Capital Markets & Investor Relations

IR Monitor – 8th March 2021

Investor Relations News

This week we begin by discussing the 9th edition of our Digital team’s Social Divide in the City report and its key insights. We then explore the two sides of the Hill Review debate, before examining how companies are beginning to engage with their retail shareholders. Following on from that we discuss the decline of the liquidity premium and the rise of activist shareholders, then turning our attention to the efficacy of ESG ratings. Finally, we look at LinkedIn’s top tips for budding IR professionals.

This week’s news

A Social Divide in the City

Our Digital and Insights team have recently launched their 9th edition of the Social Divide in the City report, the annual ranking of the FTSE 100 companies’ results reporting on social media. Through their analysis of over 1,000 posts and 2.6 million engagements across four platforms, our team were able to identify key insights from this turbulent year, with Glencore now at the top of the index for volume, quality and impact. LinkedIn’s dominance as a key tool for reaching financial audiences has continued to increase, while leaders are playing a progressively larger role in sharing results-related messaging directly. The pandemic was heavily featured in posts and was often used as not only an explanatory factor for a company’s financial performance but also as an opportunity to highlight purpose and long-term vision. This in turn led to an overall ‘softening’ and diversification of results content that was previously restricted to financial statements and data. While they expect this messaging to continue, the team also identified three trends to watch – Audience-led activity, Robo-surveillance and Retail investors – as factors that will likely have an impact on results reporting on social media over the next year.

Hill Review: for and against. 

Following the report of former EU Commissioner for financial services, Lord Jonathan Hill, we have begun to see two camps emerge. Those in favour of de-regulatory recommendations like the adoption of a dual class shares structure for companies being admitted to the LSE’s “premium” segment, reduction of the free float requirement and loosening of the rules on SPACs, believe that these changes could allow Britain to use its newly found freedom from the EU to turbocharge the city. The Telegraph has suggested that if London does not make moves to take on these recommendations it will be left behind certain cities like New York and Amsterdam that are already engaging in some of these practices. However, the Financial Times also noted that many investors were nervous of dual class structures and SPACs, believing the former are being used as a bargaining chip to attract business to the UK and the latter are being rushed in far too quickly, without proper assessment, for fear of missing out. Any recommendations taken will require action from the Treasury and FCA – who will later publish their consultation on the matter and suggest new rules by the summer.

Retail Investors: how to engage?

The recent surge of small investors in some companies’ stocks has prompted IR departments to look for ways to engage with their new shareholders. The Wall Street Journal has reported that companies are starting to reach out to individual investors through special events, podcasts, and social media channels, whilst also keeping lines of communication open for institutional investors. Individual investors can sometimes be less knowledgeable about a company (or the stock market in general), making it important for firms to provide educational materials or adjust their marketing strategies. Similarly, Bloomberg’s Matt Levene has noted that the last few months have highlighted that, for some companies at least, individual investors can play a pivotal role in raising capital and driving up share prices. He remains unconvinced, however, that companies will be using “influencer strategies” anytime soon in their IR functions.

Liquidity premium now on the decline 

According to the Financial Times, the era of the “liquidity premium” is coming to an end and this is expected to have significant impact for investors relations. From the onset of the pandemic, many publicly traded companies concentrated on liquidity and cut share buybacks or went even further and took large cash infusions. As a result, these companies benefited from “liquidity premia” in the markets in the form of an inflated valuation. However, as we move into the recovery period, companies have begun to see the benefits of this liquidity begin to erode. To some extent this repeats the events following the financial crisis, which later led to the rise of activist shareholders calling for excess capital to be returned through buybacks and dividends or put to use through near-term capital projects to boost earnings. A clear hallmark of this shift is growing activism by hedge fund shareholders. To avoid such instances, executive teams are advised to look over their “recovery era” business plans in detail, ensuring they are familiar with their management’s recommendations on capital allocation, the internal forecasts that support them and understanding their effect on valuation.

ESG ratings: Bringing transparency or just greenwashing?

Questions are emerging over the quality and robustness of sustainability ratings. In stark contrast to financial reporting, there are no uniform requirements for ESG reporting, with Investment Week highlighting that a company’s ESG score can vary considerably given the numerous different methodologies in the market. Consequently, investors are being urged to see ESG ratings as a guide, and to avoid over-reliance on aNY single rating. There are also calls for more transparency in ratings systems, with some suggesting that allowing companies a right of reply (which is already standard practice at the credit rating agencies) could be the next step to help investors make informed decisions. With demand for ESG data and insights constantly growing, ESG ratings are likely to become commonplace across the industry over the next few years so these questions will be not going away.

And finally … Top tips for job searching in a highly competitive IR job market 

The IR jobs market has become even more competitive over the past year thanks to a flurry of new entrants following 2020’s market disruption. LinkedIn has published a guide for budding IR professionals on how to make themselves stand out. Identifying a USP is vital, as is maintaining a positive outlook, using your existing network and demonstrating strong interpersonal skills. Unsurprisingly, LinkedIn also advocates maintaining a strong, up to date LinkedIn profile.

Conferences

09-10 March: Financial Institutions Conference – RBC Capital Markets

09-10 March: Global Consumer and Retail Conference – UBS

09-11 March: Global Healthcare Conference – Barclays

11 March: UK & Ireland Equity Ideas Conference – Davy & Peel Hunt  

10-12 March: Mobility Disruption Conference – Cowen  

Contact Us

To be added to the distribution list for the IR Monitor, or for further information on the dedicated investor relations team at FTI, please contact [email protected].

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