The challenges of IR in the small- to mid-cap space

This article was published in Informed magazine, the quarterly journal of the IR society.

The IR Society hosted its annual conference earlier this year which saw Equitory CEO and founder, Clara Melia, join a panel of senior IROs to discuss the opportunities and challenges for small- to mid-cap companies, and how to attract new investors and broaden sell side coverage.

The final breakout session of the day featured five experienced mid-cap IROs, including the moderator, Rob Gurney. It was definitively standing room only and there was a buzz of anticipation from an audience who had clearly taken Evan Davis’s ChatGPT-derived motivational speech to heart, ready for an inspiring afternoon of discussion.

The session kicked off with each of the panellists giving their views on what was the ‘best’ thing about being in mid-cap IR – and there were an interesting range of responses, from the chance to be innovative, greater engagement with board and operational colleagues, and broader exposure to a broad range of projects and opportunities.

One former sell-side analyst admitted being motivated by the chance to do better than some of the story-telling she had encountered previously, but the common theme was that it was possible to be more involved and more influential as a mid-cap IRO than in most of the larger teams across the FTSE100.

Accessible information

There was some useful advice on what makes for good messaging, in a space where attention from investors is limited. Clara Melia, founder of the advisory firm Equitory summarised this neatly as being in a space where companies are ‘competing for capital’, and to do some basics to help a new investor: make your materials simple and approachable, have financials downloadable in a spreadsheet, develop a salesforce friendly factsheet, and build relationships with sell-side sales teams, for an invaluable 3 minute mid-morning download when the CEO is wanting reasons for a share price move.

Other very useful takeaway ideas noted down (as a mid-cap IRO myself) were to undertake ‘bite-sized’ capital markets events, use of 3 minute videos, and Marina’s publishing a ‘roadshow Q&A’ summary at the end of the programme.

Make your materials simple and approachable, have financials downloadable in a spreadsheet, develop a salesforce friendly factsheet, and build relationships with sell-side sales teams. – Clara Melia

The importance of feedback

The panellist then turned their attention to the issue of liquidity and how this has an impact in this sub £1-2bn market cap space. Both Louise and Siobhan were advocates of engaging with hedge funds as useful providers of liquidity, and even for the firms known to be holding a short – especially as the buyside sector analyst may not have been the driver of the position and can be an internal advocate. Saving space in IR meetings to have 2-way feedback was also highly recommended, and to train CEOs to try and get the last 10 minutes of an IR meeting as more of a 2-way discussion on perceptions.

Recommend a friend

The final portion of the panel was spent discussing the challenge of the mid-cap broker space, and reducing research provision. The ‘juniorisation’ of research teams was noted as an increasing challenge, and the benefit of ‘mix-and-match’ for roadshow support in various locations. There are increasing routes to accessing investors, through PCB-focused roadshows and a range of online solutions. Using core investors to suggest others who might be open to a visit had also been a successful strategy for one panellist. Free resources such as the LSE online tools were also recommended.

Analyst coverage was the final topic – how many analysts is sufficient? 3 fully engaged opinion-formers were of course felt to be more valuable than a dozen ‘me too’ followers, but Clara noted that consensus could be skewed if the number fell below 5-6, and you had a strong outlier.

As with all good panels, the session finished with a request for tips: 1. build your network, both internal and external as they will be critical for you (Louise); 2. Never be afraid to say you aren’t sure of an answer (Clara); 3. Get deeply involved in the business, which allows you to speak with more authority (Marina); 4. Manage your own career path – find a mentor, relevant courses etc (Siobhan). 5. The able moderator, Rob, added his own thought: get involved in projects outside the official IR remit, which will add more strings to your bow’.

Never be afraid to say you aren’t sure of an answer. – Clara Melia

Feedback from the audience as they left the room was very positive, a very helpful and productive session for a segment of the market which is often both resource-limited and time-poor.

If you would like to find out more about how Equitory can support your business with its IR communication and programme email info@equitory.com.