No matter how in-tune you are with the Street, how many one-on-one conversations you have with key investors, or how forthcoming they are with their opinions and ideas, chances are, there are some things being left unsaid. This may be because investors aren’t directly being asked all the right questions. (Indeed, they are often the one’s doing the asking while you do most of the talking.) Or maybe it’s because the time and place of the conversations are not conducive to getting investors to really open up and share their thoughts.
That’s where a perception study comes in. When conducted by senior-level consultants who know how to ask meaningful questions and probe for deeper insights (think Barbara Walters), perception studies can reveal hidden gems and uncover information that’s worth its weight in gold.
There are three situations in which these studies can be particularly invaluable to a business:
1. You’re planning a transition that will change your investment narrative.
A new acquisition or divestiture, a new management team, or a new strategy will obviously impact your investment thesis. And it’s imperative to tell your revised or updated story right. Before you decide how to alter or enhance your narrative, you need to gain an in-depth understanding of investor perceptions around the change you will be making.
Done right, a perception study can reveal investors’ candid views, uncover gaps in understanding, and pinpoint any potential objections or concerns investors may have related to the change. Through direct conversations and, sometimes, quantitative surveys the study determines both what investors like about a deal, and what they don’t like. Both the good and the bad should weigh into your story and help you fine tune your messaging for maximum impact when you announce and message the deal or strategic change. In a recent perception study, one of our clients uncovered a split between one group of investors who wanted to see the company acquire to grow, and a second group of investors who expected a significant share buyback program. Upon announcement of a transformational deal, the client took a two-fold approach: First, the company created deal messaging that justified the acquisition as being highly opportunistic and a critical move toward future growth. Second, the company made sure to target new, slightly higher beta growth investors to replace the traditional share buyback oriented firms.
Further, perception studies can lead to actionable recommendations that go beyond messaging to help you define the details of how, when, where, and with whom you will communicate and focus your time and resources. What you learn can also lead to and/or help inform other considerations, such as how best to integrate ESG communications into your story.
2. You’re not getting full credit for a transformative or disruptive event or transaction.
If you’re not seeing the results you expected from a deal, a perception study can help you learn exactly why not. Using shareholder base analysis, you can dissect investor behavior post-transaction. Then, through a strategically crafted perception study, you have the opportunity to ask some pointed questions to investors that either didn’t buy, didn’t buy as much as your anticipated, or sold.
In this case, it’s critical to work with seasoned experts who know how to create questions that are relevant to your specific situation and that will drive the most actionable insights. Specifically, you will want to identify perception gaps or potential hurdles to investment; i.e. the kinds of information that help you determine what to do next. For example, a recent post-event perception study revealed that despite low stock valuation, investors still didn’t consider it an entry point because they didn’t get the roadmap to integrate the businesses effectively. So, they took a wait and see attitude. The company created a long-term roadmap with benchmarks to help address this concern.
Talking to people who did buy or who may now be overweighted in your stock can be equally as insightful. Learning what resonated with them about the deal or how you messaged it can help you create the necessary action steps to refine your story and further improve engagement with other potential investors.
3. Your narrative needs a strategic fresh coat of paint.
Maybe nothing has dramatically changed for your business recently. Still, that doesn’t mean that what your investors want or need hasn’t evolved. Regular perception studies, conducted at least every two years, can keep you in-tune with investor perceptions as well as keep you privy to the impact of any emerging trends, such as ESG considerations.
When you conduct a perception study primarily as a way to keep the pulse on investors sentiment, speaking to a wide range of investors is a must. Getting perspectives from investors who are overweighted, underweighted, those who have sold, and those who remain on the sidelines ensures a comprehensive understanding of what’s working with your story, and what could be enhanced. Recently, when planning for an Analyst Day, an IRO engaged us to speak with his underweighted and oversold investors. Rather than simply taking a victory lap for the good things achieved, the IRO wanted to push management to more deeply cover the tough topics. And he knew he needed to hear from all investors, not just those who seemed fully onboard with the company’s recent actions.
As with any perception study, the primary takeaway should be a set of action steps that can help you sharpen the narrative and ultimately maximize opportunities to drive valuation. You also benefit from having the data to support any actions or efforts that are doing well and helping you get the results you want. Either way, when you are proactive about continually evaluating and optimizing your story, you’ll be in the best position to achieve your strategic IR goals in both the short- and long-terms.
Start asking the right questions today.