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SECTION ONE

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“ S E T T I N G T H E S TA G E ”

their investment advisors and/or the media – or Advocates. The result of this competition for investment capital is that it has become more transient.1 SETTING THE S TA G E Shareholder Value is derivative of management ’s ability to manage and invest the corporation’s capital to provide investors above-average returns. SECTION ONE: D O E S YO U R C O R P O R AT I O N R E P R E S E N T O U T S TA N D I N G I N V E S T M E N T VA L U E ? 1. Gaps are resultant of informational disparities that fail to close any perceived differentials between Shareholder and Market Value of securities. Billions of dollars worth of their securities are traded each day as investors “bet” on which corporations they perceive to represent the most outstanding investment value. Perceived Value of corporate securities is derivative of management ’s ability to communicate it ’s success in having managed and invested the corporation’s capital to provide investors those above-average returns. They do so by either purchasing New-Issue securities directly from the Corporation for cash.AN INTRODUCTION TO INVESTOR R E L AT I O N S Approximately 35.000 publicly traded corporations are listed on North American stock exchanges today. is by determining a corporation’s Shareholder Value. or by purchasing Issued securities in the open markets to affect the corporation’s Market Capitalization or Value. relative to their respective perceptions of Value. The way in which Market Participants receive that information. sold or traded by investors in response to their Perceived Value. It is represented within the public market context as the Market Value of corporate securities which are bought. H OW M U C H D O I N V E S T O R S K N OW A B O U T YO U R C O R P O R AT I O N ’ S S H A R E H O L D E R VA L U E ? SECTION ONE 2 . is by having it delivered to them by the corporation. to make those determinations of value. The way in which they most commonly assess Investment Value. Investors provide capital to corporations when they purchase the securities of those corporations they perceive to represent outstanding investment value. each competing for investment capital to commence or expand their corporate operations. It is represented within the public market context as differentials between Shareholder and Market Value – or Gaps. Gaps are usually filled when Market Participants receive enough information to make informed determinations of a corporation’s Value. as the investors who provide capital to corporations search the globe for those investment opportunities they perceive to represent outstanding value.

Advocates are those individuals or firms with a vested interest in buying. so too does available capital for the corporation to create Shareholder Value.e. Therefore. Investor Relations Professionals and Shareholders) Indirect Advocates are those individuals or firms that are indirectly associated with a corporation. it can be said that Shareholder Value and available capital are affected by Effective Corporate Advocacy. Direct Advocates are those individuals or firms that are directly associated with a corporation. Directors. Brokers. SECTION ONE 3 . whose vested interest it is to sell the corporation’s securities to earn fees and/or sell investment advisory services. Corporate Advocacy is the process of providing proper corporate information to investors in such a manner. is what is known as Corporate Advocacy. M A R K E T PA R T I C I PA N T S R A R E LY “ B U Y ” S E C U R I T I E S . H OW M U C H D O YO U R A DVO C AT E S K N OW A B O U T YO U R S H A R E H O L D E R VA L U E ? To prompt investors into making those specific purchases of securities. increase capital and/or ease the effort required for procuring financing. Officers. as to enhance the probabilities of having specific securities purchased by specific investors. whose vested interest it is to sell the corporation’s securities to maximize returns. R AT H E R T H E Y A R E “ S O L D ” S E C U R I T I E S ! As Advocates succeed in selling investors the specific securities they are actively advocating. As the Market Value for the corporation’s securities increases. As the Market Demand for those securities increases. the Market Demand for those securities will usually increase. so too does the Market Value of those securities and that of the issuing corporation. and they are generally characterized as either Direct or Indirect Advocates. (i.e. It is estimated that eighty to ninety per cent (80-90%) of investment decisions being made today. selling and/or covering the securities of specific corporations. (i. are being made on the basis of having investors receive information. recommendations and/or favorable coverage from the corporation’s Advocates. Advocates must pass proper corporate information on to investors for them to make informed investment decisions. Analysts and the various forms of financial and common Media) The common interest that binds all forms of Advocates is the desire to prompt investor purchases of those specific securities that the Advocates are advocating. The process of passing that information to investors to prompt securities purchases.

