Why your 2018 plan should start with doubling your share price
A new year presents new opportunities to implement your corporate strategy. Cannings Purple’s Investor Relations Director, Andrew Rowell, ask why every company doesn’t have this at the top of their New Year’s list.
Will 2018 be better than 2017?
Even if 2017 was a corker, you’d be expecting that your management team will be saying ‘yes’. Continuing on the same path is not a strategy, in the same way that hope is not a strategy.
Yet it is staggering how many companies don’t have a coherent strategy to communicate to their stakeholders.
Sure, they might have a management team in place and a core business that is humming. However, many can’t articulate where they see their business going or what it will look like in one, three or five years’ time.
Often the plans for creating value for shareholders is predicated on either an element of luck (such as exploration discovery) or external events (like a general increase in market conditions).
We regularly facilitate strategy sessions with our clients, where we ask the hard questions, listen (a lot) and then work with the company’s management to either create or refine a corporate strategy for the year/years ahead.
But it is always interesting to see how many companies don’t have strategies for managing aspects of the business relating to equity capital markets, investors and shareholders.
Often the plan for dealing with raising new equity is when they need it, rather than when it is strategic to do so. Low trading volumes or liquidity are often viewed as being out of their control and therefore ignored.
A good strategic plan should pose the following questions:
- Is the business poised to deliver positive outcomes for shareholders? Do you have the right projects, balance sheet and management team to double, triple or quadruple your market capitalisation?
- Do you have enough funds to deliver on your strategy? Investors recognise that financial strength offers opportunities to grow the company, whereas a low bank balance is a sure sign things aren’t going that well or are not going to turn around quickly.
- Is your strategy one that investors understand? There is little point having a diversified portfolio of projects or business avenues if your investors don’t understand it or can’t properly value it.
- Do you have a clear communications plan for the year ahead? This involves mapping out the key milestones and announcements for the year, conferences, roadshows, investor meetings and regulatory reports so the plan is balanced and consistent for the year ahead.
A careful analysis of these questions often reveals and explains the potential reasons behind share price underperformance.
For management of listed companies, it can often be difficult to understand they are in the business of selling something — in this case shares in their company. Every one of their actions, announcements or meetings with a broker is an opportunity to sell the value of those shares.
What are your strategic goals for 2018? Do you have a plan that will double, triple or quadruple your share price?
And if not, why not?
Andrew Rowell is an expert in Investor Relations and leads a Cannings Purple team that has advised on more than 115 M&A transactions with a combined value of US$130 billion over the past 12 years. We placed first on Business News’ PR League Table in 2017-18 and are again leading the field this year. Contact Andrew