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Aug 20, 2017

How they do investor relations at Baidu

Sharon Ng on coming to China to brush up on her Mandarin and ending up running IR for one of the world’s largest internet companies

At a glance 

Internet giant
Baidu, China’s largest search engine, has a market capitalization of $60 bn, listed in 2005 and has around 40 covering equity research analysts. 

Game of two halves 
Blackout periods set the rhythm for the IR function. ‘I think of it as ‘open season’ when we’re not in blackout,’ says head of investor relations Sharon Ng. 

Telling the story 
As three quarters of Baidu’s shareholders are based in the US, the company must work hard to explain the idiosyncrasies of the Chinese market.

The investor relations team at China’s largest search engine, Baidu, one of the biggest internet companies in the world, is a rare beast. The four-person team takes almost full responsibility for the business’ extensive IR program. It truly is the nexus between the company and its investment community. 

‘We’re much more than an administrative function that takes requests and arranges meetings with investors,’ says Sharon Ng, head of investor relations at Baidu. ‘The IR team is the company’s face for investors. We are the main point of contact, whether by email, phone or in person: we attend investor conferences on our own, and host investor visits and tours.’

The IR team is also an important conduit for providing investor feedback to management. ‘We play a very important role in helping to shape how investors think about Baidu, and we are the frontline for doing that,’ Ng adds. ‘Our investors also provide valuable insight that we can share with management.’ 

Baidu by the numbers

Ng has been with Baidu since August 2010. It’s a Nasdaq-listed company with a market capitalization of $60 bn and has been publicly listed since 2005. Baidu is the pinnacle of Ng’s career so far, and her experience logically led her to this role. She previously held a senior associate position in the technology investment banking team at Credit Suisse, where she worked on equity and debt financings, as well as M&A. ‘I came to China to brush up on my Mandarin and experience working in China firsthand,’ Ng says. ‘After being in investment banking, I wanted to work in a corporate environment. And having previously worked in technology investment banking, I was really interested in Chinese internet.’

She started out working in Baidu’s M&A team, a natural crossover from her previous work in investment banking. When the head of investor relations rotated into a different role, Baidu’s CFO thought investor relations would be an interesting position for Ng to consider. She was correct.

The main game

Baidu’s IR team thinks of its world in two halves: the period of time it is in blackout, and the period when it is not. ‘I think of it as ‘open season’ when we’re not in blackout,’ says Ng. ‘During that time we’re busy hosting and meeting investors. We attend conferences mainly in Beijing, Hong Kong and Singapore, and also run roadshows in Asia, Europe and the US.’

Given that Baidu’s investors are located around the world, come results season Ng must manage analyst calls across a number of time zones. ‘I would typically do a US East Coast call first thing in the morning, followed by a call with US Pacific Coast investors,’ she details. ‘Then I fit in Asian calls between midday and 4.00 pm and UK calls after that.’

Despite the challenges of managing communication with investors across different time zones, Ng and her team are committed to being as responsive as they can be. ‘When we’re out of blackout we’re communicating with investors around the clock. When we’re in blackout the big focus is making sure we catch up on everything that’s going on within the company,’ she explains.

The blackout period gives the team time to prepare board reports and earnings materials, working closely with management to make sure messages are consistent. ‘Peak busy season starts about three weeks before earnings announcements,’ says Ng. ‘We are also very busy communicating with investors when we’re out of blackout. But it’s a different type of busy: when we’re not in blackout, it’s more about how to balance our schedule with the numerous investor requests.

‘Given that we’re a large Chinese internet company, there’s never any shortage of investors and equity research analysts reaching out to us to understand more about our company. At the moment, roughly 35 equity research analysts cover us; by the end of this year it’s likely there will be 40 or more analysts looking at Baidu stock.’

Lessons for success

Understanding internet industry dynamics is a core part of the work the Baidu IR team does. This is not an easy job given the pace of change in the industry and the size of the company.

‘Even though it may seem we have one product that generates the majority of our revenue, we actually have many different products,’ Ng says. ‘We operate in a highly competitive landscape where industry trends are constantly changing. But I tell my team there are three things that are fundamental to being a good IR department and a good IR professional.’

According to Ng, the most important of these three factors is to develop a sound understanding of the company – which is a challenge when the business is as large as Baidu’s. This involves building good relationships and trust with gatekeepers in the business who can provide the IR department with the information it requires.

Second is developing an understanding of Baidu’s peers, which requires tracking them closely and being on top of third-party research and industry news. Third is an appreciation of current and emerging industry trends in China and globally. ‘Unless you have a handle on those spheres of knowledge, it’s terribly difficult to be credible in front of investors or analysts – because they <i>have</i> done that homework,’ Ng points out.

More than three quarters of Baidu’s investors are based in the US, but the end-market for the company’s products is China. The IR team is, therefore, an important bridge between the investors and the end- market where Baidu mainly operates.

‘Our products are largely in Chinese so our job is more difficult as we need to explain our business to investors who don’t get to use our products,’ Ng says. ‘Communicating well in English and Chinese is important. Being able to understand the nuanced differences between the Chinese internet and the US internet, or the internet anywhere else in the world, and being able to do a comparison, is also vital.’

China specifics

Moreover, the Chinese internet landscape is rapidly evolving, something the team must keep a firm grasp on so it can communicate what’s happening to investors. In the past, internet models and trends were routinely imported from the US. Now, in the mobile era, new internet business models are emerging in China specifically for Chinese market conditions.

‘Chinese internet is an incredibly competitive market, and we need to iterate faster and run faster than our peers,’ Ng says. ‘With more than 700 mn users, we have the largest internet population in the world. This is creating an interesting phenomenon where business models that come out in China might never come out in the US.

‘From an investor point of view, it used to be pretty easy to figure out and understand trends in China because there would already be a US example to follow. But it becomes more difficult for investors when we’re talking about business models in China that have not proven themselves in the US.’

For instance, Baidu owns a majority stake in an online video platform similar to Netflix called iQiyi. It operates a hybrid revenue model that combines advertising and subscriptions, which is understood to be completely untested in the US.

Above all, says Ng, it’s essential for her and her team to gain a thorough understanding of investors’ perspective. ‘Typically, they come from the business angle, so it’s critical for my team to be very well versed in business and finance,’ she explains. ‘It’s not enough to just know the industry and the company. Investors look at Baidu as an investment – they study many different companies and many different business models.

‘For me it’s all about ensuring my team gets as close as possible to how our investors think by putting itself in those investors’ shoes. And as long as we can do that, we will continue to show our value, both to investors and to the company itself.’

This article appeared in the fall 2017 issue of IR Magazine

Alexandra Cain

Alexandra Cain is a Sydney-based journalist, editor, author and presenter who has been writing about investor relations for more than 20 years. When she’s not interviewing big wigs, emerging leaders and prime ministers, she’s surfing her favorite...