IR Monitor – 16th February 2022

This week’s news

Shareholders reign supreme despite CEO promises to society

Despite big words about the potential and importance of stakeholder capitalism, most executives are still firmly engaged in shareholder capitalism when it comes to dealmaking, says the Wall Street Journal. Academics at Harvard Law School analysed 116 takeovers worth more than $1 billion since April 2020 and found that none of them included any legally binding protection of jobs or compensation for those laid off. In contrast, the average takeover premium for those holding shares in the target firms was 34%, and in 98% of deals executives received a takeover payout. None of the deals contained any protection for customers or suppliers, and only 4% of deals contained limits on firing workers – though even these were unenforceable. Perhaps this goes to show that it’s down to other actors within society to look after wider stakeholders – and that the job of businesses should remain taking care of shareholders.

Hedge funds and activists threatened with new US disclosure rules

The Securities and Exchange Commission have proposed new rules around disclosing significant investments in US public companies, reports the Financial Times. Currently, hedge funds and other activist investors have ten days to amass a secret stake before disclosure, but under the proposed rule change, this would halve to five. Any stake of 5% or more would need to be revealed, which would particularly impact high-profile activist investors which can move share prices just by announcing they have bought in to a company, and benefit from that. The proposed change has been met with both praise and criticism, with some commentators applauding an intention to increase transparency, whilst others argue that it will allow investors to ‘piggyback’ on others’ research.

The practical guide to a successful virtual investor day

Love them or hate them, virtual investor days are here to stay, and OpenExchange has developed a guide for making them a success, as published by IR Magazine. It details how to maximise impact by presenting your brand, people and investment narrative in an engaging and memorable way. Virtual events come with their own challenges, including technical broadcast production, program development, networking, program execution and on-screen management. Particular gems of wisdom from the report include detailed questions to ask of a broadcast platform provider, how to manage chat functions and Q&As to avoid public-facing conversations that would be better had in private, and the importance of establishing, and sticking to, one key take-home message.

Wall Street’s wee hours are getting wilder

Whilst officially open 9:30 a.m. to 4 p.m., the tides have been changing on Wall Street, with an increase in huge after-hours swings. As the markets closed this past Friday, Peleton’s share price soared and Amazon’s rose 17%, whereas Facebook’s took a 22% plunge – just one day of recent notable after-hours moves. The New York Times has suggested that some of this after-hours volatility is a reflection of the current state of economic uncertainty, after all, volatility during regular trading hours is up as well. Additionally, they note that the wild swings in stock prices could also relate to the very nature of computer trading. Unlike humans, computers don’t mind working all night, and last year researchers at the New York Fed found that computer traders were largely responsible for overnight stock swings. It is undeniable that wild after-hour stock swings give the impression that something is amiss, even if it is not, so some say that the SEC must take closer look into overnight electronic markets, to ensure investors that nothing is awry.

We may need to pay our bosses more, not less, to keep the best in Britain

After a record year for mergers and acquisitions, bankers’ bonuses are bound to come under further scrutiny, with new headlines surrounding executive pay to come to the fore. But, despite this, The Times report that, in the background, there is a mounting view that executive pay in the UK must continue to rise, if running a PLC is to continue to be an attractive career choice for talented executives.

The rewards, and comparative lack of public scrutiny of them, available in other sectors (notably private equity) in both the US and Europe, are tipping the balance for British executive talent and worry for the FTSE100 chairman is rising.

And finally … Delivery Hero’s unorthodox approach to IR

Thursday, February 10th, Delivery Hero CEO, Niklas Oestenberg, proudly tweeted the Company’s Q4 achievements: EUR 1.9bn total segment revenue, reflecting +66 YoY, and 9.6bn GMV reflecting +39% YoY. Oestenberg concluded the tweet by stating that Delivery Hero had closed its year by becoming the majority shareholder of Glovo, adding to its footprint, reaching an impressive 2.2 billion customers. Yet, less than four hours later, he quoted the original tweet with a sombre update. Delivery Hero’s share price had dropped 30%. Oestenberg apologised to his shareholders, tweeting “I’m truly sorry for all shareholders”, and even included a sad-faced emoji. In a different turn of events from the previous tweet, he closed off the surprising update by stating the Company would not change its strategy, but instead, work even harder to prove their investment strategy was going to pay off. It is safe to say, that the replies to the tweet were less than positive – with one tweeter claiming the cause of the share price drop was as a result of “arrogance and a complete lack of understanding capital markets”. Ouch.

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