited off of investors loses. Paulson was involved in selecting the investments Goldman Sachs would market, yet investors were not aware of Paulson & Co. involvement in the selection process. Investors were told that the ABACUS was chosen by an independent third party, without mentioning Paulson involving, and that the hedge fund operator was betting on the failure of the ABACUS.
This lawsuit is closely related to various topics we have covered in Investor Relations this semester. We discussed different disclosure regulations, and making sure the public and investors are constantly aware of different actions being taken by a company. This case shows the severity of the actions that will be taken if a company chooses to present false or insufficient information to the public. It will be interesting to see what happens with this lawsuit as the SEC attempts to punish various companies for their involvement in the financial crisis.
Monday, April 26, 2010
Monday, April 19, 2010
Social Media and How IR Professionals Can Use It
Throughout this semester we have learned extensive amounts about social media through our own use, speakers and the article we were asked to read for class this week. The article discusses different outlets including Facebook, Twitter, LinkedIn and blogs and showed how different companies you these outlets in order to distribute information about their business. Through experience with blogs and Twitter this semester I decided to further research the need for social media usage in today’s Investor Relations industry.
A recent article written by Lisa Davis discussed the usage of social media and how it is able to build stronger shareholder value. Davis mentioned numerous times how the use of these media outlets has been significantly growing. While these outlets are being used, people worry about things such as blogs and Twitter due to the extensive disclosure regulations. IR departments need to be cautious to not distribute information through social media that has not already been made public. Davis decided to avoid the legal issues of social media and just focus on how relations with stockholders can be strengthen through using these outlets.
Typical thoughts about social media, which are untrue, include that the outlets should only be used by public relations and marketing departments. Another belief held by IR departments that is untrue, is that companies shareholders and investors are not present within the social media world. Since these ideas are untrue, companies are beginning to use these outlets in additional to traditional outlets. This addition has helped them to connect with media, analysts and investors in a new and economically proficient way.
Davis attempts to encourage companies to become involved in social media by mentioning certain statistics. Statistics include 85% of financial services professionals under the age of 50 are utilizing social media. 58% of investors believe new media will become increasingly important in making investment decisions. A final statistic which proves the increasing need for IR professionals to understand social media, is the 35% of Fortune 500 companies use a Twitter account.
Davis comments that these outlets can start conversation with investors, along with strengthen the bonds between companies and their shareholders. Davis attempts to help those not using social media to enter the Twitter, Facebook and blogging world in the correct ways. When first starting out, it is important to listen to what others are saying about your corporation. Once information has been listened to, start monitoring people that frequently mention your business and help them to disperse correct information. Once comfortable with these media outlets, business will start sharing in a proactive way. A considerable amount of our class has included social media, so it was of interest to me to learn how frequently these outlets are used, along with how companies can actively participate in Twitter, Facebook, LinkedIn, and blogs.
A recent article written by Lisa Davis discussed the usage of social media and how it is able to build stronger shareholder value. Davis mentioned numerous times how the use of these media outlets has been significantly growing. While these outlets are being used, people worry about things such as blogs and Twitter due to the extensive disclosure regulations. IR departments need to be cautious to not distribute information through social media that has not already been made public. Davis decided to avoid the legal issues of social media and just focus on how relations with stockholders can be strengthen through using these outlets.
Typical thoughts about social media, which are untrue, include that the outlets should only be used by public relations and marketing departments. Another belief held by IR departments that is untrue, is that companies shareholders and investors are not present within the social media world. Since these ideas are untrue, companies are beginning to use these outlets in additional to traditional outlets. This addition has helped them to connect with media, analysts and investors in a new and economically proficient way.
Davis attempts to encourage companies to become involved in social media by mentioning certain statistics. Statistics include 85% of financial services professionals under the age of 50 are utilizing social media. 58% of investors believe new media will become increasingly important in making investment decisions. A final statistic which proves the increasing need for IR professionals to understand social media, is the 35% of Fortune 500 companies use a Twitter account.
Davis comments that these outlets can start conversation with investors, along with strengthen the bonds between companies and their shareholders. Davis attempts to help those not using social media to enter the Twitter, Facebook and blogging world in the correct ways. When first starting out, it is important to listen to what others are saying about your corporation. Once information has been listened to, start monitoring people that frequently mention your business and help them to disperse correct information. Once comfortable with these media outlets, business will start sharing in a proactive way. A considerable amount of our class has included social media, so it was of interest to me to learn how frequently these outlets are used, along with how companies can actively participate in Twitter, Facebook, LinkedIn, and blogs.
