It’s all about trust

It’s all about trust. When it comes to investor communications, TRUST, trust, trust is the key. Or should I say confidence – confidence in the management’s capability to lead the company in the right direction, to increase the value of a business in a profitable way, and, at the same time, to increase shareholder value. To make the right strategic choices in every critical business situation. If the investors have confidence in the management, the market value of the company will increase. So simple is that. Or is it?

A good, or one, sad example of losing confidence among investors is Nokia’s recent publication of selling its whole mobile phones unit to Microsoft, including the right to use Nokia’s patents. This transaction was on everyone’s lips in Finland on that day. From the investor communications’ point of view the question at the date of the publication was, why did the stock price react only +34% on the trading day. What are the factors that reflected on the share price? Is it the relatively low transaction price for the deal, is it the losing of future growth potential and resources, or what…?

In fact, investors’ confidence in management to make decisions that create true shareholder value strongly reflects to the company’s share price. After losing shareholder value significantly by more that cutting the company’s revenues in one-third in only three years, is it even credible to speak about the importance of shareholder value to company’s investors? It is also important to remember that a company cannot be led from the shareholders’ perspective – never, ever. Why? Simply because most shareholders have made financial investments for themselves, not for the company. Money always finds itself in the places or shares or funds it gains most return. The cost for swapping investments from one share to another is minimum. And it is in fact the name of the whole trading game.

In my opinion that is the second thing to be noted in the recent Nokia transaction. The shareholders truly benefit only and ONLY when the company is successful in its key businesses, and, the future prospects look good, and, they are confident in the company’s management to lead the company in the right direction.

All in all, in investor communications our goal is to help our customer companies in establishing good, fruitful, open relations to investors. By discussing, listening, meeting with investors, but first of all, providing relevant pieces of information about the company to market – equally, transparently and honestly. Is it always easy? I can say it is not.