IR Monitor – 10th November 2021
Investor Relations News
We begin this week with the revelation that THG’s founder, Matt Moulding, wishes the group had never floated in the UK following its steady share price drop. Next, we look at Allbirds having to drop their sustainability claim from the IPO, as the SEC cracks down on climate change disclosures. We then turn to look at the art of consensus management – and how analysts are starting to call out foul play. From here, we explore where investors go for the best corporate access – with JP Morgan topping the league tables, once again. Following on, we look at how outflows from passive funds in October were almost 5 times larger than the previous record. Finally, a look at JD Sports and corporate governance… or lack thereof.
This week’s news
THG founder wishes he had never listed in London
Bloomberg has reported on THG’s steady decline since the Softbank-backed firm floated on the London Stock Exchange in 2020. Its founder, Matt Moulding, described the time since as “the worst period ever”, wishing the group had listed instead in the U.S. (where corporate governance requirements are less onerous). THG has lost nearly a third of its market value in 2021, largely linked to analysts’ concerns over the growth outlook for its ecommerce business, Ingenuity, and corporate governance fears. Moulding, however, attributes the 69% drop in share price to a short seller attack, suggesting “you wouldn’t rob banks anymore, you’d just do short attacks, you can get away with it, it’s legal”.
Allbirds dropped ‘sustainable’ claim from IPO after SEC objection
Regulators are increasingly cracking down on companies’ assertions about their ethical credentials and, this week, Allbirds was no exception to the scrutiny. The Financial Times has reported that the sneaker brand dropped the sustainable claim from its IPO following an SEC objection. The push comes following the SEC’s renewed focus on climate change disclosures and nomenclature. Allbirds CFO, Mike Buffano, said that existing ESG ratings, whilst great, “are biased to companies with longer track records”. In light of this, the SEC last month announced it was looking at investment funds’ labels to ensure that they too showed sufficient rigour behind sustainability claims.
Art of consensus management has analysts calling foul play
Averaging market estimates to create a consensus forecast requires judgement calls: Which estimates should be included? Which should be excluded (on the basis of being outliers or using outdated models)? Plus500, a financial markets bookmaker which publishes consensus forecasts – and then beats them – has recently been in hot water over its decision to exclude one analyst’s estimates from its forecasts. As reported in The Financial Times, Justin Bates, Canaccord Genuity’s head of research, has been predicting optimistic results in revenue and EBITDA which have proven to be the most accurate, and yet has been excluded from Plus500’s consensus for almost a year. Observers have been weighing in on both sides of the debate, with Plus500 supporters saying the exclusion has had insignificant effects, whilst others have sought regulatory opinion.
Where investors go for the best corporate access
JPMorgan has once again topped the tables for corporate access in the USA, in a ranking compiled by Institutional Investor. The firm was voted No. 1 in two separate leader boards: one for buy-side, and one for corporate executives. Voters were instructed to consider six categories, namely conferences, logistics, roadshows, field trips, team quality and virtual events, and JPMorgan swept the board, topping every single category in both leader boards. Its success has been credited to a proprietary online events platform, a client-centric approach and offering a “seamless, high-quality experience”, by Bernal Vargas, head of North America investor access at the firm.
Passive funds bleed more than £700m during worst month on record
Outflows from passive funds in October were almost five times larger than the previous record – set only in July of this year. Investors, increasingly concerned by inflation and rising interest rates, pulled £709m from passive funds last month, as reported by Financial News. The tide may finally be turning for passive funds: until this time last year, they had outperformed actively managed funds every month for two and a half years yet in 10 of the last 12 months, they have been outdone, attracting less money or suffering more outflows. In fact, October is the first month on record when outflows from passive funds (£709m) have exceeded inflows into active funds (£568m).
And finally… JD Sports antics show why governance matters
With JD shareholders enjoying returns of over 15,000%, compared to 211% from the FTSE 100 index, Executive Chairman Peter Cowgill has been the goose that laid the golden egg. But there comes a time when highly successful bosses become too powerful, The Times has suggested. Cowgill previously made his disdain for a CMA ruling (to block JD’s takeover of Footasylum) very clear calling it “appalling, unjust and inaccurate”. Moreover, he recently breached CMA rules by (somewhat dubiously) meeting with Footasylum boss, Barry Bown, in a car park. There is a perception that the Chairman acts like JD’s owner – a form of governance that is okay until it isn’t. As the Times also observes, nobody complains about the absence of governance when share prices are shooting up; it is only when things dip that eyebrows are raised.
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