concise. means penetrating a Vicious Circle of Information Dependency that exists among Market Participants today. That being to mitigate or overcome a dreaded. corporate communications and direct marketing to deliver proper corporate information to Market Participants. corporate affliction known as Market Anonymity. accurate. the corporation must provide the proper tools that Advocates will need to become effective.A R E M A R K E T PA R T I C I PA N T S “ B U Y I N G ” YO U R C O R P O R AT E S E C U R I T I E S ? Effective Corporate Advocacy originates with the corporation and the Direct Advocates whose interest it is to increase the corporation’s capital. and often fatal.) Effective Investor Relations creates the tools of Advocacy by combining elements of financial analysis. The tools that the corporation must provide to make it ’s Advocates effective. beyond the corporation’s capacity to Advocate itself. It is clear. is what is known as Investor Relations (I. SECTION ONE 4 . The Circle represents the barrier within which a corporation must circulate it ’s information for investors to consider it ’s securities for investment. are those that combine the corporation’s need to disseminate proper corporate information with it ’s desire to expand Advocacy. Beyond a corporation’s need to disseminate information and expand Advocacy. Expanding Advocacy. For Direct Advocates to become effective Advocates. effective Investor Relations plays a more fundamental role within the capital market context. Proper Corporate Information is that corporate information that makes a corporation transparent to Market Participants. in a manner that expands the Corporation’s Market Profile and it ’s probabilities of procuring financing in the future. I N V E S T O R R E L AT I O N S I S M O R E T H A N A N SW E R I N G T E L E P H O N E C A L L S A N D D I S T R I B U T I N G A N N UA L R E P O R T S . D O YO U R A DVO C AT E S H AV E T H E P R O P E R T O O L S T O B E E F F E C T I V E A DVO C AT E S ? The process of creating those tools that make a corporation’s Advocates effective. reliable.R. verifiable and articulated in a manner that allows relatively easy analysis and comparison of information with that of other corporations.

Corporations must constantly undertake to apprise Market Participants of the investment value that it ’s new and issued securities represent. X was alerted to the corporation by an associate who claimed to be familiar with the management of the corporation. Mr. invested $50. E F F E C T I V E I N V E S T O R R E L AT I O N S C A N OV E R C O M E T H E E F F E C T S O F M A R K E T A N O N Y M I T Y. as measured by securities price stability and financing success. X bought his securities on the open market. Mr. CASE IN POINT: AN INVESTOR’S EXPERIENCE Mr. Most corporations that suffer from Anonymity are usually not aware of their affliction. with the intent to increasing his investment by subscribing to a private placement that was being offered by the corporation. press releases and the occasional distribution of quarterly/annual reports will tacitly accrue to them the market cognizance. 1. “ X”. X bought his securities after noticing some unusual trading anomalies in the corporation’s stock – uncharacteristically heavy trading and price movement. investor support and finance capabilities that they will need to survive. an experienced private investor. It is usually attributable to a corporation’s lack and/or inappropriate use of proper corporate information. and not doing anything to mitigate it ’s affects.2 SECTION ONE 5 . These types of corporations typically assume that an exchange listing. What differentiates outstanding public corporations from lesser market performers. we provide the following fictionalized account of an actual investors experience with just such an afflicted corporation. the property commercially viable and that the securities were worth more than the market was indicating. The associate was a geologist. The associate claimed that management was first rate. To illustrate the potential danger of being afflicted by Market Anonymity. Mr. is the extent to which they employ Investor Relations to mitigate or overcome the effects of Market Anonymity. They are wrong.Market Anonymity is characterized by the Market ’s chronic apathy for a corporation and/or it ’s performance. proper personnel and/or proper communications faculties that would otherwise be used to reach appreciative Market Participants.000 into a small-cap resource corporation that was seeking to finance the exploration of a promising new mineral property it had recently acquired.

“he was too busy to talk.” The “contact ” suggested that Mr. and then three weeks until finally a month went by without having receive any more “information”. Having sold his stock. The overwhelming sell pressure caused a precipitous drop in price back to the stock ’s all-time lows. He doubted that they would ever amount to anything other than a promotional play. and that preliminary negotiations had commenced. he claimed. whom he knew to have also invested. X wanted some tangible information to assuage any doubts that he might have and to confirm the corporation’s fundamentals. He called “the associate” for information who also said he had nothing.” SECTION ONE 6 . X called back to ask about the delay but was repeatedly snubbed by the corporation’s staff. “But ”. Mr. The “contact ” confirmed that a financing was in the works. X wait for an “imminent announcement ” that would clarify any questions Mr. it consisted of some photo-copied financial statements (“it was a new company after all”) and some mandatory press releases that provided little useful information about the corporation. Mr. X’s friends sold their positions “at the market ” which overwhelmed the buy-side of trading to stop a rally that was developing in the stock. To sell quickly. “Besides”. fax and cellular numbers. He called several friends. Mr. and all of the same for his broker. X would have about the corporation. Mr. X promptly told several friends and associates of his experience which prompted them to sell their holdings as well. The divestiture eliminated $4. The banker confirmed that discussions had taken place. he said. but he said he could not provide any details for reasons of propriety. “ X” happened to have a friend who was part of the banking syndicate that was considering the financing for the corporation. Having received the “package’. As a gesture he would send Mr. All anyone could recall was having been provided some verbal information from an obscure party who claimed to be associated with the corporation.5 million (or 80%) of the corporations previous market cap. X waited for the “announcement ” before making any decisions about his holdings. “the deal fell apart prior to the drop in share price and capitalization. He called his broker for some information about the corporation who said he had none. then two. X promptly sold his stock at a loss. the management or the project. and they had nothing. none of whom seemed to know what was going on. X decided to call the “Investor Relations Contact ” of the corporation who happened to be a director of the corporation as well. Mr. Mr. mailing and e-mail addresses. He waited a week.Mr. X an “information package” for the interim. leaving the corporation with angry shareholders and an apparent end to it ’s financing prospect. which in and of itself usually indicates incompetence. He felt that the corporation’s attitude and behavior had indicated an “investor ignorant ” management. he called to leave his phone. Being an experienced investor Mr. To ensure that he would receive all available information from the corporation.

