Capital Markets & Investor Relations

IR Weekly – Monday 3rd August

Welcome to FTI Consulting’s IR Weekly newsletter.

This week we consider why Sweden’s approach to the Covid-19 crisis has paid off for its companies. We also highlight the key findings from FTI Consulting’s latest research report on the investor view of corporate litigation and its effect on investment decisions; the growing importance of corporate governance risk; what Boohoo can tell us about ESG ratings; the IR Society’s reaction to the SEC’s decision on holding disclosures and finally we look at the phenomenon of ‘resultsageddon’.

This week’s news

Swedish companies reap benefits of country’s Covid-19 approach

The Financial Times reported that, despite scrutiny over Sweden’s approach to coronavirus, companies have been delivering profits well above expectations. Even in cases where companies showed a decline, this was less precipitous than predicted. Sweden’s predicted economic impact paints a similar picture with central banks forecasting a decline in GDP by 5%, broadly in line with Norway and Denmark but still far better than the UK, France and Italy. There is general agreement that Sweden’s psychological advantage – keeping businesses open and having people less scared of working, shopping and socialising – has helped its companies. A good time to be an IR professional in Sweden.

Decade of disputes – the trillion dollar investor view

FTI Consulting’s latest research assessed the investor view of corporate litigation and how it can affect investment decisions. With responses from over 500 global institutional investors, our research found that 99% believed litigation to be an important factor when assessing investment opportunities, of which 52% believed litigation to be “very important”. Hedge funds stood out as the most likely to consider litigation “very important” and investors in South America and the Asia-Pacific region were those most likely to attribute high importance to corporate disputes. Our report also found that 61% of investors said that media coverage “strongly affects” their investment decisions when looking at companies engaged in corporate litigation. 97% of those surveyed also believed corporate disputes “often” or “always” become a crisis.

PwC stands down at Russian gold miner Petropavlovsk

Financial News reported that PwC may be starting to appreciate more keenly corporate governance risk. In an unusual move, the firm rejected its appointment as the auditor of Russian gold mining company Petropavlovsk after “significant changes” to its board, including the ousting of its CEO Pavel Maslovskiy and chair Sir Roderic Lyne which has led to fears around its ability to “function properly”. Mr Maslovskiy and Sir Roderic were voted out by four large shareholders led by the Uzhuralzoloto Group of Companies (UGC), a company controlled by Russian billionaire Konstantin Strukov that owns 22.4% of Petropavlovsk. PwC will reportedly wait for the 10 August general meeting to assess the board’s new composition and will then provide an update on whether it will be prepared to audit the company. Elsewhere, the FRC has recently deemed one in three UK audits as “unacceptable”.

What does Boohoo say about ESG ratings?

Boohoo was until recently the darling of fast fashion, scoring high ESG ratings from a number of providers leading to large investments from ESG-focussed funds. However, according to the Financial Times a new wave of allegations of paying below minimum wage has led some to question the influence that ESG scores can have on investment decisions. Several explanations have been offered as to how Boohoo was able to score such high ratings, but confidence in the ratings themselves has been damaged nonetheless, leading some investment managers to state that ESG ratings should not be viewed as investment recommendations, but as starting points for further analysis.

IR Society reacts to SEC decision on holdings disclosures

The IR Society has expressed its discontent with the Securities and Exchange Commission’s proposed amendments to the Form 13F disclosure rules. Under the proposal, the minimum threshold for 13F disclosure would increase from $100 million in US equities under management to $3.5 billion. This would, according to the IR Society, have a significant impact on the number of investment managers that would have to disclose holdings giving many UK listed companies less visibility over their share register. The IR Society believes this is a “backwards step in transparency” and is asking members to share their views before the Society submits an official response. If you have a view feel free to share it either with us or with the CEO of the IR Society directly ([email protected]).

And finally…It’s resultsaggedon

Lex highlighted this week the peculiar absurdity that is UK results in the last week of July, which it terms ‘resultsageddon’. For myriad non-financial reasons, the last week of July has become a favourite for half-year results declarations. This, combined with the UK market’s propensity to declare only on Wednesdays and Thursdays at 7am on the dot, means that this year 40 of the UK’s 350 largest listed companies published figures in a window of just 24 hours and a few minutes. Unfortunately, this peculiar market quirk has a very real downside. Whereas computer trading programmes can plough through this data surge in a matter of microseconds, it poses an issue for beleaguered analysts and active fund managers, who are already a species in decline.

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