IR Monitor – 21st September 2022

This week’s news

Market downturn sparks longest US tech IPO drought in over 20 years

It’s a bad sign for the cutting edge of the US economy and a bad sign for the IR job market. The FT has reported that, as high-growth technology stocks have been hit disproportionately hard by this year’s sell-off, the market is seeing the longest US tech IPO drought in over 20 years. Wednesday 20 September 2022 will mark 238 days without a tech IPO worth more than $50mn, surpassing the previous records set in the aftermath of the 2008 financial crisis and the early 2000s dotcom crash.  The US stock market has been rocked by the Federal Reserve’s battle to bring down inflation through aggressive interest rate rises, deteriorating investor sentiment and increasingly scarce growth capital.

Increased taxation of stock buybacks in the U.S

People are worried about stock buybacks and the fact that they protect investors from paying too more tax. But why would you invest money in a company if it could never give you any money back? Matt Levine’s Money Stuff newsletter questions the idea that companies should perpetually re-invest profits at the expense of stock buy backs. Levine notes that buybacks in the US are more tax-efficient than dividends, as they are only subject to capital gains tax whilst the entire dividend amount is taxable. However he also notes that this advantage has been recently eroded by a 1% excise tax, as part of the Inflation Reduction Act of 2022. Meanwhile, some argue that the 1% tax could be applied to SPAC redemptions, which are soon expected to increase strongly.

Creating investor presentations that help differentiate your story

James Beech, Editor-in-Chief of IR Magazine, hosted a panel discussion on what investors and analysts want from effective investor presentations. The panel consisted of Harry Shah (founder and CEO of OUTKREATE), Gervais Williams (Head of Equities at Premier Miton Investors) and Mark Zindler (VP, investor relations at Verra Mobility). The panel discussed how to tailor presentations for different audiences, how to create an emotional story that leaves a long-lasting message as well as best practice for using metrics to evaluate your performance and improve results. Watch this discussion to understand what adds value to presentations and what should be omitted.

New clawback provisions?

Ahead of revisions to be released by the SEC in October, ISS has discussed clawback provisions whereby companies may recover incentive compensation from current and former executives in the event of a material restatement of financials. The SEC is expected to release revised rules on clawback policies in October 2022 and has called for comments on its proposals. In doing so, it has also added 10 new policy questions along with a memorandum focusing on the voluntary adoption of clawback provisions and on the distinction between big restatements versus small restatements. Clawback policies are already the norm in most industries, whilst the Health care sector still shows one of the lowest adoption rates currently. The new SEC rules may well prompt companies to re-examine the scope of their policies.

ESG bonds “do little good”

On paper, they look like a perfect deal for green-minded investors. But goal-linked ESG bonds have been slammed by T. Rowe Price in Bloomberg for doing little good. Theses instruments are said to exemplify some of the most “egregious behaviour” by Wall Street banks and companies eager to exploit the surging demand for ESG investment. Why? Because sustainability targets embedded in indentures are either too easily achieved or hardly enforceable, making the whole point behind the investment strategy meaningless. In that context, the article stresses the guidelines published by the International Capital Markets Association, which encourages structures that require performance to be measured against at least one sustainability performance target and prevent call provisions that can be actioned before any target is achieved.

And finally… the world’s most baffling stock market jargon, according to Google 

And finally .. what’s the most baffling stock market jargon? A press release from CMC Markets reveals which of these words we often struggle to understand. Whilst the term “stock market” receives over 2.4 million Google searches globally each month, CMC Markets’ used search data to analyse the most baffling stock market terms in order to help new investors understand their meanings. The 15 most commonly baffling stock-market terms include ETF, IPO, Broker, Arbitrage and Bear Market. Michael Hewson, Chief Market Analyst at CMC Markets, said: “It’s not surprising that a lot of people find financial markets terminology baffling. As market professionals, we have to get used to new acronyms on a regular basis, and that’s before you take into account the ones that are in regular use.”

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