Investor Relations

IMPLEMENTING BEST PRACTICES IN INVESTOR RELATIONS 893.2.1.1 Meeting with hedge fundsIssuers may demonize hedge funds, and quite justifiably so in certain cases,but they nonetheless constitute a separate category of investors. Theirresearch is often extremely sophisticated, their knowledge of your industryimpressive. This is why meeting with hedge funds can also help enhancemanagement’s strategic thinking. Having one or two good contacts in thehedge-fund community is useful, and discussions may be fruitful, albeitchallenging, for all involved. Companies should not refuse to meet withsuch contacts on principle, but rather be vigilant about the ones that they domeet and by whom they are represented.First of all, the IRO should list the reasons why they should be meetingwith hedge funds: Is it to generate greater liquidity? Higher volatility? Toremove uncertainty in the stock conveyed by market rumors?Indeed, management time is incredibly valuable, and the IRO has theright to be selective about who in the company structure meets with whichhedge fund, if at all. Dialogue with hedge funds should be a two-way streetlike with any other institution. In particular, you should insist on obtaininginformation about their holdings in your company directly from them.3.2.1.2 Activist shareholders or the limitation ofinstitutional targetingLastly, this inventory of potential shareholders would not be complete if itdid not mention activist shareholders, although they can hardly be deemedfit to meet the criteria of the ideal shareholder.Activist shareholders are known to discreetly build a position in acompany, make a lot of noise, and ask for seats at the board of directors. Indealing with activist shareholders, management and the Investor Relationsteam should absolutely establish the view of the other shareholders: Are theactivists alone in their thinking or are their views supported by other institutionsin the investment community? All investors at some point in time takean active role. Listen to what they have to say because they have done alot of work on which they have based their investment decision, as well aspossibly their decision to become activists.A basic rule is to try and keep the debate out of the public eye asmuch as possible, as it is less time consuming, more efficient, and moreconstructive.3.2.2 The “Seed, Harvest and Lock” Approachto Investor RelationsOnce the targeting exercise is complete, it is the IRO’s job to initiate the“seeding” phase: The IRO will proactively contact analysts and investors