Capital Markets & Investor Relations

IR Weekly – Monday 4th May

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Welcome to FTI Consulting’s IR Weekly newsletter

This week we take a look at; considerations for making the most of your virtual AGM; moves towards improving disclosures around short-selling; the SEC’s U-turn in curbing the power of proxy advisors; and Wetherspoons’ latest funding round excluding small shareholders. Finally, we consider why the stock market is showing resilience despite the worst economic plunge in history.

The week’s news

Virtual AGMs- legal, practical and governance considerations

A webinar hosted by Deutsche Bank addressed some of the legal, practical and governance factors that should be taken into account when hosting virtual AGMs. Companies should take into consideration the legal position of the countries in which they are listed as well as any relevant stock exchange rules, and in many cases constitutional documents may need to be amended to remove provisions which prohibit electronic meetings. While virtual meeting technology is praised for being more inclusive of shareholders, companies must remember they should give clear notice with instructions to their shareholders, and establish clear procedures including authentication security measures. Proxy advisory service Glass Lewis believe holding meetings is preferable to postponing as they provide direction in a time of uncertainty, as well as being critical to governance as usual. The Economist has taken a less favourable view arguing that online annual meetings favour managers over shareholders.

French regulator to improve disclosure around short selling

The French markets regulator has been moving forwards with attempts to improve disclosure around short selling, joining a list of several European regulators who have imposed temporary bans on short selling. The Financial Times reported that the AMF would look towards lowering the level at which shareholders must declare their positions, arguing that  these disclosures should encompass all securities including derivatives and bonds, as opposed to just a short position in the equity.

Getting the band together, when they’re apart: making virtual earnings calls work

IR Magazine detailed ways in which IR teams and management can navigate some of the challenges presented by virtual meetings while still presenting with calm to alleviate shareholder concern. Setting up a private video call thirty minutes before the teleconference can provide the opportunity for management to co-ordinate with each other, and leaving this running (on mute) for the duration of the earnings call can provide a visual connection between execs as if they were sitting in the same space. Supplementing this with minimal use of the chat function can also help to send cues and notes, and the use of a backup phone will provide an alternative option in case the speaker’s internet connection fails.  Management must prepare more than ever for the Q&A session, so preassigning responsibilities for addressing each subject area will smooth some of the virtual road bumps; the CEO should provide a high-level overview and hand over to the relevant speaker to address as appropriate.

SEC rethinks proposal to limit the power of proxy advisors

The Financial Times reported that the US Securities and Exchange Commission has forsaken an integral part of its proposal to limit the power of shareholder advisory firms over corporate decision making. The plan would have seen proxy advisors submit their voting recommendations to companies for comment and correction before distributing them to investors prior to shareholder meetings. The proposal has been criticised for attributing a high concentration of power to proxy advisory firms when it comes to matters put to shareholder vote, leading to questions as to whether they should be subject to increased regulation and accountability.

Wetherspoons bars private investors

The Times reported that JD Wetherspoons has raised equity of approximately £141m, facilitated by an accelerated bookbuilding process executed by Investec at 900p a share. Chairman Tim Martin, having volunteered to take a 50% pay cut amidst the COVID-19 crisis, has subscribed for £300,000 of shares alongside other senior management members including John Hutson, chief executive, and Ben Whitley, finance director. However, the placing, which represents 15% of the company’s existing share capital, is not open to the company’s small shareholders – a controversial exclusion given the measures which other companies have taken recently to bring private investors into the fold.

And finally…If things are so bleak, why are the stock markets rising?

As the world suffers the worst contraction in recorded history and nations worldwide battle the coronavirus, Tim Worstall ponders why the stock market is showing resilience. The argument goes that recent occurrences in the stock market should not come as a surprise, as whisperings of a storm on the horizon often spark a drop in shares and stock indices. Tentative recovery after the initial slump in prices can incite frustration, since the rise occurs against the backdrop of significant distress, presented by crises in both healthcare and the economy. However, this is an indication of how individuals believe the future will unfold, as opposed to a representation of conditions at present. Investors keep their gazed fixed upon the big picture, one which holds promise of the economy reopening within a matter of weeks and embarking upon a two-to-three month trajectory back to ‘normality’.  Rest assured – “however bad things seem now, people can see that they will get better.”

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