IR Monitor –10th August 2022

This week’s news

Proactively managing IR through a volatile market 

Last week, a webinar hosted by IR Magazine discussed how IROs can proactively manage their IR strategies in a volatile market, especially ahead of the potential economic downturn this year. A prevalent theme was the importance of engagement with investors. Within the context of economic slowdown, there is higher urgency for investors to meet with corporates in person, as they want a pulse on the management of the business. Investors want quality information at a timely pace – so keep those IR websites up to date. It is important for IROs to understand why there is market volatility, to understand where it is coming on, and how it will impact business. Competitor analysis and benchmarking oneself against peers are also important elements of an IROs toolkit during an economic downturn. Those interviewed said IROs needed to maintain long-term relations with investors, take a long-term economic view, and that the worst thing to do is to make panicked decisions during this upheaval. ESG is set to remain at the front of minds for investors regardless of the potential recession. Measurement of recalibrated IR strategies will also be critical, to support decision making throughout what may potentially be a difficult period.

Restoring shareholder confidence when your stock is down 

According to the Harvard Business Review, shareholder confidence can be restored during difficult times by proactive managers who balance the effects of inflation and recession, with a strategic vision. Managers must first identify the difference between temporary and long-term issues affecting their stock price. For example, recession concerns should lessen in one to two years whilst unemployment levels could continue to grow and become a problem that is here to stay. Ultimately, communication with investors is key – especially those who are new and have onboarded themselves during recent peaks. This group needs reassurance and answers to important questions, so that credibility and trust is regained during a precarious time. The internal environment is also important; companies should prioritise talent retention and acquisition so that the business can grow with vision but with consistency and stability by the people who know the business inside out.

Traders love the ‘G’ in ESG 

Whilst numerous surveys have concluded that the ‘E’ for environmental matters most to investors regarding ESG, Bloomberg is championing the plight of the ‘G’ for governance this week. Analysts at Bloomberg Intelligence recently asked head and senior traders at 93 European asset management firms, including hedge funds, about what matters most to their business: The E, S or G. The overwhelming consensus was traders prioritise governance, motivated by a fear of being trapped in a regulatory nightmare. This means traders will move away from businesses that don’t meet desired codes of conduct, including data privacy, anti-corruption and ethical internal controls. The European focused survey found that 87% of European buyside traders said governance is “important” or “very important” to their business, especially in vendor and counterparty relationships.

No fast way to beef up City appeal 

Quoted in The Times, the chief executive of the London Stock Exchange Group has warned that the City of London is not protected from overseas market competition. David Schwimmer said there had been some “very productive moves” in the past two years to make Britain’s markets a more attractive destination for international companies and investors, but he added that there was no single solution for making London the most sought after location. This is already on the Government’s agenda, which is looking at ways to reform City rules after concerns increased that international companies are choosing to list in other foreign locations, over London. One solution is boosting Britain’s financial technology sector which the Treasury asked Mark Austin, a City lawyer to look into.

UK companies pushed to list at home after poor US showings

The FT reported last week that European companies listing in America have consistently underperformed compared to their domestic US listings and peers which remain in Europe, and have been particularly hit by the recent stock market downturn. European companies listing in the US have fallen an average of 47 percent from their offer price, compared to a 29 percent decline among domestic US listings and a 10 percent fall for domestic European listings. The data bodes well for those wanting to convince UK companies to list at home, as it seems the view that the US delivers superior valuations on a like-for-like basis, is changing.

And finally… Inside trading: how prisoners in America got into stocks

The Economist profiles a new trend this week – participation in market trading in some of America’s most notorious prisons. Two factors have created the perfect environment for jails to become a stomping ground for discussions around analyst predictions and views on market trends. These are the granting of covid-relief funds to prisoners and an increase in financial literacy as a result. As prison life does not grant the luxury of mobile phones and thus access to trading platforms, inmates have relied on dependents on the outside to trade on their behalf, just some of the 20 million Americans who took the activity up during the pandemic. Incarceration leads, more often than not, to life-long poverty, which in turn can lead many back to prison. The phenomena of prison trading has opened up the minds and broadly enhanced the opportunities, available to those who spend time inside.

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