Case Study - Gazit Globe Ltd. (Symbol GTZ)
Nadav Cohen, Gazit Globe's head of Investor Relations, describes the real estate company's extensive activity in maintaining contact with investors and the IR activity contribution to the company's growth.
Only few companies understand the value of investor relations from Day 1 of their activity. The Gazit Globe real estate company, which began its business activity in 1991, is one such company. Since then, the company has grown significantly and is now considered to be one of the leading global companies in its field. The company in its current format has been traded on TASE since the 1990s and is today included in the TA-35 Index and the TA Real Estate-15 Index. The company is also listed for trading on the New York Stock Exchange and the Toronto Stock Exchange.
Company profile on the on the TASE website
Nadav Cohen, the company's head Investor Relations, attests to the contribution of IR to the growth of Gazit Globe. "The company's beginnings originated from a single property acquired by the controlling shareholder, Chaim Katzman, in 1991," says Cohen. "Thanks to the trust of the capital market and of the investors, and naturally the company's successful business activity spearheaded by Gazit Globe's controlling shareholders Chaim Katzman and Dori Segal, we've succeeded in growing to become among the world's largest companies in our field. This is also thanks to the fact that from day 1 of the company’s activity, its controlling shareholders understood the importance of investor relations."
Cohen describes how activity in this area is carried out on a number of levels, including: quarterly conference calls (in both Hebrew and English), analysts' tours of properties in Israel and worldwide, an annual investors conference held almost always at the Tel Aviv Stock Exchange Conference Center, and participation in additional conferences in North America and Europe. "The company's controlling shareholders and management are always ready to listen and talk with the capital market and with investors, because they understand that this is a bidirectional relationship," says Cohen.
In addition to Cohen, who is involved full-time in investor relations, the company's senior management is also committed to dedicating considerable time to contact with investors. "Senior managers maintain an ongoing dialogue with investors; it is not rare to see even our CEO and CFO answering phone calls from investors – it's a very effective practice. We maintain an investor relations website and beside from the conference calls, we also regularly supply investors with presentations and additional materials to help them evaluate the company's activity and value" explains Cohen.
"When you maintain a dialogue with your investors and the capital market, your stock price better reflects the company's business activity since the market understand your company better," adds Cohen. "We are always ready to talk with investors, even when the stock price falls or when there's a need to explain less fortunate events. Thanks to our openness and transparency, we've increased our pool of investors. Beyond institutional investors in Israel, the second largest holder of company shares (next to the controlling shareholders) is a foreign pension fund”.
How do investor relations help a company grow?
The best example of this is Israel's Teva Pharmaceutical Company, which for many years grew with the help of acquisitions paid for in cash but also in company stock. At Teva they understood the great importance of investor relations and made sure to hold quarterly conference calls and annual conferences, and always be ready to talk with investors, including at the company's senior management level. As a result, and due to Teva's successful management, the share price to earnings ratio of Teva stock, for decades, has been among the highest in the industry. Furthermore, its high multiplier granted it the ability to grow via mergers and acquisitions, paying in company stock such that it immediately contributed to increasing its per-share earnings. The company's expansion is carried out in a way that generates added value to its shareholders. Savers and investors in Israel have benefited from this for a great many years."
Less exposure to volatility
Cohen explains that one of the greatest advantages of IR activity is that the company enjoys greater financial flexibility in its financing activity. "In a highly volatile capital market, whoever wishes to succeed in harder times understands that it is imperative to have a variety of financing sources, i.e., banks, the capital market, debt-financing, and Equity. At the end of the day, the business activity of any public company needs to be successful, that's the basis. But the capital market, just like banks, is a further important source to finance the activity. The more you broaden your variety of sources, the less exposed you are to market volatility," says Cohen.
As for the manner of measuring activity, Cohen remarks that from his experience, IR activity possesses clear and measurable economic value. "Even a website can be of huge value, mainly for small companies with low trading volumes and, consequently, only minor exposure to investors. Very few companies that are not included in the
TA-100 Index are covered by analysts; so, for them an investor relations website constitutes their business card,
a good IR website is a sort of first step in broadening their investor circle. The website enables investors to be exposed to the company and more easily understand its basic economic data as compared with reading financial statements, which can sometimes be cumbersome and contain hundreds of pages. An analyst or investor, who examines 50 companies for the purpose of investment, will prefer information that is presented in an investor friendly and concise manner to complement the information contained in the financial statements."
When is it worthwhile appointing an investor relations director from within the organization?
"Over the course of time, such activity is performed through senior management. Appointing an internal director of investor relations can be appropriate for companies with a market value of approximately NIS 200 million and more. Smaller companies can certainly work with an external supplier; here, it is important to distinguish between investor relations and public relations, which in essence are two different fields. Rules that are correct for the press and media do not apply to a long-term dialogue with investors. If you want to preserve investor loyalty, a newspaper article or a Facebook post are not enough. This is a process that requires time."
To Gazit Globe IR website