IR Monitor – 18 December 2024

In this week’s newsletter:

• London Stock Exchange suffers biggest exodus since financial crisis: main market set for fewest listings in 15 years as allure of New York grows, despite planned UK reforms
• How to build an IPO investor base that powers your future: building a successful IR programme starts with the initial listing, according to IR Magazine
• US Judges order Nasdaq to throw out Board diversity rules, reports The Times. While Nasdaq believed the rules would benefit both companies & investors, critics have countered that the rules are against investor interests since there is no conclusive evidence that diverse Boards increase corporate performance
• Worried about stocks? $1 trillion in buybacks will help, suggests Bloomberg. Record repurchases will be an important buffer to total returns if share price gains disappoint
• CEO resignations and appointments: the FCA has changed its guidance on what is considered inside information during the process of a Chief Executive leaving
• The IR Monitor festive video: we climbed cringe mountain

This week’s news

London Stock Exchange suffers biggest exodus since financial crisis

Rafe Uddin, Marianna Giusti and Ian Smith of the Financial Times report the London Stock Exchange is on course for its worst year for departures since the financial crisis, as fears mount that even more FTSE 100 businesses will quit the UK in favour of New York.  A total of 88 companies have delisted or transferred their primary listing from London’s main market this year with only 18 taking their place, according to the London Stock Exchange Group. This marks the biggest net outflow of companies from the main market since 2009, while the number of new listings is also on course to be the lowest in 15 years. The exodus has continued despite efforts by the UK government, regulators and the LSE to boost the City’s attractiveness by reforming market rules and the domestic pensions system. The movers include £39bn gambling giant Flutter, which owns Paddy Power, and £55bn building materials group CRH. Last year, the Financial Times identified London as the European stock exchange most at risk of suffering departures of big companies to the US. Many advisers and executives say privately that recent reforms – including planned changes to the pensions system and an overhaul of the UK’s listing rules – have not yet moved the dial but City advisers hope the UK market will get a boost if China-founded fast-fashion group Shein goes ahead with a planned IPO in London.

Building a successful IR programme starts with the initial listing

April Scee and Jeff Bernstein of IR Magazine outline the key ingredients for a successful IPO. In order to bolster an IPO programme, IR teams must be master storytellers and effectively define the problem their company sets out to solve, communicate the urgency and scale of the opportunity at hand and justify why they are uniquely equipped to succeed. IR teams must show investors that their company has been purpose-built to both solve – and scale – a real challenge. Crucially, Scee & Bernstein advise the vision pitched to investors has to expand beyond the headline IPO itself as investors are more likely to trust a long-term plan that has been laid out with clear and credible milestones beyond the first quarter of listing. The success of an IPO is not defined the day a company becomes listed. Rather, paying attention to longer-term goals and the performance that follows will enable IR teams to consolidate and grow a loyal investor base and ensure success.

US Judges order Nasdaq to throw out Board diversity rules – The Times 

The US Court of Appeals for the Fifth Circuit has thrown out Nasdaq rules designed to increase representation of women and ethnic minorities on company boards. Introduced by the Securities and Exchange Commission (SEC) in 2021, the rules required Nasdaq-listed companies to acknowledge diversity and inclusion considerations when making Board appointments or explain why not. The requirements have been criticised by conservative groups such the National Center for Public Policy Research, and the Alliance for Fair Board Recruitment, a group founded by Edward Blum, who also led a successful US Supreme Court challenge against affirmative action college policies in 2023. The parties claimed that there was no conclusive evidence that diverse boards increase corporate performance. Moreover, the court ruled that the SEC lacked the power to approve the diversity requirements for Nasdaq-listed companies. Nasdaq said that while it believed its rule would benefit companies and investors, it respected the court’s decision & would not appeal. Judge Andrew Oldham, who was appointed by Donald Trump in his first term as president, wrote for the majority and said the initial rules approved by the SEC ran against federal securities law.

Worried about stocks? $1 trillion in buybacks will help – Bloomberg 

December is a big month for share buybacks and by month’s end companies are expected to have spent more money repurchasing shares this year than ever before. Buybacks have been called everything from market manipulation and wage killers to a tax loophole and an executive compensation scheme. With US stocks widely expected to deliver lacklustre gains in the years ahead, investors should regard buybacks as indispensable as they have become a key component of total shareholder returns for investors. In 2023, the S&P 500 companies spent $790 billion repurchasing shares, up from $170 billion in 2000, based on the longest data compiled by Bloomberg. Buybacks give companies the flexibility to distribute profits strategically when they lack compelling investment opportunities, rather than on a preset schedule, and shareholders generally pay a lower tax rate on buybacks than on dividends. Since 2000, buybacks have contributed more to total shareholder returns than dividends in all but three years. 

CEO resignations and appointments

The appointment of a new CEO is a sensitive issue with issuers keen to manage the announcement of a CEO’s resignation and the proceeding incumbent appointment as smoothly as possible. However, the FCA has just  issued updated guidance under UK MAR on the communication of CEO departures for business. In the Primary Market Bulletin 52, the FCA places more emphasis on the intention of a CEO to leave and on the start of a search process, both of which constitute inside information and can affect share prices. It is now mandatory for issuers to promptly disclose inside information regarding CEO changes and to carry out separate assessments for developments in resignations and appointments. The FCA suggests firms manage appointment announcements carefully, avoid information leaks and mitigate against press speculation during selection processes. 

And finally … the IR Monitor festive video

In order to gear up for the festive season, FTI’s very own IR Monitor team organised a festive video featuring your favourite Wednesday writers. We gathered around a snow-dusted pine tree with red hats twinkling to wish you all happy holidays from our respective London, Dubai and Washington DC offices! Stay tuned next year for more riveting and scandalous stories about CEOs, the trials and tribulations of IR and investor sentiments. And with that we’ll see you in the New Year! The IR Monitor will return on Wednesday 8th January 2025.