were a waste of “their time and their money ”. that the syndicate had to satisfy to provide financing. The deal would have been done simply to earn a fee. The banker explained that the problem with the deal was not the project.” “Investor Relations”. so how would anyone know anything about it later without an effective I. left the syndicate to assume (correctly) that any investor buying this stock to provide the financing. therefore they refused to provide the financing. “was money and the only way to provide investors the information they will need to support the stock in the after-market. investors are clamoring to come aboard already. the after-market for the corporation’s stock would have dried up”. not any investors as the syndicate was claiming. They love us!” At that point the syndicate packed their briefcases and walked away from the deal. is with proper Investor Relations. “represents information and without a continuous supply of that information. That statement.R. coupled with the corporation’s already non-existent I. Management ’s attitude precluded any prospect of after-market support. Mr. they said. under the terms and conditions that we want! Just look at our stock. because they refused to disclose certain information that the syndicate insisted he made public. provisions. leaving their investors “holding the bag”. he said. because the syndicate had a fiduciary duty to protect their investors interests. X’s friend explained that management ’s reluctance to disclose information at the prospectus stage would have probably carried on to the after-market. even as the stock continued to rise in price and volume. The management claimed that the information was proprietary and “for their eyes only ”. as well as any further provisions for Investor Relations. “Information”. Program”. Under those circumstances they had no choice but to walk from the deal. not them. That kind of investor drumming would have reflected on the syndicate and it ’s ability to finance any further deals. would have been “killed” in the after-market because there wasn’t the slightest hope of any support for the stock subsequent to closing.He explained that the syndicate was getting increasingly more frustrated with the corporation’s management. “Nobody knows about this company now. Rather he said it was management ’s inability to comprehend that it was investors. he said. SECTION ONE 7 . its commercial viability or even management ’s ability to bring it to fruition – they all appeared to be fine. They were arrogant by stating that they (the syndicate) were “lucky ” to have been “chosen” to finance their deal. The deal was “pulled”. Management had categorically refused to consider anyone else’s needs but their own. “this deal is so good that investors will be begging to finance this deal. given that “it could probably finance itself ”.R. They claimed that the disclosures that the syndicate was insisting on. Then they got belligerent by asserting that it was they (management) that the syndicate had to satisfy to get the deal done. “After all”.

X by stating that “in the end the syndicate had an obligation to protect the investor ’s interest. YOU DON’T DESERVE NEW ONES. The consequence of ignoring those needs is banishment. Companies with good Investor Relations are assigned premiums because good I. the banker explained. and it mitigates the Market ’s worst fear – surprises. Investors are the capital market “Kings” of corporate finance. discontented shareholders and weak to non-existent finance capabilities.R.“Further ”. adds multiples to a corporation’s valuations which makes it more valuable to investors. as did the corporation. If the corporation refused to consider it ’s obligation to investors. corporations had better satisfy their informational needs.” The lesson to be learned from this fictionalized account is: IF YOU CAN’T KEEP YOUR CURRENT SHAREHOLDERS.R.R. provides investors the information they will need to support the stock. Effective I. “I. the syndicate could not provide financing. That was why the financing failed. had implications beyond those of just financing and after-market support.” The banker concluded with Mr. SECTION ONE 8 . To attract capital from those investors. KEEP INVESTORS INFORMED TO MAINTAIN YOUR CAPITAL MARKET ACCESS. leaving those corporations with undervalued securities. from investor portfolios to capital market exile.