Sunday, April 11, 2010
The Different Actions To Make a Company Lose Value
For this week’s class we read different articles about the ethics and professionalism that are necessary to the success of a firm’s investor relations department. One of the articles talked about the ten things necessary to create value for shareholders. The suggestions for value included not managing earnings, making decision and acquisitions that maximize value, not carrying assets that only maximize value, return cash when there is no value, rewards CEOs, operating-unit executives and middle managers for their efforts, requiring executives and bear risks and lastly, provide investors with relevant information.
While thinking about the different tactics that typically enhance shareholder’s value of a business, I realized that it is also important for IR departments to understand what type of actions would cause shareholders to lose value of a company. I then found a list of ten things not to do which closely corresponds to this weeks discussion on ethics and professionalism. The article is written by Stanley Bing and explains ten different procedures that business should attempt to avoid.
The activities Bing refers to include not bringing on executive board members that have too little knowledge or have too much knowledge and think their opinions are the only ones that would work for the company. Having either type of personality on the executive board would be detrimental as they could either be entirely unhelpful, or too involved in their own ideas. Bing also suggests that in order for stockholders to value the company, it is necessary to avoid unnecessary expenses. While it is important to not spend aimlessly, value will be lost if the cuts involve cutting important necessities to the company.
Value will also be lost if executives are taking too many business trips, where stockholder’s money is being spent for executives to have exciting vacations. When workers are working a lot, and hard, people will consider the company more value. If hours are lacking, people will lose value for the company due to the performance of executives. Bing suggests that relying to the existing workforce will decrease the value of a company. To improve value, it is necessary to hire youngsters less concerned with pensions and are very willing to work. The last two recommendations of things to avoid are to pay senior executives to much, along with not paying the CEO enough. It is stated that overpaying senior executives will create a loss of value, while underpaying the CEO would also create problems for the company.
The article was interesting due to the fact that it mentioned a couple different methods than the Harvard Business Review article we needed to read for class. All of these components are important in order for investors to find value and a purpose in purchasing stock within any company.
While thinking about the different tactics that typically enhance shareholder’s value of a business, I realized that it is also important for IR departments to understand what type of actions would cause shareholders to lose value of a company. I then found a list of ten things not to do which closely corresponds to this weeks discussion on ethics and professionalism. The article is written by Stanley Bing and explains ten different procedures that business should attempt to avoid.
The activities Bing refers to include not bringing on executive board members that have too little knowledge or have too much knowledge and think their opinions are the only ones that would work for the company. Having either type of personality on the executive board would be detrimental as they could either be entirely unhelpful, or too involved in their own ideas. Bing also suggests that in order for stockholders to value the company, it is necessary to avoid unnecessary expenses. While it is important to not spend aimlessly, value will be lost if the cuts involve cutting important necessities to the company.
Value will also be lost if executives are taking too many business trips, where stockholder’s money is being spent for executives to have exciting vacations. When workers are working a lot, and hard, people will consider the company more value. If hours are lacking, people will lose value for the company due to the performance of executives. Bing suggests that relying to the existing workforce will decrease the value of a company. To improve value, it is necessary to hire youngsters less concerned with pensions and are very willing to work. The last two recommendations of things to avoid are to pay senior executives to much, along with not paying the CEO enough. It is stated that overpaying senior executives will create a loss of value, while underpaying the CEO would also create problems for the company.
The article was interesting due to the fact that it mentioned a couple different methods than the Harvard Business Review article we needed to read for class. All of these components are important in order for investors to find value and a purpose in purchasing stock within any company.
Monday, April 5, 2010
Road Show Disadvantages and An Alternative
For this weekend’s Investor Relations homework, we discussed the use of conference calls and road shows in the lives of typical investor relations officers. The chapters in our text discussed the different benefits and procedures to be followed during a typical conference calls. After learning about road shows in our textbooks and from our speaker’s presentation in class I decided to further research them.
An article by John Palizza discussed the repetition and boredom that are often associated with road shows. He discussed the amount of endurance and energy necessary to sustain the breakfast meeting, 3 morning meetings, lunch meeting, 3 afternoon meeting and then a dinner meeting and flight to the next city for another day of the same tedious schedule. While the days are long, the also will incorporate the same presentation given to each investor throughout the day. The repetition of these presentations would generally send people into repeat with little thought about the information they are presenting to investors.
