IR Monitor – 6th April 2021
Investor Relations News
This week, we begin by looking at the data behind company relocations, post-Brexit, which reveals that investors are still choosing London. We move on to speculate about the potential for an increase in hostile takeover bids during 2021, as many public companies look primed for takeover. We then look at the risks of an ill-judged April Fools’ Day joke as Volkswagen was bitten by its attempt at a corporate quip. We go on to consider how the financial community has failed to learn from the Covid crisis as stock buybacks continue to soar. From there we discuss IR Magazine’s new Investor Events report, which looks at how conferences, investor days and site visits have transitioned into the new virtual world. To close, we visit the world of SPACs, and how their managers have been giving investors the silent treatment.
This week’s news
London to remain the financial services centre of Europe
Post-Brexit ‘Project Fear’ claims have been challenged as EU investors have continued to move to the City of London in order to better meet the needs of their clients. Data from a report by financial services consultancy Bovill has showed that over a thousand European banks, insurers and asset managers were opening offices in London to better serve European customers. While some companies have relocated to Amsterdam, estimates speculate that only 7,600 jobs have been relocated to the EU from the UK. While negotiations on a memorandum of understanding are still in play, this has not inhibited companies from choosing to relocate to London in the interim. Last week, a regulatory framework was agreed which means Brussels could grant UK financial firms the same recognition as EU firms while falling short of full equivalence.
The wolf is at the door
Companies are being reminded to prepare for what looks to be an increase in hostile takeovers during 2021. Many public companies are looking ripe for takeover: share prices are undervalued, there is an overabundance of available capital, and firms are experiencing challenges to organic growth, making conditions optimal for hostile approaches. As FTI Consulting has explained, it is vital that management works to identify hostile activity early. Companies should keep a watchful eye on their shareholder base, as groups of investors often join together in “wolf packs” to coordinate efforts; tracking movements via a stock surveillance service is a crucial way to identify early action. Should a takeover bid look imminent, boards and management teams should use business intelligence and forensic accounting to shine light on the leadership history of the nominated board members and provide shareholders with information on the successes and failures of the hostile individuals in their prior roles.
The dangers of trying to be funny
Last week Volkswagen AG (VW) provided a lesson in just how difficult it is to mirror Elon Musk and his power over Tesla’s stock price. VW’s U.S. arm claimed it was changing its corporate name to “Voltswagen,” denied it was an April Fools’ Day joke, then admitted that it actually was in fact an April Fools’ Day joke gone wrong. According to Bloomberg, the German giant has been riding a wave of investor excitement about its electric-car strategy and news of the purported name change helped VW’s American Depositary Receipts to climb as much as 12.5% last Tuesday. Reporters from trusted outlets such as the Associated Press are furious at having been misled by VW and made to look foolish. The Times also reported that some analysts were urging regulators to get involved. In an era of fake news, the light-hearted tradition of companies spinning tall tales appears to have lost its charm.
Stock buybacks soar to all time high
According to ZeroHedge, share buy-backs’ purpose of making shareholders and management richer – by becoming fixated on quarterly earnings results and on the share price, rather than on the long-term health of the business – has exposed these same groups to catastrophic risk, usually culminating in taxpayer bailout requests. Look no further than the 2020 bailout of U.S. airlines stocks despite the largest six carriers spending more than $47bn on SBBs in the preceding years. One might have hoped that the covid crisis has made companies more cautious when repurchasing billions of their shares. Four-week average buybacks are now at a record high according to Bank of America’s data going back to June 2009. Full-blown buyback mania has returned.
Investor Events report now available
Fewer than three in 10 IROs expect a return to in-person events in 2021 with nearly half uncertain and a quarter definitely not expecting a return. That’s according to IR Magazine whose new report – which has surveyed more than 1,000 IROs, fund managers and analysts – examines the changing face of investor events. Specifically, it looks at investor conferences, investor days, site visits and roadshows and how these events transitioned from in-person to virtual formats as a result of Covid-19. Three key findings from the report are that: investor conferences are the most common event for IROs to participate in, IROs find roadshows the most rewarding in-person event and investor conferences the most rewarding virtual event and, finally, investors attend more roadshows – both in-person and virtual – than any other investor event. The report also looks at how investors rate both the in-person and virtual formats of each of these events and concludes that, for future in-person events, IR teams should focus on investor days and site visits. The full report can be downloaded here.
And finally…SPAC silence isn’t golden
A novel approach to investor relations from the SPAC world. Managers of special-purpose acquisition companies (SPACs) have been giving investors the silent treatment according to Reuters. When hosting calls to explain their chosen transactions – such as Bespoke Capital Acquisition’s deal for Vintage Wine Estates or BowX Acquisition’s deal with WeWork – SPAC executives are not opening the line to questions. Unlike a public company announcing a major deal, a SPAC doesn’t usually make itself available other than for set-piece presentations. There are some benefits to SPAC disclosures: they are usually detailed, include projections for the business, and everyone receives the same information. But the no-questions habit misses any opportunity to put the architects of a SPAC deal on the spot publicly and to address their projections. The SPAC market is gaining traction and the dealmakers are in line for massive payouts. It’s not unreasonable, Reuters suggests, that they should answer for their decisions.
7 April: Israeli Banks Day 2021, Citi (Virtual)
9 April: Biopharma Team Doctor Day Series: Genetic Medicine, RBC Capital Markets (Virtual)
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