The words investor and public relations roll off the tongue with such ease that it seems yet another confirmation the disciplines share a cozy symbiosis.

They don’t.

The notion that increased media exposure leads to increased investment rings false for issuers primarily focused on gaining institutional investors.

The reason for this is simple.  For equities, buy (and sell) decisions are primarily driven by earnings and earnings growth.  And with instantaneous access to new and consistently issued financial information every 90 days, spotting a meaningful, or at the very least an interesting change in earnings or earnings growth is easy.  In some cases, it’s just a matter of managing alerts.

Of course, the first glimmers of growth rarely lead to immediate buying among institutional investors.  Certainly, more color is needed on strategy, the CEO and industry trends.  Might that be where carefully orchestrated media coverage, laden with key messages play a role?

Perhaps, but not likely. In aggregate, institutional investors (the buy side) pay analysts (the sell side) $5 billion annually for research, earned in the form of commissions.  As a result, it’s far more likely investors will turn to the research they pay so dearly for and not the press when a company starts looking interesting.  Further, analysts are available to talk with investors, and share their latest insights from being on the road with the CEO, attending a company analyst day, or reviewing upstream suppliers.  By contrast, Bloomberg BusinessWeek, while hard hitting and well-written, can’t compete with this. Given this carefully orchestrated flow of information to the buy side via the sell side, media exposure can be little more than a distraction.  And because it’s much harder to control what the press publishes than what a securities analyst publishes, media exposure, from an investor relations perspective, brings significant risks in the form of misstatements, comments out of context and erroneous reporting. Specifically, while institutional investors are rarely moved by glowing media reports, for better or worse, they are moved by negative media reports.

Best bet for newly public companies: remove media relations from the investor relations toolbox.  Further, my own personal view is that growing earnings is the best possible investor relations program there is.  When earnings are growing, not much else needs to be said.