Knowing who holds your shares is easy, right?

Surely, all that is necessary is to look at the shareholder register (if you have one!), and there is the name address, contact name and investment profile of all the investors in your company.

Well, if only. However before I get carried away on to “how”, lets talk about “why”. Why is knowing your shareholders details so essential?

Lets start with an analogy. If you are at the centre of a maze, and you want to pass a common message to a group of people also in that maze, how can you do so, unless you can find them? And the rules of shareholder disclosures under which investors are obliged to tell the company who they are, vary from country to country. And tracking them is very like a maze.

At the heart of any investor relations strategy are some simple concepts, all of which are jeopardised if you cannot name your shareholders.

o Seek optimal valuation over time. If the heart of good IR is achieving the most accurate valuation, a key tool is doing so is communication. Future value drivers of the business communicated with sufficient insight and detail is going to help drive the valuation.
o Minimize share-price volatility. The ideal investment in your business lies in trading based on real business insight, not on rumour and speculation, anchored by a stable, geographically balanced, and well distributed shareholder base.
o Ensure favourable access to capital. One of the most frequently asked questions is how does one measure the effectiveness of an IR campaign. What is the internal rate of return on an investment in a programme? For me, the cost of capital vis-a-vis your peers, creating a genuine competitive advantage, and ready access to liquidity as required. Communicating clear and credible future business plans are essential parts of this strategy.
o Managing corporate actions. Event driven IR – combating or encouraging large scale transactions such as a takeover, getting away a rights issue, or a proxy fight – demands intimate knowledge of the attitudes of shareholders.

In every one of these objectives, the absolute start point is a thorough - and accurate – understanding of who a company’s shareholders are. There are of course many IR activities driven by knowledge of your shareholders, whether it be increasing institutional meetings, increasing research coverage, understanding institutional voting intentions (see “Empty voting) etc, however much of the need for knowing your shareholders comes from one of the above strategies.

Or to put it another way, NOT being able to identify shareholders when the FD comes calling with one of these challenges, is not a career enhancing move.

We have always argued that if nothing else, Investor Relations is primarily a marketing function and with any marketing activity the corner stone is knowing your customer. If you do not know who is the customer (for your stock) how can you know what is motivating them to buy (or sell), what their objectives are for buying, where they are, whether or not they could they buy more, where there are other like minded potential “buyers”, it goes on.

As with any marketing activity the primary goal is creating demand and increased demand in your shares will naturally force up the price.

I bet the average company spends millions on marketing their products or services. It is a shame they don’t spend the same on marketing their stock.

Maybe the board would treat IR differently if they realised the direct knock on effect that increased demand would have to their share options value!