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Interview: Unlocking the secrets of effective IR

Unlocking the secrets of effective IR.

An in-depth interview with Mark Tobin on engaging marginal buyers and maximising shareholder value

Ben Williamson: To start with, we’re gonna talk about IR. There seems to be a divide in IR where some companies believe in it and others believe that results speak for themselves. What are your thoughts on the topic?

Mark Tobin: If you have an IR professional who's engaged in getting your message across in a way that's going to resonate with the broader shareholders and that "marginal buyer", the results from IR also speak for themselves.

If you're spending $100k on an IR resource in a year and they can grow the market cap of your company by even 5% over that year, that's going to have a bigger impact I would say than just hammering away at results for a year or two and, or even three, and nobody really taking notice outside of maybe a core hard group of shareholders who are believing in the story and sticking there.

I think you need to have a solid communications IR strategy so that you can give context and background to the business and results.

Ben Williamson: And who should be doing the IR? A lot of companies are stretched for resources.

Mark Tobin: I find a lot of the time you've got the CFO who's also in charge of IR and I think this is one for boards to consider. Do you want the CFO to be the CFO? Or do you want them spending time on another job? I think they'll probably spend 10% or 15% of their time doing investor relations if they are doing it seriously. So that means they're not getting time to do their CFO role.

I really think small companies, even maybe more so than big companies, need a dedicated IR person. If you're a board, thinking about the CFO role: are we expecting this person to do IR and if so can they do both jobs effectively?

Ben Williamson: In 2023 what does good IR look like?

Mark Tobin: I mean, I don't think it looks any different now than it looked four or five years ago. I think if you are outside of the 200 or the 300, you just have to be consistently getting your message out there. We all know there are over 2,000 stocks, so that's a lot of companies that can get their story out there.

You can't just sit back, because there are a lot of companies that are just going to fill the (communication) gap. And, if you're just doing the basic ASX releases and that's it, and no real presentations or context other than, “the results speak for themselves”, I can guarantee you - definitely from the retail shareholder base - you're not going to get the same engagement as a company who's putting out all the regulatory announces with presentations, going to events like mine (Coffee Microcaps), or appearing in financial media.

Consistency is the key. It's the long game over the short game. You can't just turn the IR on for six months, you've got to be doing it on a consistent basis (and) creating a narrative. And if you're capped under 300 million, the vast majority of shareholders are going to be retail investors. So you've got to have a strategy that works for retail shareholders.

You can't just do the same as what you’re doing for institutional funds. You've got to interact with retail shareholders where their eyes and ears are focused. You've got to educate them on, "This is how the industry sets up, this is how we fit into it, this is how we make money, and this is our business model."

Ben Williamson: This relates to another question. Where should companies be focusing? The top 20 are obviously important, but retail is also a large part of both trading volume and registry makeup. How do you balance the two?

Mark Tobin: Boards are always very focused on their top 20, which I think any company should be. But go beyond the top 20. Get the CEO or the Chair to call the top 20 when any kind of major announcement goes off, but then get the CFO to call the next 20. And then after that, from 40 to 60 get somebody else in the finance team or your IR person to call and get down to the first 100 shareholders.

I remember when I was working in Wilson Asset Management, we used to do that. When you get down into shareholder numbers 89 and 95, I remember I called this one gentleman and I told I said "I'm calling on behalf of WAM Capital, just to let you know our results came out today and here are the key points". He was bowled over, that he was the 96th largest investor in WAM Capital.

But that's something I don't think a lot of companies are doing, yet they should do because those are the people who are in there with a reasonable amount of capital and who are going to be high potential shareholders for engaging with when you're doing your next capital raise.

So there's a lot of focus on the top 20, but not so much focus on that 20 to 100. I think there's a big missed opportunity: not having a very solid database of who they are, what's their email address, their phone number, and how long they've been a shareholder for.

Ben Williamson: Shout out to InvestorHub’s CRM functionality. Something you mentioned earlier was the concept of a “marginal buyer”. What did you mean by that?

Mark Tobin: A marginal buyer is a person who's going to buy your stock on-market today at the price that it’s trading at, or pay up a cent or two to get set. If you're trying to grow your share register and grow your stock price, who is the next investor that's going to pay the current share price or slightly above it? It’s the marginal buyer.

Because the shareholders who are on the register are generally set. They've got the allocation they want. And yeah, they might top up or they might trade around the edges, but they’re pretty much set.

You have to be marketing to those marginal buyers to get the daily liquidity up, get the stock price up, & narrow down the spread between buyers and sellers. So if you're not doing anything on the IR front you're not going to be engaging or attracting those marginal buyers.

Ben Williamson: What does good IR like for those marginal buyers?

Mark Tobin: No real difference: it's getting your story out on a consistent basis. I mean, look at all the announcements that come out on the ASX on a daily basis.

So if you put something out there and then they flick through a presentation that you've done somewhere else. It could be on Coffee Microcaps, it could be with Shares Cafe, it could be with a segment on ausbiz. The investor might think, "this looks interesting", and put you on a watchlist. So now you're on a watchlist. So the next time you report actual results, they're going to take a deeper look at it.

But if you're not getting that IR out there, if you're not giving them context and a deeper understanding of the business and the opportunity that the stock is presenting, you're never going to get on the watchlist. And then they're definitely not going to be hitting the buy button on their share trading screen.

So whether it's the marginal buyer or a current investor, it's still the same. You've got to have a solid IR strategy to keep the ones you've got in there engaged and try and get those marginal buyers to come and join you.

