Here we tell you everything you need to know about investor relations (IR), such as what it is and why it is important to look after your investor relations.
What is investor relations?
Investor relations is a function within a company that is responsible for the relationship between the company and its investors. Investor relations is important for giving all external stakeholders, such as shareholders, venture capitalists and lenders, clear information concerning, among other things, the company's strategy, finances and plans for the future.
If a company manages its investor relations function well, it gains greater trust from investors, while the market gets a fair picture of the company's business.
What does investor relations include?
Below we describe the activities and strategies that matter most in investor relations.
Communicate well with investors
Investors should have easy access to information about everything concerning the company. Investors normally receive this information through, among other things, press releases, annual reports and quarterly reports. Ideally, all information concerning the company should be easily accessible and in an understandable format.
Manage external expectations
In principle, every company benefits from managing the expectations the market has of it. This is best done by being direct and honest in your communication, thereby reducing uncertainty and large swings in the share price.
Media relations
Managing the relationship with the media, such as journalists and analysts, is an important part of IR. Those working in investor relations should therefore provide correct and timely information to the media in order to build a high level of trust with them.
Legal duties
Listed companies in Sweden must comply with requirements set by authorities such as the Swedish Financial Supervisory Authority (Finansinspektionen). An important function within investor relations is therefore to ensure that the company follows all the rules that exist to, among other things, counter insider trading and money laundering.
Are IR and shareholder communication the same thing?
No, investor relations and shareholder communication are not the same thing, even though they “overlap”. Shareholder communication is about giving shareholders all the information they need about, among other things, finances and upcoming strategies. IR is a broader concept that includes more stakeholders, such as potential investors, analysts and the media.
Why is IR important?
IR is important for several reasons, among them that good IR work creates long-term trust among important stakeholders and a stable share price.
What does an IR team do?
An IR team handles communication with all important stakeholders, such as potential investors and shareholders. Examples of practical tasks an IR team helps with are publishing financial reports and communicating with the media.
What is an IR strategy?
An IR strategy is a detailed plan and the actual measures a company takes to communicate with its financial stakeholders, such as shareholders and potential investors, in an ideal way. A well-executed IR strategy is important for the company to be able to reduce uncertainty and maximise its chances of finding new investors.
What positive effects does good IR work have?
Good investor relations work has positive effects such as a more stable share price, reduced uncertainty among external stakeholders and a better understanding of how the company works and what its strategies are.
Why can good IR work strengthen the share price?
Good IR work can stabilise, and sometimes strengthen, the share price because it minimises uncertainty among external parties. Uncertainty about how the company will fare in the future is a typical factor behind a constantly shifting or falling share price.
Is investor relations the same thing as PR?
No, investor relations is not the same thing as PR. IR is about communicating with investors and the stock market at large, while PR is mainly about managing the company's image among private individuals and the media.
Which rules and laws must an IR team follow?
An IR team must follow all the rules and laws the company must comply with, such as national laws and the rules set by the stock exchange if the company is listed. Examples of laws and rules a company must follow are insider legislation, anti-money laundering legislation and the stock exchange's transparency requirements.
