Volga | Finance, business

True investor relations: telling the truth and nothing but the truth

22 Jan '10
Olga Stepanova, an IR specialist Group "Finance" and Investor Relations Society diploma holder

The term ‘investor relations’ is still fairly new for Russia’s business; however, for many companies operating in the Russian market it is as clear as water. What does it take to promote investor relations? It takes providing actual and potential investors with truthful information about everything that might influence corporate valuations.

For some IR is part of their PR techniques. It is obvious, however, that PR aims at presenting a company in a most positive ‘shadowless’ way, thus concealing or deluding negative aspects. As a result of such practice, the company runs the risk of losing investor trust through perceived lies and incorrect valuation.

In this country the term is closely connected to IPO and stocks. In fact, IR is a much more complex notion. Companies need IR experts to not only increase pre-IPO capitalization but also to raise equity investment. An IR specialist could aid CEOs, CFOs and directors for marketing in raising funds and preparing business plans and/or marketing strategies. He/she could also provide recommendations as regards interaction with business communities and the media. A skilled IP staff can help his/her firm disclose as much truthful data as required, while underscoring advantages.

To be successful, IR activity must be transparent and precise; data posted or presented should be correct and verifiable. To safeguard investors against inadequate information Russian law has, for one, Clause 15.19 of the Administrative Code that financially penalizes both legal entities and individuals (up to $1,300) for failure to provide an investor with adequate information or purposeful lies. The RF Criminal Code, too, has a special article, 185, that stipulates an up to three-year imprisonment for an issuer that deliberately lied in its offering circular.

Companies are now required by law to disclose to investors lots of financial information and corporate governance details. It is only a skillfully elaborated IR strategy that could help a company lower its corporate, financial, and reputational risks.
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