Most companies comply with their regulatory obligations. Far fewer communicate well with investors. The difference is subtle, but it can have a surprising impact on confidence.
Whenever I’m researching a company, one of the first places I visit is its website. Sometimes I’m considering buying shares. Sometimes I’m already an investor trying to decide how to vote or whether to buy more, hold or sell. Either way, I’m looking for the same thing – a clear explanation of the business and a reason to have confidence in the people running it.
I’m not expecting an award-winning design or a cinematic corporate video. What I want is much simpler than that. I want to understand what the business actually does, who its customers are, why they choose it rather than their competitors and, ultimately, why I should consider investing.
Over the past few months I’ve found myself asking the same question over and over again: why are they making this so difficult?
It isn’t one company, and it isn’t one sector. It’s a surprising number of businesses that make investors work far harder than they should to understand them. Instead of explaining the business, they tell me their addressable market will be worth hundreds of billions of pounds by 2035. That’s interesting, but it doesn’t tell me why I should invest in your company. A small company operating in a huge market is still a small company, so before we get carried away with impressive forecasts, tell me what you actually do.
I don’t think that’s asking for very much. If I can’t explain your business after spending ten minutes on your own website, there’s a good chance the problem isn’t me.
Communication or compliance?
Recently I read a results announcement directing investors to the company’s website for further information. The website then directed visitors back to the results announcement. Somewhere, I assumed, the explanation existed, but I never found it. It felt less like investor communications and more like being sent round in circles.
A few days later I came across another company. It had announced its AGM through the stock exchange, opened online voting and published pages of legal resolutions. Yet there wasn’t a single mention of the meeting on its own website. Unless you happened to read the regulatory announcements, you would have had no idea one of the most important events in the company’s calendar was approaching.
Neither example is particularly serious on its own, but together they illustrate something I see surprisingly often. Companies are generally very good at meeting their regulatory obligations, but that’s only half the job. Publishing information because the rules require it isn’t the same as communicating with investors in a way that helps them understand the business.
An AGM is a good example. Existing shareholders want to know what they’re voting on and why. Potential investors may be deciding whether this is the sort of business they want to own. Both groups deserve more than a legal notice. The company’s own website should explain what matters, not simply point people towards another document.
The same principle applies to groups that have grown through acquisition. Listing half a dozen subsidiary logos with a sentence of marketing copy beneath each doesn’t explain the business. Investors want to know why those companies were acquired, how they fit together and what each contributes to the wider group. That’s the story the website should be telling.
The signals investors notice
None of this means a company with an average website is a poor investment. Some outstanding businesses have fairly ordinary websites, while some beautifully designed sites belong to companies I’d never invest in.
A website does, however, provide a series of signals. A broken link doesn’t matter very much. An investor factsheet that’s been ‘coming soon’ for six months isn’t a disaster. An out-of-date news page won’t make me sell my shares. Viewed individually they’re minor irritations, but viewed together they suggest that communicating with investors isn’t seen as particularly important, and that inevitably influences confidence. Investing is largely about assessing management, and management’s attention to detail often reveals itself in unexpected places.
Perhaps the simplest test is this. Ask somebody who knows nothing about your business to spend five minutes on your website. When they’ve finished, ask them to explain what your company does, who its customers are, why those customers buy from you and why an investor should take an interest. If they struggle, don’t blame the visitor. Ask whether you’ve really explained the business as clearly as you think you have.
Your website won’t determine your share price, and it won’t turn a mediocre business into a great investment. It is, however, one of the very few parts of the investment case that management controls completely. It should make life easier for investors, not harder.
Don’t make investors work to understand your business. Save their effort for deciding whether to invest in it.
