IR Monitor – 1st June 2022

This week’s news

IR Society Event – Ask Me Anything

Last week, FTI Consulting’s IR team attended the first live IR Society event since before the Covid-19 pandemic. The ‘Ask Me Anything’ session featured a panel of six professionals with backgrounds spanning both in-house and agency IR and investment banking. A key part of the discussion centred around techniques and considerations that IR professionals should be mindful of when engaging with investors during turbulent times. Forecasting, whilst cumbersome at the best of times, is even more unreliable in times of macroeconomic disruption. To the panel, this reinforced the need for IR professionals to have a clear grasp of how best to engage with their investors and communicate the value proposition of their company in the current economic environment. Whilst it was acknowledged that engagement with investors around earnings is still a pivotal part of the job, the panel also considered a broader range of communications to attract investor attention in a noisy world. A combination of mass-marketing events, such as capital markets days and one-to-one analyst calls, was deemed an effective strategy. One important caveat: CMDs often do well with current investors but frequently struggle to draw in non-holders at the levels desired considering the time and effort that goes into such events.

FCA planning reform of the listing regime to boost growth and competitiveness

To make sure the City continues to attract new IPOs, the FCA published a discussion paper last week regarding reform of the UK listings regime. As City AM reported, the FCA has suggested a series of changes to UK listing rules, including the recommendation to create just one segment for equity shares of commercial companies, with only one set of eligibility criteria. While this would feature mandatory minimum obligations, issuers could then choose to take on supplementary ones. These supplementary obligations would be focussed on enhancing shareholder engagement and be overseen by the FCA. The plan to reform has raised concerns by some of “watered-down” standards, while others have hailed the proposals as “long overdue”. The suggestions follow on from the recommendations of last year’s government-commissioned review by Lord Hill of Oareford, and from the updated policy surrounding dual class share structures.

Executives talking about recession now nearly as much as in April 2020 

With rising living costs coupled with increases in gas prices and mortgage rates it is unsurprising that talk of an impending recession has intensified. IR Magazine has reported that the number of mentions of the word ‘recession’ in earnings transcripts has multiplied sharply and is quickly approaching levels last seen in April 2020. Such is the concern that US executives are increasingly addressing the issue on their conference calls with investors and analysts. Against this gloomy economic outlook, many are beginning to sound the alarm bells; just last week, Bank of America economists forecasted a 1 in 3 chance of US recession in 2023. Nick Mazing, director of research at Sentieo, says individual and corporate data sets are ‘concerning’ and highlights the fact that inventory levels at retailers are high which could indicate that consumers are equally anxious.

SPACs are warning they may go bust 

Just two-years since the SPAC boom began, many of these companies are already issuing warnings that they may go bust. According to research from Audit Analytics, at least 25 companies which merged with Special-Purpose Acquisition Companies between 2020 and 2021 have issued going concern warnings (which are made when an auditor concludes that there is ‘substantial doubt’ about a company’s ability to stay afloat for the next year). Funnily enough many companies, particularly start-ups with little revenue, have quickly found that out. However, the Wall Street Journal has reassured investors that (despite such warnings) many companies do survive. Conversely auditors note that many companies which end up in bankruptcy never issue such warnings.

The 10 most shorted LSE stocks and the City fund managers that go after them

City AM has taken a look at 10 of the most shorted LSE stocks which include several well-known brands including Cineworld Group which, at present, is the most shorted UK listed company. Approximately 8% of its stock is held short by five investment firms. Other companies on the list include ASOS, which is held short by eight funds, and BOOHOO, which has seven funds shorting the stock. Globally, the most popular shorted stocks remain some of the largest U.S technology names including Tesla. The analysis also notes the fund managers for any IRO to be wary of: GLG Partners holds the most short positions in UK listed companies of any investment firm with 41. The fund manager is closely followed by Marshall Wace, BlackRock Investment Management and JP Morgan Asset Management which hold 32, 17 and 10 short positions respectively.

And finally… Forget ESG. Bring on the BS Index

The Financial Times has poked fun at the increasingly opaque world of ESG with its new ‘BS Index’. The paper goes on to say that – just like ESG – the art of recognising BS is subjective but can be surmised with the help of several analytical frameworks all of which can be used to charge more fees to companies and investors, of course. Accenture is guaranteed a spot in the index after an executive recently told an investor during a meeting, ‘one of my grand ambitions is to bring creativity to the boardroom on equal footing and influence with technology and intelligence because creativity is a powerful amplifier, and is code for what’s possible and what could be and what should be.’ Oh yes.

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