Other disadvantages discussed include the task of answering the same questions over and over. Each investor will have the same thoughts and confusion after a presentation, which will require the presenters to deal with these questions in a manner that shows interest and concern with the investors problems. While your presentation are often boring to repeat, much of road shows is touring with the executive officer of the company, who is of far more interest to these investors than the IR officer. The bordem and exhaustion that seems to be associated with these road shows provoked me to search to see if other alternatives have emerged due to IR officers dislike of a road show schedule.
While Palizza discussed that road shows will always be necessary, Suzanne Galante has an article about companies decision to participate in virtual road shows. While these are less personal, they are known for saving money and enabling company information to reach more people. Typically people with less money to investor would be shut out, yet with this method of viewing company information from a personal home or office through PC, this information is becoming available to people who had never accessed the information before.
An example discussed in the article is N2K or a company that delivers programming to consumers online. With the business being on the internet, the company decided that it would be logical for their road show to take place on computers as well. The online road shows enable people viewing to send in questions, along with view past information in the archives.
While these virtual roadshows will never be used by the larger companies desiring more of a personal relationship with investors, for smaller companies with fewer funds, virtual road shows save them money and provide them with opportunity to distribute company information to wider audiences. Road shows seem quite tedious and boring for those involved, yet the close relationships formed with investors because of them is defiantly worth the time and energy required.
An article by John Palizza discussed the repetition and boredom that are often associated with road shows. He discussed the amount of endurance and energy necessary to sustain the breakfast meeting, 3 morning meetings, lunch meeting, 3 afternoon meeting and then a dinner meeting and flight to the next city for another day of the same tedious schedule. While the days are long, the also will incorporate the same presentation given to each investor throughout the day. The repetition of these presentations would generally send people into repeat with little thought about the information they are presenting to investors.
Other disadvantages discussed include the task of answering the same questions over and over. Each investor will have the same thoughts and confusion after a presentation, which will require the presenters to deal with these questions in a manner that shows interest and concern with the investors problems. While your presentation are often boring to repeat, much of road shows is touring with the executive officer of the company, who is of far more interest to these investors than the IR officer. The bordem and exhaustion that seems to be associated with these road shows provoked me to search to see if other alternatives have emerged due to IR officers dislike of a road show schedule.
While Palizza discussed that road shows will always be necessary, Suzanne Galante has an article about companies decision to participate in virtual road shows. While these are less personal, they are known for saving money and enabling company information to reach more people. Typically people with less money to investor would be shut out, yet with this method of viewing company information from a personal home or office through PC, this information is becoming available to people who had never accessed the information before.
An example discussed in the article is N2K or a company that delivers programming to consumers online. With the business being on the internet, the company decided that it would be logical for their road show to take place on computers as well. The online road shows enable people viewing to send in questions, along with view past information in the archives.
While these virtual roadshows will never be used by the larger companies desiring more of a personal relationship with investors, for smaller companies with fewer funds, virtual road shows save them money and provide them with opportunity to distribute company information to wider audiences. Road shows seem quite tedious and boring for those involved, yet the close relationships formed with investors because of them is defiantly worth the time and energy required.
Monday, March 29, 2010
Step Up of News Releases to Best Suit Investors
For this week’s class we were asked to read numerous articles about the use of news releases in Investor Relations. One article was focused upon the influence of the different wording within new releases. Another of the articles had to do with the influence of these news releases upon market value. I am very interesting in the communication aspect of IR and was eager to learn more about the news releases that needed to be sent out in order to inform investors about companies, and comply with different disclosure regulations.
I then found an article written by Dominic Jones about the different key elements that should be part of a news release in order for investors for understand and gather key information quickly if they were using the internet as the source for the release. The articles we read this week explained more about the language of newsletter but I thought it would be interesting to see the way these were set up in order to provide as much information as possible.
As time is very important to investors, people must keep this in mind as they are writing news releases. As people typically only spend 60 seconds on a web page, and also read slower when reading from the computer, this time limitation because even more challenging with the presence of news releases being online. In order to make the release easier to understand, Dominic Jones discussed the importance of putting like information into categories. These could include highlights, financial statements, discussion of business performance and segmented results.