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Unlocking the secrets of effective IR.

An in-depth interview with Mark Tobin on engaging marginal buyers and maximising shareholder value

Ben Williamson: To start with, we’re gonna talk about IR. There seems to be a divide in IR where some companies believe in it and others believe that results speak for themselves. What are your thoughts on the topic?

Mark Tobin: If you have an IR professional who's engaged in getting your message across in a way that's going to resonate with the broader shareholders and that "marginal buyer", the results from IR also speak for themselves.

If you're spending $100k on an IR resource in a year and they can grow the market cap of your company by even 5% over that year, that's going to have a bigger impact I would say than just hammering away at results for a year or two and, or even three, and nobody really taking notice outside of maybe a core hard group of shareholders who are believing in the story and sticking there.

I think you need to have a solid communications IR strategy so that you can give context and background to the business and results.

Ben Williamson: And who should be doing the IR? A lot of companies are stretched for resources.

Mark Tobin: I find a lot of the time you've got the CFO who's also in charge of IR and I think this is one for boards to consider. Do you want the CFO to be the CFO? Or do you want them spending time on another job? I think they'll probably spend 10% or 15% of their time doing investor relations if they are doing it seriously. So that means they're not getting time to do their CFO role.

I really think small companies, even maybe more so than big companies, need a dedicated IR person. If you're a board, thinking about the CFO role: are we expecting this person to do IR and if so can they do both jobs effectively?

Ben Williamson: In 2023 what does good IR look like?

Mark Tobin: I mean, I don't think it looks any different now than it looked four or five years ago. I think if you are outside of the 200 or the 300, you just have to be consistently getting your message out there. We all know there are over 2,000 stocks, so that's a lot of companies that can get their story out there.

You can't just sit back, because there are a lot of companies that are just going to fill the (communication) gap. And, if you're just doing the basic ASX releases and that's it, and no real presentations or context other than, “the results speak for themselves”, I can guarantee you - definitely from the retail shareholder base - you're not going to get the same engagement as a company who's putting out all the regulatory announces with presentations, going to events like mine (Coffee Microcaps), or appearing in financial media.

Consistency is the key. It's the long game over the short game. You can't just turn the IR on for six months, you've got to be doing it on a consistent basis (and) creating a narrative. And if you're capped under 300 million, the vast majority of shareholders are going to be retail investors. So you've got to have a strategy that works for retail shareholders.

You can't just do the same as what you’re doing for institutional funds. You've got to interact with retail shareholders where their eyes and ears are focused. You've got to educate them on, "This is how the industry sets up, this is how we fit into it, this is how we make money, and this is our business model."

Ben Williamson: This relates to another question. Where should companies be focusing? The top 20 are obviously important, but retail is also a large part of both trading volume and registry makeup. How do you balance the two?

Mark Tobin: Boards are always very focused on their top 20, which I think any company should be. But go beyond the top 20. Get the CEO or the Chair to call the top 20 when any kind of major announcement goes off, but then get the CFO to call the next 20. And then after that, from 40 to 60 get somebody else in the finance team or your IR person to call and get down to the first 100 shareholders.

I remember when I was working in Wilson Asset Management, we used to do that. When you get down into shareholder numbers 89 and 95, I remember I called this one gentleman and I told I said "I'm calling on behalf of WAM Capital, just to let you know our results came out today and here are the key points". He was bowled over, that he was the 96th largest investor in WAM Capital.

But that's something I don't think a lot of companies are doing, yet they should do because those are the people who are in there with a reasonable amount of capital and who are going to be high potential shareholders for engaging with when you're doing your next capital raise.

So there's a lot of focus on the top 20, but not so much focus on that 20 to 100. I think there's a big missed opportunity: not having a very solid database of who they are, what's their email address, their phone number, and how long they've been a shareholder for.

Ben Williamson: Shout out to InvestorHub’s CRM functionality. Something you mentioned earlier was the concept of a “marginal buyer”. What did you mean by that?

Mark Tobin: A marginal buyer is a person who's going to buy your stock on-market today at the price that it’s trading at, or pay up a cent or two to get set. If you're trying to grow your share register and grow your stock price, who is the next investor that's going to pay the current share price or slightly above it? It’s the marginal buyer.

Because the shareholders who are on the register are generally set. They've got the allocation they want. And yeah, they might top up or they might trade around the edges, but they’re pretty much set.

You have to be marketing to those marginal buyers to get the daily liquidity up, get the stock price up, & narrow down the spread between buyers and sellers. So if you're not doing anything on the IR front you're not going to be engaging or attracting those marginal buyers.

Ben Williamson: What does good IR like for those marginal buyers?

Mark Tobin: No real difference: it's getting your story out on a consistent basis. I mean, look at all the announcements that come out on the ASX on a daily basis.

So if you put something out there and then they flick through a presentation that you've done somewhere else. It could be on Coffee Microcaps, it could be with Shares Cafe, it could be with a segment on ausbiz. The investor might think, "this looks interesting", and put you on a watchlist. So now you're on a watchlist. So the next time you report actual results, they're going to take a deeper look at it.

But if you're not getting that IR out there, if you're not giving them context and a deeper understanding of the business and the opportunity that the stock is presenting, you're never going to get on the watchlist. And then they're definitely not going to be hitting the buy button on their share trading screen.

So whether it's the marginal buyer or a current investor, it's still the same. You've got to have a solid IR strategy to keep the ones you've got in there engaged and try and get those marginal buyers to come and join you.

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