Telling the wrong story is one of the key factors that negatively impacts a company’s valuation, and Jason Gold, the CEO behind Resurge wants to change that. He founded his investor relations agency so that companies with lagging stock prices can get the valuation they deserve. By leveraging his 20 years of investing experience, Gold shows management teams what their company looks like through the lens of an investor. “It’s often a very eye-opening experience for these companies to see just how little their investors actually understand about them.”
Gold’s insights close the gap between what management thinks the company is worth, and the valuation Wall Street is giving them.
The LA-based CEO saw a niche opportunity to disrupt the status quo after a long career as an analyst and portfolio manager at some of the most prominent investment firms on Wall Street. He envisioned helping public companies better understand how their institutional investors make decisions, and therefore change the strategic direction of their IR programs.
This is why his approach is to shift the focus away from the “traditional IR outsourcing” engagement, which is dominated by process-oriented activities.
“Traditional IR consultancies are more geared towards business process outsourcing–handling tasks like publishing press releases, scheduling calls, and lightly redlining earnings scripts. Doing this perpetuates the status quo because it doesn’t ask the question, ‘Is what we’re doing resonating with investors? Are we getting the valuation we deserve?’ Resurge doesn’t handle these tedious tasks and instead really shakes things up and changes the strategic direction of the IR program.”
A lagging stock valuation can be the consequence of having a complicated company story where there is too much emphasis on details that are irrelevant to investors and insufficient focus on the key drivers of the financial statements. Our job is to help management demonstrate the proper business indicators.”
Gold’s advice to companies often involves reminding them of three key components that impact how investors arrive at a proper valuation for a company. Those are: story, numbers, and credibility.
“CEOs spend 60-70 hours or more on their company every week, while their biggest investor spends less than 2 hours a quarter analyzing them. This creates a huge understanding gap between what companies know about their story and what investors understand,” says Jason Gold.
Further complicating this, sell-side analysts today are covering 35-45 stocks and don’t have the bandwidth to understand every nuance of a company story. They actually prefer working with companies that articulate a clear and concise narrative about what factors are driving the business.
Every good story needs to be easily digestible and backed up by the right evidence and numbers. This is the second key component.
“Whatever story management teams are telling, they need to have a set of numbers that an investor can go out into the field and verify. It’s important to think very clearly about what numbers to disclose, so that investors can see evidence that the story they’re telling is unfolding. Getting anchored to a set of numbers that demonstrate a company’s success underpins every investor’s valuation decision, and ultimately enables them to own a stock.
“The third key component is to have credibility as a management team. Among other things, this involves under promising and over delivering on the guidance given to the Street so that the investment community can gain peace of mind with a company’s predictability and consistency. Regularly beating and raising this guidance demonstrates that companies have an understanding of how investors gain comfort with how management runs the business and handles Wall Street. Investors like companies that have consistency in their results because it tells them that they can rely on management to do what they say. That’s something that the Street loves.”
Bringing investor insights into the boardroom can help drive success for inappropriately undervalued companies. The outcome of telling the right story and changing the strategic direction of the IR program can be that investors start to credit the company’s efforts accordingly.