What Is Investor Relations (ir) And What Do They Do?

A lot of importance has been placed on the liquidity of financial markets since Demsetz in 1968

. If you haven't ever heard of a market maker before, it's simply a company that consists of being a broker or a bank that will stand ready to buy and sell shares at a moment's notice. There is a specific 'bid' and 'ask' price and a market maker creates an opportunity for the investor to sell his/her shares, even if there's no seller willing to buy the shares at the moment.

There is significant risk associated with this, but to offset the risk, the market maker normally maintains a spread on each stock he covers, by gaining the difference between the 'bid' and 'ask' price. It can be really low, but if you consider he might sell thousands of shares, it ends up being very lucrative.

Sometimes the information that's essential to getting a stock quote published for a company through OTCBB or Pink sheets is done through a filing form known as Form 211 (otherwise known as Rule 15c211).

Disclosure information about the issuer of the stock needs to be available so that the quotation can be published. All filing requirements and the annual report will be required in order to trade with the over-the-counter bulletin board. Essentially by providing liquidity in the market, the market makers are compensated well enough. They are also members of FINRA, which used to be called NASD.

If you looked, you will discover that investor relations and a market maker will be closely interlinked. Where investor relations deal with information that is released to it's bond or stockholders, it also supports the market regulatory requirements and other activities linked with it. The information that's researched and released by investor relations is also directly responsible for how other potential investors may see the company and it can affect the company's stock price or earnings.

Investor relations may include annual reports, annual forecasts, press releases etc. Press releases used to be the primary role in the past for investor relations, but these days it will include anything and everything that the company and investors may need. By attracting investors to the company you ensure that you are creating a source of capital for when you need it. To a market maker the information released by these companies determine what risk they are willing to take and when to 'bid' or 'ask.'

On the American market you may have a single stock specialist or exchange member who will act as the lead market maker. But on other commodity exchanges and NASDAQ you will have several competing market makers, but they may not have the same skill as the specialist. It would certainly be helpful if you had a dedicated investor relations program to help ensure your investors receive the information in a timely and fashionable manner.

Also, you may consider drafting the services of a specialist 'Go Public' law firm or corporate finance consultancy firm with enough experience to help establish an investor program if you don't already have one in place. Understanding the relationship between your investor relations and market makers could mean the difference in succeeding in attracting the right investors to your business.

by: Jason Bacot

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