The equity story, or how to win over new investors…

ByArnaud Denis

The equity story, or how to win over new investors…

Beyond the figures there needs to be something more… that is the philosophy behind the equity story. Investor appetite and requirements for information are continually growing. This observation is closely linked to the effects of the economic crisis, as there is now a mistrust of figures. It is also important to be persuasive about other criteria, which are more qualitative.

In this context, the perception of a listed security will inevitably be established through the consistency and credibility of its “equity story”. But what exactly is this?

Putting together a story that attracts investors

For any investor, the equity story is the starting point for the acquisition of a stake in a company’s capital.

While there is no standard format or prescribed standards, so to speak, and while the miracle recipe for a good equity story is more an art than a science, being able to persuade still relies on a certain number of essential ingredients and know-how.

What is the company’s business activity? What is its target market? What are the reasons for its success? What is its sector of activity and what is its market share? What are its outlook and ambitions in the short and medium term? What is the profile of its management team? The company’s equity story must endeavour to answer these questions in a concise, structured and clear manner.

You can’t please everyone

The equity story concept is about setting out to investors the key elements they will need to make an investment decision. For this reason, it is important to clearly identify the reasons that prompt an investor to acquire a stake in the capital of a given company. The answer will differ based on the investment style adopted.

Each investor is defined by his or her expectations, risk tolerance and investment horizon. Given these factors, it is inevitable that you cannot please everyone. It is important that your investors invest for the right reasons, and so it is best to lay the cards on the table right from the outset.

Market and competitive environment

The dynamics of the market, its size and its development prospects are all elements likely to influence the general perception of the appropriateness of a company’s business model and its growth potential.

The formulation of the equity story must inevitably start with a description of the company’s positioning within its sector of activity as well as its competitive advantage.

Management team

The quality of the management is a key element in the successful implementation of the company’s business plan. In addition to a good script, however, it is also necessary to have a cast that is up to the challenges set.

The complementarity of the members of your management team will reassure investors about sound management and the sustainability of the company’s activities. This management credibility is among a company’s most precious intangible assets and continues to be a compelling argument in favour of acquiring a stake in a firm’s capital.

There is more to it than just having a good musical score; you also have to be able to play it. As attested to by much research on the subject, the equity story plays a major role in any investment decision. Amazon, which today has become a leader in many areas, was able to maintain investor confidence during its early unprofitable years owing to its persuasive equity story: a clear vision of market growth expressed by its CEO, Jeff Bezos, and the relevance of its positioning.

Only a well-structured equity story will make it possible to unlock a company’s full value potential.

Arnaud Denis

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