In this day and age of Twitter, Facebook posts, texting and emails, it may seem that press releases are an antiquated method of communications. However, the press release in an investor relations context remains an essential tool, a workhorse that conveys important information in an efficient manner, and which serves as a basic information feed to the electronic data sources that are the lifeblood of professional investors. So a few moments spent thinking about the format should be time well spent.
When faced with a looming deadline, the default reaction of many busy professionals is to pull out a previous press release and start marking it up to reflect what they wish to say in the current release. This is fine if the previous press release being used closely resembles the current situation and it was well written, but it can be a recipe for disaster if both of those criteria are not met. So herewith are some very simple rules to make press releases used for investor relations more effective and efficient.
First, pay attention to the maxim “Know your audience”. In the context of investor relations this means that your audience is overwhelmingly professional investors. Therefor, don’t try to be cute and don’t try to obfuscate. Institutional investors have pretty much seen it all and have a low tolerance for companies that don’t play it straight or that let their pronouncements get overly inflated with hype.
Second, think about the type of press release being sent out. Earnings announcements are a different type of release than announcements regarding unique events such as mergers or acquisitions. Each should have a basic template, but they differ somewhat. For regular earnings announcements this means a template that begins by setting out the important drivers of the earnings report – sales, earnings, EPS and the one or two main contributing factors to performance in the period. This should then be followed up by a discrete discussion of each of the components of earnings. This will differ by company, but at a minimum, would include sales performance, gross profit margin, expense controls and factors that may have caused the current period to differ from the previous year’s period, such as weather, strikes, write-offs or other anomalies. In preparing the release, it is helpful for both the writer and the reader if a consistent format is followed, as this will allow easier comparisons with other periods.
The one-off type of IR announcement is somewhat different. It should follow a more traditional format for a press release, starting by addressing the most important issues first, followed by additional information in declining order of importance. At the same time, the writer must address the “5 Ws” of journalism: who, what, why, where and when. (I’ve always found that after writing a draft of such a press release, it is a useful exercise to go back and see if you have answered all of the 5 Ws. In a distressing number of cases, you will find that you’ve missed one.)
While these are very general guidelines, they can be very helpful to have when you begin to write a press release. It sure beats starting with a blank slate every time.
John recently retired as a Lecturer in Management at Rice University’s Jones Graduate School of Management, where he taught investor relations. Prior to that, John was in charge of investor relations for Sysco Corporation and Walgreen Co. He holds a MBA from the Kellogg Graduate School of Management at Northwestern University and a law degree from Loyola University of Chicago.
You can learn more about John’s thinking about investor relations at his blog, Investor Relations Musings.