Another way to make readers understand the key information in the limited time they spend on the page, is to put the important information at the beginning. It helps to bullet point the key points of the article, along with putting a chart on financial statistics at the very top of the release. The use of descriptive headlines can make the key facts stand out when people are simply skimming the information. Different headers such as “Revenues rise 9%, driven by strong retail demand for accessories and Outlook for /images/0.30 EPS and 8% revenue growth maintained” will provide information will also helping investors to find the information they are looking for.
The use of links in a news release can have numerous different functions. Links are able to improve the traffic or amount of people viewing a release, along with shortening the document when there are links provided to different information. Other key information Dominic Jones mentioned to keep in mind is to make releases available in numerous different formats. Both HTML and PDF should be available. The last point was to make sure to find a newswire provider that is sufficient. Choosing wires with formatting options and that release to many different outlets is the best way to make information available and easy to read for these time crunched investors.
This article helped me to further understand what investors are looking for when they view news releases. I know understand the different components within these news releases that have the ability to affect investors opinions and the market value of stocks.
I then found an article written by Dominic Jones about the different key elements that should be part of a news release in order for investors for understand and gather key information quickly if they were using the internet as the source for the release. The articles we read this week explained more about the language of newsletter but I thought it would be interesting to see the way these were set up in order to provide as much information as possible.
As time is very important to investors, people must keep this in mind as they are writing news releases. As people typically only spend 60 seconds on a web page, and also read slower when reading from the computer, this time limitation because even more challenging with the presence of news releases being online. In order to make the release easier to understand, Dominic Jones discussed the importance of putting like information into categories. These could include highlights, financial statements, discussion of business performance and segmented results.
Another way to make readers understand the key information in the limited time they spend on the page, is to put the important information at the beginning. It helps to bullet point the key points of the article, along with putting a chart on financial statistics at the very top of the release. The use of descriptive headlines can make the key facts stand out when people are simply skimming the information. Different headers such as “Revenues rise 9%, driven by strong retail demand for accessories and Outlook for /images/0.30 EPS and 8% revenue growth maintained” will provide information will also helping investors to find the information they are looking for.
The use of links in a news release can have numerous different functions. Links are able to improve the traffic or amount of people viewing a release, along with shortening the document when there are links provided to different information. Other key information Dominic Jones mentioned to keep in mind is to make releases available in numerous different formats. Both HTML and PDF should be available. The last point was to make sure to find a newswire provider that is sufficient. Choosing wires with formatting options and that release to many different outlets is the best way to make information available and easy to read for these time crunched investors.
This article helped me to further understand what investors are looking for when they view news releases. I know understand the different components within these news releases that have the ability to affect investors opinions and the market value of stocks.
Sunday, March 21, 2010
Charactersitics of An Investor Relations Officer
For last weeks classes we were asked to read Professor Laskin's article on the roles and activities of investor relations officers. We learned about the different roles they played within the company along with the different problems facing the investor relations world today. Through class we learned that Investor Relations is typically managed by IR departments with only 27% percent being controlled by finance and 7% being concluded by communications departments. The typical activities include attending road shows and conference, responding to requests from shareholders and providing information to the top management.
After learning about the tasks typically involved in a investor relations officers day, I decided to research the different characteristics needed in order to successfully perform the IR tasks. Oliver Schutzmann put together an article entitled "A Wish List for the Ideal Investor Relations Officer".The article describes the need for fair valuation along with IR officers linking the demand for capital with the availability of capital to investors. This article also mentions the idea that IR professionals report to the CEO and CFO in order to show that senior management is very concerned with IR.
To be successful in IR these professionals need to be smart, credible and articulate due to the fact that they are dealing with intelligent investors asking tricky questions on a regular basis. Officers must have a clear understanding of the business, as well as a way for different managers to meausre the success of IR. Tasks including delivering target achievements, being able to reach target audiences and develop communications channels.
IR professionals should possess skills that can be considered both hard and soft. Hard skills include, financial communications, public relations, media relations, strategic planning, accounting, administration, legal and marketing among others. Soft skills are more focused upon personality, including credibility, flexibility, persuasiveness, loyalty, team work and objectivity. There is no definite way to learn IR skills other than participating in the activities.
IR officials may also need to be familiar with creating an IR office from scratch. To do this a professionals would create key messages about the company along with positioning it. The importance of information and transparency is mentioned in this article as it has been in so many previously discussed. While we have been learning about their specific jobs within a company, I thought it would be interesting to see which characteristics would help these IR professionals in the different tasks they have been assigned.
