The Power of Conversation

• Getting to the heart of the investor debate is what a perception audit should be all about

When I founded Ellipsis a little over 10 years ago, I was motivated by a simple idea: the incumbent model for IR advisory needed changing. Or at least a serious alternative. 

That’s not just a philosophy - it shows up in practice everyday. I was reminded of this recently with an investor perception audit we conducted. 

Perception audits – a/k/a studies or surveys – years ago were a power tool in an IR advisory firm’s tool kit for discerning investor sentiment, then analyzing and packaging it to calibrate IR strategy. Over time, these audits morphed into a specialty trade, and today they’re frequently conducted by independent firms built for the specific purpose. The standard product most of these companies offer skews quantitative in its questions and outputs, and interviews are conducted by “survey experts” with very limited understanding of the client’s business, if any.

Our clients who have commissioned these kinds of audits routinely tell us they’re underwhelmed with the product. We hear the same from the investment community, who often decline to participate or rush through responses because they don’t feel they are engaging with experts who know the company .

Herein lies a tremendous missed opportunity. 

Getting to the heart of the investor debate is what a perception audit should be all about. While management and IR spend inordinate amounts of time with their investors trying to discern what they think, there is an ongoing conversation on the Street that’s largely outside the company’s earshot. Like with a gossipy clique in your school days, you might get some of the story some of the time, but rarely do you hear all of it, especially when it’s about you. 

In our recent project, because we know the client’s story intimately, we were able to design a bespoke set of questions oriented to specific issues and construct them in a way to get people talking about the stock. We also talked to investors who had decided not to buy the stock, and analysts who decided not to cover it. And, importantly, our senior team who know how to speak candidly with investors are doing the work, rather than the junior team or a contractor. The result: engaging conversations, with insightful feedback (we grant anonymity) that affirmed that our client’s story was under-appreciated in several key respects. 

Great insights, however, are just the first half of the story. Our report took our conversations and translated them into analysis and productive recommendations for enhancing investor education, engagement and impact. And while we couldn’t have predicted it, we had also wrapped our interviews just before a potentially game-changing external event for our client, which resulted in our report gaining additional visibility with the board of directors at a critical moment. Altogether, the company and board are moving forward with enhanced clarity and the team is already executing on creative approaches to enhancing how it engages and educates the investment community.

This example wasn’t a one-off: in another audit we’ve done, the client’s board ultimately decided to pursue a go-private offer and credited our work with clarifying their thinking on how best to surface value amid a slew of public-market challenges. 

The lesson in all of this is that the most insightful perception audits begin with perspective on the company, its strategy, and the investment community. Data-driven insights and benchmarks are valuable and we provide them, but if you want to uncover the deeper truths you need to get inside the conversation that’s going on about your stock. Having a knowledgeable third party, one that knows your story, that can speak investors’ language and engage in a dialogue, and then - this is most important - synthesize what they’re hearing into a persuasive report with actionable recommendations, can foster better understanding of how the Street thinks about your company and how that informs valuation. 

As companies are planning IR strategy for next year – and particularly those considering a major event like an investor day – they are contemplating myriad factors including global risks, macroeconomic uncertainty, how they fit into secular themes like AI, and competition for investor mindshare as the pent-up supply of new issuances hits the public markets. Uncovering how investors truly perceive you, and what they’re saying in the halls at conferences and in Bloomberg chats, can provide an invaluable foundation for delivering great IR outcomes.

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