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By Brooke Parker

“The investor of today does not profit from yesterday’s growth.”—Warren Buffet

When you were seven, lemonade stands at the edge of your parent’s driveway was an idea that occurred to you out of boredom or pure genius. After speaking to Sally, the only person you would want to sell lemonade with, you decide tomorrow is the day to make at least enough to buy a popsicle from that girl who sells them by the pool. At the dinner table, mom and dad give you the go ahead and supply you with a table, chairs, tools to make a sign, cups, lemonade and change. Basically, they give you everything you need to succeed. Besides, you’re only seven.

Investments before and after an initial public offering (IPO) can be simplified to a lemonade stand at the edge of a driveway. To begin a business, investors supply capital to fuel the engine. If the business succeeds, investors will stick around and make a percentage of the organizations profit. Perhaps the seven-year-olds make more than imagined and decide to share some profits with their parents. Today, everyone is happy. In fact, mom and dad take you and Sally for ice cream. The lemonade stand did so well the first day, why not go for a second?

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Well, the second day, it’s raining. Imagine it: two kids sitting at the edge of a driveway soaking wet trying to sell lemonade. No cups are sold and supplies aren’t used. How are they going to tell their suppliers no money was made? In their eyes, this is a crisis.

A Fortune 500 company faces this every second. Stock prices rise and fall, irritating or exciting investors. However, in this grown up world, investors include hedge funds, personal investors and venture capitalists.

The art of public relations has a strong role not only within business, but the very beginnings of it; the money. Think of investors as people with eyes made of dollar signs. Investor relations is talking to the money.

Annual and quarterly reports are documents that describe an organization’s financial events to shareholders. These are in-depth analyses prepared by investor relations teams along with financial and accounting departments. However, when money is at play, myriad rules also come into the mix.

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The Securities and Exchange Commission, the regulatory overseer of the stock market, promotes full disclosure from corporations and is chartered to protect investors from fraudulent behavior. Public companies must comply with the laws of the SEC when it comes to financing. Before an investor relations professional communicates with investors, they must make sure the organization is following all regulations made from the SEC. Being well versed on the functions and rules of the SEC proves critical. I mean, we’re talking serious jail time here.

The Sarbanes-Oxley Act of 2002 protects investors from the possibility of fraudulent accounting and financial activities by corporations. Investor relations professionals make sure this act is being followed in things such as annual and quarterly reports. This is done through analyzing financial statements and making sure all accounting practices are following GAAP (Generally Accepted Accounting Principles).

Besides analyzing documents with lots of numbers, investor relations professionals meet with investors, prepare presentations, promote the road to an IPO, communicate with financial advisors, and study the market extensively.

Investors are one key audience that public relations professionals must speak to and have an entire industry dedicated to it.

After about thirty years, the lemonade stand turns into a brick and mortar shop selling an array of lemonade flavors at 26 different locations. Lemonade Parade has shareholders and a small investor relations team. However, the efforts of this team have amassed capitol through shareholders allowing for new locations. The annual and quarterly reports comply with the SEC, GAAP and Sarbanes-Oxley. Some serious financial growth is going on here and investors are made aware of it. Your seven-year-old self is smiling…Congratulations!

Although public relations professionals are often seen as ‘creatives’ who write catchy social media posts and foundational press releases, we also know a bit about finance and even some law. We understand the vital importance of investors and how to communicate with them. For profitable growth, the root of all business, ‘the money’ has to be informed and happy. With financial knowledge, lawful ethics and well rounded knowledge of the market, an investor relations team can make financial messages clear and the investors with dollar signs as eyes rich (hopefully).

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