After learning about the tasks typically involved in a investor relations officers day, I decided to research the different characteristics needed in order to successfully perform the IR tasks. Oliver Schutzmann put together an article entitled "A Wish List for the Ideal Investor Relations Officer".The article describes the need for fair valuation along with IR officers linking the demand for capital with the availability of capital to investors. This article also mentions the idea that IR professionals report to the CEO and CFO in order to show that senior management is very concerned with IR.
To be successful in IR these professionals need to be smart, credible and articulate due to the fact that they are dealing with intelligent investors asking tricky questions on a regular basis. Officers must have a clear understanding of the business, as well as a way for different managers to meausre the success of IR. Tasks including delivering target achievements, being able to reach target audiences and develop communications channels.
IR professionals should possess skills that can be considered both hard and soft. Hard skills include, financial communications, public relations, media relations, strategic planning, accounting, administration, legal and marketing among others. Soft skills are more focused upon personality, including credibility, flexibility, persuasiveness, loyalty, team work and objectivity. There is no definite way to learn IR skills other than participating in the activities.
IR officials may also need to be familiar with creating an IR office from scratch. To do this a professionals would create key messages about the company along with positioning it. The importance of information and transparency is mentioned in this article as it has been in so many previously discussed. While we have been learning about their specific jobs within a company, I thought it would be interesting to see which characteristics would help these IR professionals in the different tasks they have been assigned.
Monday, March 15, 2010
Thoughts on the Value and Contributions Made By Investor Relations
With our final paper about Investor Relations issues being due today, I spent a lot of time over break focusing on the different ways to measure the effectiveness and value of investor relations to a company. Numerous journals online were able to help me in seeing different ways companies can measure that having an IR department is worth the time and money.
The first article summarized was by Alexander Laskin and commented on how people thought valuation, analyst coverage, trading volume and relationship building. The people responding to these topics concluded that value of Investor Relations and most closely related to a company's need to form strong relationships with those that our investing within the organization.
A second article that helped me to understand the need for investor relations, was a study of the companies that have been awarded the title of the best Investor Relations departments. The companies that had received this award generally had higher abnormal stock price and an increased availability and desire for the companies stock. This information focused more on the quantitative contributions of the relationships between companies and their investors.
The third article focused on firms ability to measure IR's effectiveness when they were to look at their outputs and outcomes. Outputs would include number of analyst reports about the company, quality of analyst coverage and the type of media coverage the corporation is receiving. Outcomes are more closely related to the numbers in a fair market price, trading volume and P/E ratio.
Each of these articles had a different focus about the ways in which IR provides values, yet each one recognized the idea that an effective investor relations division has a positive impact on the company. This paper also helped me to further understand the role that IR professionals play in keeping up with disclosure regulations, along with making sure investors understand the history, mission and goals of the companies they are buying stock from.
The writing of this paper was very interesting because I was able to view what other bloggers were saying on the topic. While I understand that it is hard to measure the value of such a new profession, I know there is a clear use for Investor Relations professionals within the market.
The first article summarized was by Alexander Laskin and commented on how people thought valuation, analyst coverage, trading volume and relationship building. The people responding to these topics concluded that value of Investor Relations and most closely related to a company's need to form strong relationships with those that our investing within the organization.
A second article that helped me to understand the need for investor relations, was a study of the companies that have been awarded the title of the best Investor Relations departments. The companies that had received this award generally had higher abnormal stock price and an increased availability and desire for the companies stock. This information focused more on the quantitative contributions of the relationships between companies and their investors.
The third article focused on firms ability to measure IR's effectiveness when they were to look at their outputs and outcomes. Outputs would include number of analyst reports about the company, quality of analyst coverage and the type of media coverage the corporation is receiving. Outcomes are more closely related to the numbers in a fair market price, trading volume and P/E ratio.
Each of these articles had a different focus about the ways in which IR provides values, yet each one recognized the idea that an effective investor relations division has a positive impact on the company. This paper also helped me to further understand the role that IR professionals play in keeping up with disclosure regulations, along with making sure investors understand the history, mission and goals of the companies they are buying stock from.
The writing of this paper was very interesting because I was able to view what other bloggers were saying on the topic. While I understand that it is hard to measure the value of such a new profession, I know there is a clear use for Investor Relations professionals within the market.
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