IR Monitor – 14th June 2021

This week’s news

The text of an investment revolution

We know public companies release reams of financial information every quarter as standard; in fact, according to S&P, the average length of an annual report is now equivalent to a 240-page novel. To help separate the wheat from the chaff, and to effectively identify tradable signals, analysts now rely on AI in the form of ‘natural language processing’, the Financial Times has reported. An increasingly popular field of artificial intelligence, NLP involves teaching machines how to read and understand the intricacies of human language. An NBER paper has estimated that algorithmic downloads of quarterly and annual reports in the US exploded from just 360,000 in 2003 to 165 million in 2016. What’s more, it’s not just financial reports that can be considered low hanging fruit when it comes to algorithmic processing: transcripts of management calls with analysts, media interviews, newspaper reports and social media conversation are all up for grabs.

No more deposits… please! 

When the Coronavirus pandemic hit in 2020 corporate executives rushed to raise money, then gave it to the banks for safe keeping. However, because in the current climate companies remain reluctant to borrow from them, the banks are unable to turn these funds into income-generating loans. So what now? The Wall Street Journal has reported, as their profit margins have suffered, that some banks have started not so gently encouraging corporate customers to spend the cash on their businesses or to move it elsewhere. Many bankers thought the improving economy would reduce the desire for holding cash but, on the contrary, deposit inflows have continued in recent weeks. In fact, bank deposits between late March and late May rose by $411 billion to reach a staggering $17 trillion according to the latest data from the Federal Reserve. While the pleas from the banks continue, finance chiefs insist holding onto cash is sensible for now.

Foreign investors dominate, holding 66% of UK-listed shares

Time for London IR teams to get on the plane again. According to The Guardian, analysis of the London market has shown that foreign investors now own 66% of UK-listed shares, this figure up 2% from 2019 levels. While domestic holdings by British shareholders have declined steeply, Europeans have increased their holdings the most in the last two years, ahead of both US investors and the increasing interest from Chinese-based funds. Notably, British pension funds own just 2% of the London stock market now, also following a sharp decline in recent years. Alison Owens, Global Chief Executive of Orient Capital explained that the London stock market, not unusually, “is dominated by big multinationals whose operations span every continent and compete with global peers, wherever they happen to be listed. There is therefore no logic for investors only to consider companies that happen to be listed at home.” Thus, while foreign investors have come to dominate shareholdings in London, UK investors are otherwise occupied in rapidly diversifying overseas.

Top tips to help you plan your next virtual or hybrid investor day 

IR Magazine hosted a webinar which discussed the best practises in hosting virtual or hybrid investor days. There was a consensus that hybrid could result in a “best of both worlds” scenario for investor days, allowing the entertainment and product demonstrations of real life interactions whilst utilising technology to be inclusive of other stakeholders such as retail investors. The panel stressed the importance of creativity and keeping the days engaging in the age of Zoom Fatigue, and of using the virtual capabilities to showcase more senior leaders in the company than previously.

Watchdog warns investors it’s watching meme stocks 

The Times has reported on the US Securities and Exchange Commission which issued a statement last week saying that it was closely monitoring the volatility around “meme stocks” as shares in AMC Entertainment, the world’s largest cinema chain, rallied by a fifth. Last Monday, they closed up by 15 per cent, or $7, at $55. Over the past month, they have surged by more than 500 per cent.  A fresh online frenzy this month propelled meme stocks (which include GameStop, the video games retailer) to their highest since the peak of their rallies at the start of the year. Some of these companies have capitalised on their new-found popularity by issuing new shares. “SEC staff continue to monitor the market in light of the volatility in certain stocks to determine if there have been any disruptions of the market, manipulative trading, or other misconduct,” the SEC said on Monday. “In addition, we will act to protect retail investors if violations of federal securities laws are found.”

And finally … these unprecedented times

Dealing with the fallout from a deadly, destabilizing pandemic left many executives struggling for words and resulting in the persistent use of the same descriptor when communicating with investors: “unprecedented.” New York Times DealBook has reported that as economies reopen the chatter among executives, analysts and investors is changing as well. Mentions of “unprecedented” events are less prevalent than they were a year ago and are often references to something in the past.

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