The real MVP? Investor relations

Professor Alexander Laskin dates the birth of investor relations to 1953, when General Electric was the first corporation to dedicate a department to communicating with shareholders. 

Other companies soon followed, as Laskin recounts in his authoritative Investor Relations and Financial Communication. With the postwar economy expanding and a newly affluent middle class looking to invest, publicly listed companies realized they needed to compete not just for customers, but for capital, too.

Mostly that meant promoting the company to retail investors just as they promoted their products — lots of marketing, little disclosure. At that early stage, Laskin opines, the job of communicating with shareholders was “perhaps not that different from the exploits of P.T. Barnum.”

In the 1960s, however, investor relations emerged as its own discipline, distinct from public relations. And by the 70s, the field was increasingly populated with people from accounting and financial backgrounds — experts who could better explain a company’s accounting and strategy to an increasingly institutional shareholder base. 

But the goal was still to get the company’s stock price as high as possible: Investor relations remained a persuasion function, tasked with painting the company and its management in the best possible light.

Things are much different today. The goal for investor relations now “is not as high a valuation as possible,” Laskin explains, “but rather a fair value of the stock price.”

Investor relations officers (IROs) should therefore be “eager to disclose negative information as much as positive.”

If they emphasize only the positives, Laskin warns, “they may contribute to a phenomenon called overvaluation.”

Shocking, I know.

Overvaluation seems like a nice problem to have — the catch is that it often leads to a subsequent undervaluation. When investors’ artificially inflated expectations are inevitably disappointed, they’re likely to overreact, pushing the shares well below their true value. 

This needless volatility can be avoided with good investor-relations work — and that, Laskin says, puts investor relations officers “at the very foundation of efficient markets.” 

Laskin notes Eugene Fama’s definition of an “efficient market”: when prices fully reflect all available information. 

The job of investor relations is to provide more such information, along with the context required to make it understandable, so that markets are more efficient.

More efficient markets mean that investors’ capital gets allocated more productively, to everyone’s benefit: Companies get cheaper capital, investors get better returns, and everyone gets better products and services. 

So it stands to reason that by making markets more efficient, “investor relations becomes a key activity not just for a particular company but for the whole modern economy.”

It’s a weighty responsibility — and probably not what IROs are thinking about when they’re prepping the next quarterly earnings call.

But Laskin believes they should be: “The survival of modern capitalism depends on how well [investor relations officers] perform their task.”

No pressure!

You might need a little hyperbole to sell a book on investor relations; I’m not sure.

But if Laskin is right, I guess it’s no exaggeration to say that the survival of modern crypto depends on how well Blockworks can do IR.

Now for the hard part

In collaboration with Blockworks, the Solana Foundation has launched Lightspeed — “the industry’s first investor relations platform.

The pitch: a comprehensive investor relations platform built specifically for crypto protocols and companies building onchain products.

Lightspeed, the Solana Foundation explains, “gives institutional investors, fund managers, asset issuers, and large token holders a single destination to understand the Solana ecosystem through institutional grade data, contextualized research, protocol level reporting, the latest news, and in-person events.”

In other words, crypto is progressing out of its promotional phase and into its efficient-markets one.

This is a big change. 

Traditionally crypto has attracted retail investors with sloganeering: the mantra “HODL” and the kumbaya catchphrase “we’re all gonna make it,” for example.

Somewhere along the way, things got a little more cynical. In 2021 (if memory serves), Sam Bankman-Fried was asked in an interview what drives crypto prices. His reply: “dank memes.”

He didn’t just mean memecoin prices, either. He meant all crypto prices.

Even as recently as 18 months ago, people still rationalized billion-dollar memecoin valuations by arguing they were tokenizing culture — PNUT as a kind of pseudo-equity in the Peanut-the-squirrel meme, for example.

The world has since forgotten about Peanut (RIP). And even crypto people have forgotten why they ever took memecoins semi-seriously.

For better or worse, crypto is changing — and despite what prices would have you believe, it's probably for the better.

If any of us are going to make it now, the industry will have to create real value, not just attract more attention.

What we’ll need to attract instead is capital — specifically, the institutional capital willing to back the builders of durable businesses, productive protocols, and in-demand products. Capital that's far more sophisticated than the retail money that chased memecoins to such dizzying heights.

The role of investor relations is to give that kind of investor the information they need to be confident enough to invest in crypto.

It’s not as easy as making memes.

But striving for the correct valuation of crypto tokens — and setting realistic expectations — will ultimately lower the cost of capital for real projects.

Let’s hope it does. The survival of modern crypto might depend on it.

— Byron Gilliam

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