Most management teams understand the importance of marketing their own products but often fail to make that link to marketing their company shares once they become public and in harsh times, Investor Relations investment is often the first to go with potentially dire consequences.
Business without marketing has been described as adventure and looking at the typical small/mid cap share graph over recent times (below), it is clear we are living in adventurous times! Even though the rally in small cap stocks we have seen since March appears to be continuing, no-one is out of the woods.
With reduced liquidity in equity markets, which is here to stay for a while, it is especially important to ensure that a company’s stock is firmly in the mind of those investors that are still investing in equity in order to maximise liquidity in the stock and safeguard shareholder interests. This means investing in a comprehensive IR campaign.
A recent report from Bloomberg illustrates the potential extent of the problem:
“European small-cap fund managers may be stuck with $67 billion in shares that are too tough to trade.
The number of stocks in the 1,122-company MSCI Europe Small-Cap Index that are difficult to sell, defined as taking at least one day to trade 1 million euros in holding, has jumped 85 percent to 724 last month from a year earlier, data compiled by Bloomberg shows.
Plunging share prices triggered by the credit crunch and selling by hedge funds are hitting portfolios of Europe’s small-cap funds harder than bigger peers. As much as 46 billion pounds in shares, equivalent to 90 percent of the combined market value of all European stocks that are worth less than 100 million pounds, weren’t traded in the past 12 months and the amount is set to increase, according to an estimate by London-based Marwyn Investment Management.” (Bloomberg)
I think it is clear that investors are attracted to more liquid stocks and this means companies need to work hard at bringing liquidity into their stock and that means marketing themselves.
Accountants (of which I am trained) have often been criticised for approaching business from the perspective of cost whereas marketing professionals approach it from market share. In times of recession, it is the CFO’s voice which shouts loudest and often the IR budget is an early victim. This strategy is dangerous as it simply means that the company’s share of the reduced capital market liquidity is reduced.
So, if your company, or a company you know about, has a story to tell, it is vital to get out there and shout about it.