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Improving Shareholder Targeting & Monitoring

It is 9 times easier to get current shareholders to buy more stock than it is to acquire new shareholders, according to David Whyte from Irwin. So, monitoring your shareholders, understanding their concerns, and developing relationships with them is a vitally important role for IR teams. In this week’s blog we’ll discuss how to improve shareholder monitoring, with insight into the Mexican context. 


Why is shareholder monitoring important?

Besides monitoring shareholders to sell them additional stock, IR teams can use improved monitoring to lower the company’s cost of capital. The company’s beta, which is a measure of the volatility of the stock price, is the most controllable unit of cost of capital. With the right information, IR teams can spend their time wisely targeting investors that hold the stock for longer periods of time, thus lowering their beta. Having an intimate understanding of your shareholders is also helpful for financing, because it gives you negotiating power and information when working with investment banks (ie, you can help source your own deals). Additionally, knowing who your investors are will allow you to build relationships with them, making them less likely to sell and more likely to refer your company to other investors. 


How to identify existing shareholders?

It’s impossible to identify all of your shareholder base, due to the structure of financial systems and reporting limitations. However, there are ways of compiling and updating all available information to get the most accurate picture possible. For the most part the available data comes from reported filings of funds, and beneficial owner data. 

Bear in mind the data is incomplete as while USA mutual funds have to disclose holdings, as do controlling or large shareholders, many funds do not have to report, (hedge funds, offshore funds, some institutional funds). In Mexico, the reporting requirements for local funds are especially limited (which is why the best data is on foreign holdings of Mexican stocks, and controlling or concentrated stock positions). 

For all markets there are services available to compile and update this information, such as Bloomberg, Refinitiv, Irwin, IHS Markit (formerly Ipreo). Also investment banks usually have very good data, as they subscribe to all these services, and in addition are talking to investors and trading their stock, and organizing their trips, which gives them strong insights and data. Most IR departments will have their own database from a combination of the public data, investor meetings, brokerage feedback and so on.

Once you have the holdings this needs to be interpreted. Some of the largest funds (ie, Blackrock) have both active and tracker funds, and need to remove the tracker ownership to get an accurate sense of the active ownership. Ownership of a company may be through a LatAm fund, an EM fund, a global fund, a sector fund, with different PMs involved, so it’s also important to understand where the position is held, and who is the decision maker.


Targeting new investors

Then you need to look at the large universe of possible investors that do NOT hold your stock, and identify those that might be interested and contact them. This can be done by compiling an investor list of your closest peers, and comparing that with your own list. Or you can try and look at funds by style (Value, growth, tech..) or geography and logically estimate their likely level of interest. Some consultancies (ie, IHS Markit) offer rigorous analysis of possible new investors, but we have found the high cost/mixed benefit for the Mexican market is fairly limited, although are happy to be proved wrong. 

Look at BuysideIQ: Investor Targeting Software for more information on IHS Markit’s offering. To quote, “BuysideIQ is an online targeting system that ranks investors based on how closely their investment strategy matches your company’s investment story…Isolate portfolios with material exposure to your company’s industry and float and, for international marketing, exposure to your country of domicile.”

Looking at changes in ownership every quarter can be enlightening and improve your targeting. Most investment funds have target size holding, and if the holding is below that but the fund is adding, you can assume it will continue buying. And if it’s selling you can assume the fund is exiting. If a growth fund is exiting, it may be because you are not sufficiently convincing on positioning the company as fast growing. If a fund has sold, you can often ask them why, and learn from that.


Maintaining the shareholder relationship

While many of your investors are reading your press releases, reports, and presentations, many are not, and prefer to be more selective in what they read. According to a survey conducted by Irwin, investors preferred to be personally contacted by the company once-per quarter. 

From a recent NIRI webinar on the subject, the panelists suggested a meeting with somebody other than the IRO or CFO that has more on the ground knowledge, such as a division head, country head, or engineer. Another idea is to send out a quarterly email with updates and some new material that is insightful into the industry. For example, Ken Levy from Iridium (a satellite technology company) sends out a newsletter about the space industry along with results about this company. 

To keep track of your interactions, CRMs (like HubSpot and Salesforce) and excel spreadsheets are the most prevalent tools. IHS has its own IR CRM that comes with a cost but offers high quality data within the CRM. Please see BD Corporate: An investor relations CRM platform. The main reason to use a CRM is that it is clean and user friendly, making it more likely to actually be used by multiple team members, not just on the one person that understands how their excel document works. Also, the valuable information that the CRM holds will stay with the company after the IRO (or whoever owns the document) leaves the company. The cons of a CRM are higher costs, and potentially less customizability than an excel spreadsheet. 


Miranda IR specializes in investor communications and is happy to help with all of your IR needs. 



Contacts at Miranda Partners

Damian Fraser
Miranda Partners

Ana María Ybarra Corcuera