Does Investor Perception Affect Your Stock Price?
We’re all pretty familiar with basic fundamental valuation metrics when it comes to stock pricing. Financial fundamentals indicate that the higher the revenue and earnings, both historical and projected, the higher the value of the company, and its stock price. But if valuation rules were this simple, stock markets would be very predictable. There must be other factors influencing investors and traders to get into and out of stocks. Does investor perception affect your stock price?
This influence, manifested in many, many considerations is called perception. It’s the perception that investors have about the likelihood a company will continue to grow, achieve strong financial fundamentals and continue to remain competitive despite internal challenges and external influences. No business is immune from challenges, so investors want to back strong leaders and creative management teams. Investors want to back thoughtful executives that think like investors. That care about the same things their investors care about.
Does investor perception affect your stock price?
It does. It always does. But how? And how can you use it to your advantage? Simple: be genuine, transparent and reliable. Even when things don’t go as planned – especially when things don’t go as planned. And do it consistently. The better your relationship is with investors, the more likely they will remain your investors and not start trading out of your stock. Once an investor leaves, they are unlikely to come back.
Don’t disappear for months on end, to one day spring a press release on the market with a spun-up story that is likely out of context, trying to turn something bad into nothing at all, or nothing at all into something great, in an attempt to prevent downside pressure or pump demand for your stock.
Investors want to know what your goals are, what your plan is to achieve them and how your approach to differentiation gives you the upper hand, and makes you likely to achieve them. They want to understand your business. They don’t want to wait for press releases, they want access to specifics at their convenience. Today the internet provides loads of free tools to connect you in more ways than ever. Investors expect it.
How will you know you have an investor perception problem?
If your business is fundamentally the same as it was the day you hit your 52 week high, but you are off that high you may have an investor perception problem. A passive approach to investor relations can be a slippery slope. That’s why an active approach to engaging investors and reminding them why they invested in the first place is expected.
True or False?
Investor relations is the most personal, engaging and effective way to connect with investors.
I want to say “True” is the correct answer, but I’d have to amend the question by changing “investor relations is” to “investor relations can be.”
Investor relations can be your most personal, engaging and effective medium when you work it. That is, you set it up to engage the investor.
You flip the inbound investor relations switch on.
Wait. Don’t go running scared from this perspective now if inbound investor relations sounds like a massive, active upgrade to your otherwise passive, smooth sailing press release style that feels just fine. Getting started with inbound investor relations is as simple as creating an investor blog and email series. Then it’s leveraging other free online tools to get your message out to the market. To let investors know why they invest in you.
7 Reasons you need inbound investor relations
- Make a great first impression – Inbound investor relations is like a digital handshake between two people. It’s the first step to forming a relationship.
- Provide immediate value – Your content instantly sets the tone and demonstrates your company is a reliable source of accurate content.
- Save time – It’s easy. The work is done in advance, once, and everything else is handled automatically. You’ll spend less time engaging with each investor.
- Generate buzz – Relevant information can get prospective investors excited about what’s to come.
- Win investors – Inbound investor relations enables you to strike when the iron is hot, right? The recipient wants – and gets – something. Access to current, relevant information about your company will engage prospective investors.
- Easy personalization – Your investor CRM can be divided into different groups and you can personalize your content to meet the needs of each.
- Stronger engagement – Investors pay more attention to inbound investor relations content. You will actually know who is reading your posts – there’s no telling with press releases.
How do you get started with inbound investor relations?
Every publicly traded company is entitled to, and should, tackle their inbound investor relations the way they want. So no two inbound investor relations programs are likely to be the same. However, the process of planning yours should be.
Think it through by asking yourself these simple questions:
- What’s the first thing we could say to give investors a reason to learn about our business?
- How might we better acquaint investors with our brand, products, services or content?
- Why did they read our content (and maybe opt-in to our blog?)
- How can we be helpful?
- What will engage them?
- How can we help them become an investor?
A list of your active investors and a current draft blog post with relevant fundamental information helps make the process of getting started with your inbound investor relations program easier. Many inbound marketing platforms will even provide industry-specific templates. Don’t forget that investor relations is an important component of your all-in brand strategy, the same way corporate development, sales & marketing and all other public relations are.
Getting started means the first few messages your new subscribers receive are crucial for setting expectations and making a connection with your brand. If you are interested in engaging with your investors to build awareness of your goals, strategy and performance so they truly understand why they invest in you, inbound investor relations could be for you. Think about it: investors support management teams for the long term. Traders support volatility.
That’s a lot of opportunity to touch investors with relevant, current communications you otherwise would not have made and your small investment of time compounds every day going forward.