Visibility + Credibility = Market Capitalisation Also
While the impact of credibility and visibility is no rocket science to understand, it is among the most misused, underused or overused formulas for a good market capitalisation. Different Companies use the combination in different ways. While some rely mainly on visibility to push their share price upwards believing that the train of shareholder value needs to be constantly pulled by an external engine, there are a number of Company Managements who believe in the age-old adage of my-bat-will-do-the-talking! It is seldom used optimally.
It is as much important to promote the product/service well as it is to offer a good product/service. Let us consider an example of a listed car manufacturer. The stakeholders of listed car manufacturing company would include the buyer, his spouse, children, parents, colleagues, boss, neighbours, car dealer, salesman, mechanic, banks giving car-loan, local municipal body, manufacturer’s partners, collaborators, over 200 different types of vendors, employees, trade unions, tax authorities, licensing authorities, regulators of emission, banks lending corporate loans and ofcourse retail, HNI and institutional investors, stock brokers, stock analysts, stock markets, stock regulators, media, etc. For best market capitalisation, the Company will need to communicate with each one of them.
All Companies, whether B2B or B2C, have such a diverse stakeholder spectrum. It is the same for an airline brand to a bank or a manufacturer of adult diapers!
Market capitalisation is not only a responsibility of the entrepreneur or the Investor Relations department of the Company. An engineer bringing out a revolutionary car model is as important as the CEO of FII keen on investing in Company is as important as a creative director bringing out a great advertising campaign. They are all important.
Market share and market capitalisation travel hand-in-hand!
The question now is about the stance a Company should take during IPO when entering the stock market. A large number of hitherto unknown stakeholders would join as the Company shareholders. With a near cold-blooded approach towards profits, these investors and their battery of influencers would not hesitate to walk away immediately if they see a better opportunity. Education about the Company is key. Educating the investors about the dynamics of its business, the opportunity horizon, the competence of management, etc. It would be similar to a new bride entering a new family that is joint, large and happy. She needs to be educated on all things including family’s ethos. The sooner she is educated on all this, the better it would be for the entire family including her.
Building mutual trust with shareholders would be a slow process and neither parties should hurry it up. As a patriarch of the family, the buck will always stop at promoter of business. It is the balance between credibility and visibility that is more important to maintain.