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IR Blog: HOW TO GET THE INVESTMENT CASE RIGHT.. IF YOU ARE A SMALL LISTED COMPANY

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From: IR FOR SMALL CAPS – IR  Society is focused on providing advice and help smaller cap companies

 

Small cap companies are a key element of efficient capital markets, providing the diversity for balanced capital allocation for tomorrow’s mid and large caps. However with limited IR resource and limited advisory support – often as a result of low transactional or trading income to support advisory services – the changes occurring as a result of MiFID II risk swamping the benefits of being on the capital markets.

 

Smaller listed companies need to explain why investors should be interested in their business

An investment case is an integral part of any company’s communications, even more so for small caps and AIM-listed companies.

With changes in the market environment taking place under MiFID II, corporates and IROs for smaller listed companies have even before a greater responsibility to ensure a clear understanding of the business.

Consequently, the investment case should be used as a clear pitch, with dedicated content to explain how a company differs from the competition and why investors would profit from investing.

 

 

A smooth sea, never made a skilful sailor

Investment cases are on the rise – With the increasing obligation to stand out from the crowd and demonstrate the company’s key strengths, the overall trend has been that of an increase in the number of investment cases, both in the annual report and on the corporate website.

 

Corporates are choosing to put their investment cases online – Particularly in the face of MiFID II, it is more common for companies to have an investment case featured on their corporate website.

However, out of the companies that did have an investment case on both their corporate website, company presentation and in their annual report, only a small number made these consistent.

Many companies instead highlighted different reasons to invest on each channel and used more data on one or the other. Also, a very small number of these companies included an investment case in their most recent investor presentation.

 

The investment case should be used as a clear pitch, with dedicated content to explain how a company differs from the competition and from similar stocks

 

Key areas of focus include:

  1. Reasons and content – what should your investment case focus on and what is most relevant to your industry?
  2. Text and data – what information can be provided to best support your investment case and how should this text and data be presented to be most effective?
  3. Location – depending on your audience, where should the investment case be placed both in the annual report and on the corporate website to best influence how many people view it?
  4. Engagement – it is important that an investment case engages the investors and drives them to further information.

 

What good looks like – How companies can build a best practice investment case:

  • Include an investment case on all of your main methods of communication and ensure these are all consistent with one another.
  • Provide at least 5 reasons to invest, covering topics that are relevant to your industry and purpose.
  • Provide full paragraphs of text for each reason but ensure this is kept engaging with pull-out statistics and graphs.
  • If possible, support your investment case with a quote from either the CEO or chairman to demonstrate ownership and fuel confidence in leadership.
  • Consider using video to support your investment case on the website.
  • Provide relevant links and page drivers for investors to find out more information.

 

The focus for small caps should be on increasing the return on investment of their communications, using the channels they already own

 

 

Daniel Redman – research and strategy director at Design Portfolio – has highlights new research to explain the importance of making an investment case https://www.design-portfolio.co.uk/about

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