Even in the age of algorithms, well-chosen words matter a lot
An institutional salesman is pitching your stock to a portfolio manager. He’s got three sentences to pique his prospect’s interest; if he doesn’t get a nibble, it’s on to the next stock on his list. This happens to your stock every day. It’s the most important half-minute in the process of marketing your shares to investors.
If it’s that important, where do those sentences come from? A mega-brokerage hired us a little while back to train securities analysts in extracting the three sentences from their insightful-but-dense 10-page research reports. If the analysts don’t provide the bullets, the salespeople have to invent them. But if it’s that important, why aren’t the firms themselves choosing the three sentences, and making them central to their outbound investor communications? A few companies do this well. Most don’t even try.
Our minds start making decisions in seconds; even if they are taking notes, people will remember only three things you say – and the first 30 seconds is when they are listening with total attention. That’s about 50 words or less. Say what matters most in this brief window, or risk your points being lost.
Everyone has access to everyone else’s numbers, so your numbers cannot be your story. You have to differentiate yourself with words, ideas, visions. These shape human decision-making, which still powerfully impacts your share price.
Here’s how an institutional salesman pitched one company we know: ‘This industry’s in a cyclical upturn. This is the biggest company in the industry. It pays a great dividend.’ Here’s the company’s version: ‘Technology is about to turn this industry upside down. We’re the only major player totally committed to digital transformation. While it’s happening, we’re growing EPS and paying dividends.’ Both can be good stories – but for very different investors.
The recommendations to IROs are: get your three sentences nailed down and use them until your audience has them memorized. That’s when they become the frame for everything else you say about your company’s business, prospects and shareholder value. But don’t stop there: you also need at least two other 50-words-or-less verbal modules.
The Corporate Strategy 50 is what it sounds like: two, three or four key points you want investors to absorb as the essence of your corporate direction. This also matters to proxy voters, which ask whether activist proposals will aid or sabotage your strategy, and whether a hostile takeover will generate more or less value than staying on the management’s course. In proxy season, these decisions get made in minutes.
The Shareholder Value Proposition 50 is aimed mostly at investors with longer-term horizons, but everyone else pays attention. What kind of returns does your company hope to give its owners? Over what period? In what form (share price appreciation, return of capital, terminal transaction)? It won’t all fit into 50 words, but you can get the high points across.
Nearly all boards have a formally adopted strategy. Many have addressed shareholder value creation. What’s less common is for these conclusions to be translated into investor-directed messaging. IROs usually present to their boards once or twice (or more) each year. We’d suggest making these three 50-words-or-less modules integral to those presentations and to subsequent discussion. Messaging is now a board-level discipline.
The ways to integrate these sets of themes into presentations, releases, personal interactions – even tweets – are too numerous to cite. We know CEOs who open investor presentations with ‘let me remind you of our strategy – one, two, three. Here’s how we’re doing with these directions right now…’ have their audience’s attention, no question.
James MacGregor is vice chair of Abernathy MacGregor.
This article originally appeared in the Winter issue of IR Magazine.