All Firms Need Investor Relations

February 27, 2004
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GRAND RAPIDS — Investor relations is often viewed in the public relations industry as a specialty, a niche in the broad communication of good and bad business news.

Also, investor relations is seen as only applying to publicly held companies — after all, those firms are the only ones with investors.

That is not the creed at Lambert, Edwards & Associates Inc. (LE&A).

The local public consulting firm believes most companies should practice of investor relations, even privately held ones and not-for-profit entities, too.

LE&A reported that its philosophy toward investor relations was directly responsible for 40 percent of its business last year, a year in which sales were up 20 percent from the previous year with much of that revenue coming from performance-based fees — meaning if the client didn’t do well, neither did LE&A.

And, remember, 2003 isn’t a year likely to wind up enshrined in the business hall of fame, and that makes the rise in revenue the firm had even more compelling.

“PR is a marketing function. But many times it gets tucked away below the management level. That’s because a lot of PR people come out of journalism or communications and don’t spend a lot of time in business classes,” said Jeff Lambert, a principal with LE&A.

“What we have found is that we are in the minority. as the PR firm that understands business and ties our results to a business outcome,” he added.

Lambert told the Business Journal that his firm links its revenue to that outcome because public companies are just that, public, and their business success, or lack of it, can be studied five days a week every week in the equity markets.

But Lambert felt that a private firm’s cost of capital was just as crucial as a public firm’s. Both types, he said, have to find it and then figure out a way to pay for it.

“What we do is simply apply the understanding of what public companies have to be concerned about in promoting themselves, and say, as a private company, you can also take some of these disciplines,” said Lambert.

Lambert pointed out that a company’s annual report isn’t just for investors. He said it should be shared with suppliers, customers and employees, and is a tool that private companies can use to thank those groups for helping to make the past year a good one and to invite them to repeat that effort for the current year.

One way to do that is with a road show. LE&A urges its private-company clients to hit the road to spread the news and talk about where the company is going.

“Just because you’re private doesn’t mean you shouldn’t share your challenges and your successes with all of your audiences,” he said.

“I would argue that the term ‘stakeholder’ doesn’t apply just to shareholders. It also applies to a nonprofit and its donors, as they certainly feel like they’ve invested in your organization and so they should be treated like shareholders.”

LE&A recently directed relations for an IPO. Asset Acceptance Capital Corp., of Warren, went public last month and offered seven million shares priced between $13 and $15 a share.

When the relations work was done, nearly 680,000 sold for $15 and shares were recently selling for $18 on NASDAQ.

As a contrast, Spartan Motors of Charlotte, already a public firm, had an uncommon challenge for LE&A. While earnings were down, the firm’s stock price remained up for the year. How did that happen?

LE&A helped Spartan Motors pick up a pair of new analysts who positively reviewed the small cap stock, and then they got the word out by framing the firm within an emerging industry.

Spartan Motors makes fire trucks and emergency vehicles, while homeland security issues continue to grab headlines. That positioning lifted the firm’s earnings for the third quarter last year. The company posted net earnings of $1.3 million for the fourth quarter and $6 million for the full year.

The point of these stories is that thinking in terms of investor relations can provide tangible benefits to almost any firm.

And that type of communication is just as important when things aren’t good, since talking openly during down times can add to a company’s credibility and possibly halt a decline or contribute to a turnaround.

“I think, many times, investor relations is fringed as this specialty within overall corporate communications. We believe it’s applicable to most organizations, public or private,” said Lambert, whose firm has clients in seven states.

“We can only be as effective as the story we are telling,” he said.

“But there are a lot of great companies that have very poor valuations because there is not a perceived value in the markets,” he added. “We spend our time educating people on the markets they serve, on their products, on their vision, and where they’re going as an organization.”

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