Investing

Ralph planned to continue working hard to build the company’s credibility with Wall Street analysts and investors. It would be essential for EG to track analyst views on its performance and prospects on a regular basis. Ralph wanted to do this for two reasons. First, he would be able to ensure that the market had sufficient information to evaluate the company at all times. Second, Ralph knew that the market was smart. He could learn a lot about the direction of his industry and competitors from the way investors evaluated his shares and those of other companies. He did not believe that he could, nor would he try, to fool the market about EG. He was convinced that it was sound strategy to treat investors and the investing community with the same care that the company showed its customers and employees. Had previous management taken the time to understand what the market was saying about EG, the company might have avoided the difficult position in which it found itself.
In addition to tracking the analysts’ opinions and meeting with them regularly, Ralph thought EG should be more active and clearer in communicating with investors. Henceforth, communications with the market at securities analyst meetings and in press releases would focus on what EG was doing to build value for shareholders. He even thought it might be a good idea to have a section in the annual report entitled “Perspective on the Value of Your Company” that would discuss the company’s strategy for creating value.
He thought that EG could go as far as publishing estimates of the value of the company, as long as the assumptions were spelled out clearly. Ralph knew that this communications strategy would be a break with the practices of many companies and with EG’s recent past. However, Ralph did not really think investors got much benefit from the mechanical—and usually vague—explanations of changes in year-to-year performance typically found in annual reports. Likewise, the glossy photographs and glowing language in the front sections of many annual reports did little to give investors a clear sense of where a company was going and what the status of their investment was.