Chapter 8Investor Relations

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Definition of Investor Relations

The National Investor Relations Institute defines Investor Relations as: “A strategic management responsibility that integrates

finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation.”

Source: National Investor Relations Institute, NIRI Corporate Website – www.niri.org, accessed August, 2007.8-2

Objectives of Investor Relations

The main goal of IR is to position the company to compete effectively for investors’ capital To achieve this, IR focuses on the following objectives:

Explain the company’s vision, strategy, and potential to investors and “intermediary constituencies” such as analysts and the media

Ensure that the expectations of the company’s stock price are appropriate for its earnings prospects, industry outlook, and the economy

Reduce stock price volatility

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IR Has Many Responsibilities

IR is responsible for a wide variety of investor activities, some regularly scheduled and others that arise on an as-needed basis Regularly scheduled activities

include: Marketing the Brand to Investors Annual Report Investor Meetings/Conferences Internal Valuation Models Quarterly Reports & Conference Calls Maintenance of Website

Event-driven activities include: Investor Targeting Crisis Communications Merger & Acquisition Issues Cross Border IR

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Nike’s Investor Relations Website

Recent updates are clearly highlighted

Use of videos allows investors to get a better sense of

senior management

Real-time stock quote

Ability for investors to customize their

own page based on the info they want to

seeStrong use of

Nike’s branding

reinforces the brand image

with investors

Links to company and

investor information are accessible and

simple

Investor press releases are easy to access and up-to-

dateSource: Nike Corporate Website, www.nike.com, accessed August, 2007.

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IR Directly Impacts Stock Price

Corporate Investor Relations activity could account for as much as a 25% variance in a company’s stock price, according to a recent study Study surveyed 243 buy-side investment professionals

from leading mutual funds, pension funds and insurance firms 82% believe good investor relations affects a company’s

valuation “Superb” IR is associated with creating a median stock

price premium of 10% “Poor” IR is associated with a median stock price

discount of 15%

Source: Holmes Report, “Investment Professionals Believe Communications Adds -or Subtracts- Value,” July, 2007.8-6

Investor Relations Framework

• Stock Price• Cost of Capital• Volatility• Reputation

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