IR Monitor – 20th July 2022

This week’s news

How IR professionals can talk recession with Wall Street

In times of economic transition, investor communications can ultimately make or break a management team’s credibility. There are two critical time periods to consider when thinking about investor messaging, IR Magazine suggests – the shift we are currently in, when financial performance remains positive but the markets are anticipating a slowdown, and the actual economic slowdown, when more financial indicators have started to turn South. As we navigate the tricky transition to a recession, IR professionals should consider discussing stress tests and scenarios, providing data from previous slowdowns, acknowledging the disconnect between the current market and what is to come, and, finally, sharpening their guidance. IR professionals must ensure that they continue to proactively communicate during a slowdown by meaningfully reporting new metrics, reviewing their companies’ long-term strategy and dissecting the balance sheet. These times of uncertainty are nudging us toward a global economic slowdown. With economic cycles ultimately inevitable, a solid communications plan should always consider the best case, worst case and base case scenarios in good and bad times.

SEC scraps rules giving companies more power in proxy process

As the USA attempts to further distance itself from the Trump era, the SEC has voted to undo rules that handed companies more involvement in the creation of proxy advice, writes IR Mag. The move will see proxy advisory firms no longer required to make available to companies any research about them, or required to share with investors any written responses by companies to voting advice. A blow to corporate groups that have long campaigned for change, the rule reversal is said to see a return of the perceived issues with proxy voting advice such as accuracy and conflicts of interest. The SEC has also voted to delete a 2020 change to liability requirements for proxy advice, which provides examples of material misstatements or omissions. As is to be expected, the changes have sparked a flurry of opposing views with the US Chamber of Commerce criticising the announcement, citing a “politically motivated agenda”, whilst The Council of Institutional Investors has welcomed the rule changes.

Haleon’s listing shows the woes of the London Stock Exchange

Pharmaceutical giant GlaxoSmithKline provided the London Stock Exchange’s largest new entrant in over a decade, Haleon, this week. Each of GSK’s shareholders received one share in the new firm, Haleon, for every GSK share owned. With trading commencing at £30.5bn, the listing has been seen in some quarters as emblematic of the travails of a stock market whose best days are behind it. Haleon isn’t a fast-growing tech or life-sciences firm but, rather, a business selling Sensodyne toothpaste and Ibuprofen. And the most damning indictment of Britain’s stock market here? Haleon isn’t even looking to raise capital. So, why has the City’s appeal dimmed? The Economist argues that one reason is the departure of long-term capital. Another reason is that tech firms distrust City investors, who they worry are too focussed on short-term profits to take their businesses seriously, so they prefer to list elsewhere. Until the LSE has worked to update and adapt rules to make the exchange more attractive, not much can be done to alter the attitudes of those trading on it.

AIM research: small caps neglected

With a market value of £90 billion, London’s AIM market is one of the most successful in the world. However, it is not doing enough for companies worth £200million or less and neither the market nor its constituent members are to blame for this, The Standard alleges. Rather, a series of complex EU reforms introduced in 2018 lie at the heart of the matter. MiFID II makes it uneconomic for brokers to cover most small stocks and, with no prior research on them, it has become more difficult for firms to raise money from investors in this corner of the market. Despite the FCA’s decision to relax these rules there are simply not enough brokers to go around leaving certain companies with no other option but to pay for their own research.

Pre-emption changes should force modernisation for London

The FT has reported on the latest revision to pre-emptive rights that would see the limit on non-pre-emptive fundraising increased from 10 percent to 20 percent (as it was during the pandemic). Pre-emption rights, guaranteed in company law, afford existing shareholders with the right of first refusal when companies are raising equity (to preclude having their stakes diluted by new money). There is a consensus that the Covid-era flexibility worked well and that ‘soft-pre-emption’, where shareholders are informally offered first choice, was respected. Many, however, have voiced concerns over the possible weakening of the overall framework; with this in mind, additional measures are expected to be published which will try to put the onus on companies to explain their rationale in fundraising and on investors to take them to task.

And finally… ‘Above 20C is shorts territory’: City workers push boundaries in heatwave

As London deals with temperatures above 40C, The Guardian has reported on the imaginative ways that those in the financial sector have devised to keep cool without flouting dress codes. An open white or blue shirt with trousers or chinos seems to be the unofficial uniform for men of the city, while there is greater flexibility among outfits worn by female workers. One law firm’s employee, featured here, proudly sported a striped bow tie, linen jacket and straw hat. Thank goodness for the old school world of foreign exchange where the heatwave is reported to have had no impact at all. Andy, who did not want to give his surname, recently started a new job at a forex firm. “Andy” was admonished for his outfit during last week’s warm weather and told by his boss that chinos were “unacceptable”.

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