IR Monitor – 22nd June 2022
Investor Relations News
First up this week, the Financial Times has published an outline of what analysts look for when identifying strong management within a company. Second, Bloomberg has noted a cooling in ESG investment as the sector’s notoriety grows. Third, IR Magazine has looked at how crisis communication plans have changed, with the magazine reporting a change in attitudes towards companies’ formal crisis plans. After that, to the bankruptcy of Revlon – the makeup company whose lasting contribution to financial history may well be a ruling that boards must maximize value. The penultimate article flags the move by Hargreaves Lansdown and AJ Bell towards the REX trading platform to provide small investors access to floats. Finally, The Times looks at whether companies should have a say in political matters or whether, on the contrary, it is a focus on profits that allows business to deliver human progress.
This week’s news
How to spot strong company management
The Financial Times has published an outline of what analysts look out for to identify strong management within a company. Managers should combine a high level of knowledge, and sector-specific expertise, with softer skills such as the ability to adapt quickly and an open and honest demeanor. Equally important is consistency so that analysts can compare what was promised or forecast with what actually happened. Candour is key ultimately: whilst everyone makes mistakes, those who take accountability are distinguished from those who attempt to mislead or simply ignore the issue at hand. Given the recent challenges for the market – including a pandemic, a war and rising inflation – now is the time to rethink management style in order to forge a successful future. Incidentally the late Robert Maxwell, whose threats to analysts made him unpopular, is a great case study in the sort of manager who investors avoid.
ESG Investment Cools as the Sector’s Notoriety Grows
ESG Exchange Traded Funds have been on a relentless rise until May 2022 when, according to Bloomberg, the biggest class of ESG ETFs had outflows for the first time in six years. The stark contrast between this reversal and where ESG investment was a year and a half ago exemplifies the recent criticism of ESG in the public domain. When Elon Musk described ESG as a “scam”, in May, he received global coverage and perhaps even sympathy in some quarters. Whilst this may be the opinion of an individual, many fund managers are looking to reassess their recent allocations. Furthermore, the increasingly complex regulatory environment, of which both Deutsche Bank and Goldman Sachs have recently fallen foul, has not done much to encourage further investment in ESG.
How have crisis communications plans changed?
This week, IR Magazine has released a report which examines how attitudes toward and practices in crisis communications have changed in the 10 years since their last report in 2012. The scope of analysis includes whether companies even have formal crisis plans and also the impact of Covid-19 on these. The report found that more than three quarters of IROs claim their company has a formal crisis plan, an increase from 2012, while seven in 10 claim further that this has changed as a result of the pandemic. Compared to Asia and North America, Europe lags behind marginally with 73% of companies responding that they do have a formal crisis plan (which compares with 75% in Asia and 81% in North America).
The case of Revlon
Boards can often become overconfident, when it looks like their prospects are only going to get better, but tides almost always turn according to Breakingviews. Revlon is a clear example – the 90-year-old company filed for bankruptcy last Wednesday after the Covid-19 pandemic exacerbated a shift to online sales. Reuters suggests this is a clear reminder to corporate leaders that they must maximize value when they can; the good times won’t last forever.
Hargreaves Lansdown and AJ Bell boost small investors’ access to floats
The Times has reported that two of Britain’s biggest retail share-trading platforms are moving to improve ordinary investors’ access to initial public offerings and secondary fundraisings. Hargreaves Lansdown and AJ Bell are now offering a service that they believe will enable private investors to have wider participation in the market. Many companies ignore the retail element in their IPOs, in large part because it is simpler to place shares with big institutions. Private investors and retail brokers have long complained of being marginalised. Henceforth, the two retail trading groups will offer access via the REX platform run by Peel Hunt. Andy Bell, Chief Executive of AJ Bell, believes Britain’s retail investors should be viewed as an attractive source of capital for any company considering a float.
And finally … Only by focusing on profit can business deliver human progress
The Times has written on the role of politics for businesses. It argues that only by focusing on profit can businesses really deliver human progress. Contrasting the active political viewpoints of companies such as Ben & Jerry’s (who recently spoke out against the UK government’s deportations to Rwanda) and the staunch apolitical stance of McDonald’s, this piece encapsulates the debate about the role of business in public matters. 35% of voters allegedly believe that companies should speak out on income inequality or race relations issues. They are entitled to this belief (even if these voters are not the shareholders). The McDonald’s Chief Exec has an alternative belief: that companies should be for all and that they should not divide along political lines.
Contact Us
To be added to the distribution list for the IR Monitor, or for further information on the dedicated investor relations team at FTI, please contact [email protected].
| The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
©2022 FTI Consulting, Inc. All rights reserved. www.fticonsulting.com |
