When executives of Astronics Corp., a Buffalo, N.Y., company that provides specialized lighting for civilian and military airplanes, were preparing to spin off a printing and packaging division in early 2003, they almost overlooked a key player -- the company's biggest institutional investor, mutual fund giant Fidelity Investments.
Had Fidelity spurned the spin-off and sold its shares, it could have "devastated" the share prices of the tiny company (market capitalization: $55 million) and its spin-off, says Deborah K. Pawlowski, a veteran investor relations consultant who had just been brought on to help in the process.
Pawlowski says she quickly arranged a meeting with Fidelity's portfolio managers. It was the first time company executives had ever met the fund's officials. Among other things, she also made sure there would be market makers for the stock of the spin-off, MOD-PAC Corp.
As it turned out, Fidelity did not flee and MOD-PAC started life trading above the $5 a share mark, which ensured that it would be traded on the more widely followed NASDAQ National Market rather than the NASDAQ Small Cap market. While Fidelity has since departed from MOD-PAC, the company's shares now trade above $15 and Astronics' share price of over $7 is near its 52-week high, justifying everyone's rationale for the split.
Chalk up another success for investor relations, the myriad of outreach activities companies undertake to attract investors.
It's one of many, especially when it comes to small- and mid-capitalization companies that typically are traded on the NASDAQ and OTC markets, according to Brian J. Bushee, a professor of accounting at Wharton and Gregory S. Miller, a professor of accounting at Harvard Business School. The two researchers recently wrote Investor Relations, Firm Visibility and Investor Following, a paper that documents the impact of investor relations activities on the market prospects of small companies.
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