IR Monitor – 06 November 2024
In this week’s newsletter:
- Earnings could force CEOs to get political, warns Axios. Chief Executive Officers have been keeping their heads down ahead of Election Day, but quarterly earnings often require them to come up for air and to address investors & the media
- Is London’s AIM set to thrive after the Budget? asks CityAm
- SAP on LinkedIn IR channels, working with finfluencers and the future of digital IR: IR Magazine chats with the tech company’s Investor Relations officer
- Saudi Arabia’s wealth fund pivots from international investments: the Public Investment Fund focuses more of its financial firepower on domestic projects
- NIRI held a webinar on enhancing buy-side engagement: FTI’s correspondent attended
- And finally … If you run investor relations at a public company, should you run your press releases through an LLM to make them more chipper? Matt Levine on sentiment
This week’s news
In the run up to the US elections, corporate executives who tend to stay clear of commenting on politics have been facing pressure to address election uncertainty during earnings calls. According to an Axios analysis, more US companies are reporting earnings around election results compared to past cycles and the likely recounts have been extending the period of uncertainty. Given the turmoil around the last two election cycles it is key that companies prepare contingency plans for varied election outcomes. While most CEOs aim to remain neutral, extended uncertainty may require them to address the political landscape and reassure stakeholders of their company’s resilience no matter the outcome, especially given recent election cycles’ unpredictable impacts.
In last week’s Budget, AIM listed companies saw a partial inheritance tax levy, less severe than the anticipated full 40% expected by markets, which temporarily boosted investor confidence, according to CityAm. The FTSE AIM 100 index initially surged by 4%, though gains have since moderated. Despite the cool-off that followed the initial spike, Rachel Reeves’ plan for the AIM market filled investors with relief who are now hoping that the large discount developed in the face of uncertainty will narrow. Experts note that deeper reforms are still needed, however. With AIM listings at their lowest since 2001, new entrants like Winking Studios, a Singapore-based game development organisation, are sparking limited optimism. Analysts predict that AIM stocks may benefit from the changes in IHT, though larger economic catalysts are likely needed for a sustained revival. Others argue the Budget was a ‘missed opportunity’ to do more for smaller companies.
LinkedIn leverage: How SAP’s IR team is turning likes into investors
IR Magazine spoke to Johannes Buerkle, IR officer at German tech company SAP. Following SAP’s strong Q3 earnings, he explains how the company embraced LinkedIn for IR outreach, using the corporate social media platform to amplify updates via a coordinated ‘communications cascade’. By focusing on LinkedIn, SAP aims to reach new investor demographics with a dedicated IR channel, finfluencers, and in-depth content. After switching from X (formerly Twitter) due to its changing community dynamics, SAP now leverages LinkedIn to offer engagement-friendly, professional IR content, including event highlights. Whilst finfluencers continue to be a contentious group, SAP has successfully worked with them to connect with younger investors, by hosting in-person events and sharing SAP’s equity story. Its strategy also includes expanding content accessibility with multilingual avatar presentations, and improving direct data access for investment professionals, especially on ESG topics. Although cautious about generative AI, SAP selectively integrates AI-powered tools for market research, viewing them as soon-to-be standard across IR platforms.
PIF refocuses on Saudi projects
Overseas companies may be disappointed: Saudi Arabia’s Public Investment Fund (PIF) is scaling back its international investment focus to prioritise domestic projects amid shifting economic goals. The Financial Times reports that PIF Governor Yasir al-Rumayyan has announced plans to reduce overseas investments to 18-20% of its $930 bn portfolio, down from a high of 30% in 2020, at Riyadh’s Future Investment Initiative. This move aligns with Crown Prince Mohammed bin Salman’s agenda to strengthen Saudi’s non-oil economy. Historically known for high-profile international investments, such as stakes in SoftBank’s Vision Fund and Blackstone, the PIF is now reallocating resources to focus on meeting domestic development targets, including the ambitious $500 bn Neom project. To accommodate this, international investors are proposing co-investments with PIF rather than seeking direct funding. As the PIF targets $2 tn in assets by 2030, this approach reflects a focus on steady growth within the kingdom – with high-profile projects slowing or undergoing reassessment.
The Association for Investor Relations’ (NIRI) recent webinar on buy-side engagement provided valuable insights for Investor Relations Officers (IROs) and their management teams. Panellists emphasised the importance of understanding how trading commissions impact investor access, with higher commission revenues often granting more frequent meeting opportunities at conferences. This is particularly relevant as the sell-side often lacks insight into companies’ preferred investor base, creating a need for proactive outreach from IROs to secure desired meetings. Preparation is king & IROs should equip management with specific details, such as fund ownership levels and past discussion points, to foster more productive and personal interactions. For identifying new investor leads, CRM systems, sell-side analysts and even debt investors can serve as useful resources, especially for tracking down hard-to-find investors. IROs are encouraged to own their corporate access time, track KPIs for meeting effectiveness and focus on meeting the right investor types to advance their IR strategy.
And finally … cheer or fear?
In his Money Stuff newsletter, Matt Levine explores sentiment analysis and the ever-growing importance of getting the tone just right to effectively guide investors.. When companies sound optimistic, some stocks rally, even if the financial details are neutral. However, companies face a dilemma: staying optimistic boosts stock appeal but could invite legal risks if it appears misleading. To navigate this, some companies are turning to AI-driven large language models (LLMs) to analyse & subtly adjust the sentiment of their disclosures as described in a new paper by Sebastian Lehner. His research found that LLM-generated rewrites of Management Discussion and Analysis (MD&A) sections showed higher positive sentiment, correlating with optimistic stock responses. However, this raises the inevitable question: could a company get sued for having an LLM write a misleading press release? Should IR use LLMs to enhance stock appeal with carefully crafted positive language or does this run the risk of misinformation — leading to legal exposure?
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