IR Monitor – 23 October 2024

In this week’s newsletter:

• FTI Consulting releases its latest report analysing AGM voting trends across the UK, Ireland, France and Germany
• Why London’s flotation business may finally be rising again: after a tough few years things can only get better, suggests The Times
• ESG investing falls out of favour as two thirds say ‘greenwashing’ is a key concern
• Everybody has a podcast – suggests Matt Levine at Bloomberg – even activist investors
• UK small-cap stocks face ‘existential threat’, a New Financial report warns 
• And finally … fat finger of the week award goes to ASML: the computer chip equipment maker reports accidental earnings disclosure to the Dutch market regulator

This week’s news

Latest FTI report analysing AGM voting trends across Europe

Confused as to how investors will engage with your latest AGM proposals? FTI has the answer as its latest report analyses AGM voting trends across France, Germany, Ireland and the UK. The report provides insights across the increasingly complex voting and corporate governance environment, where companies and investors try to balance stewardship with shareholder value. After analysing 435 companies, FTI found two key themes. Firstly, companies have continued integrating ESG & sustainability into the corporate governance landscape. Secondly, the impact that discussions on market competitiveness and regulatory developments have had on companies’ governance and remuneration is pronounced. Some key talking points include new companies offering shareholders say-on-climate votes- despite diverging views; shareholders for French and German firms ratifying auditors appointed for CSRD reports; board accountability for ESG risk oversight; greater accountability for directors breaching the “one-share, one vote” principle; and a willingness to consider remuneration packages outside of market practice for European Chief Executives. 

Why London’s flotation business may finally be rising again- The Times

Worries of declining flotation activity on the London Stock Exchange appear to be easing as “tentative signs” show business may pick up, according to The Times. Through a recent announcement, Liverpudlian company Applied Nutrition confirmed its intention to list in London, with an estimated £500 million valuation. Similarly, British payments business Ebury and the owners of Canopius are reported to be preparing for potential listings in 2025. Moreover, these IPOs are not confined to only British companies. The Singapore based, fast-fashion giant, Shein also looks to list- with an estimated £50 billion valuation. With only 11 businesses listing in London this year and raising a combined £586 million, a mega deal like Shein would be a game changer and put London’s market back on the map.

ESG investing falls out of favour  

Less than half of investors now consider ESG when making investment decisions. As reported in This Is Money, since 2021 there has been a decline in investors considering ESG when choosing investments, as many believe it does not positively impact returns. While investors are not completely ignoring ESG when making investment decisions, they are less concerned with the “E” and “S” than the “G”. One investor went so far as suggesting that “If it hasn’t got good governance, you really shouldn’t be investing in it. If the management are poor, then it’s going to lead to a disaster.” This trend reflects broader shifts in the geopolitical landscape, as evidence for which November’s COP29 conference in Baku expects to see 40,000 less attendees than last year’s COP28 in Dubai. Once considered the new direction of the market, with climate commitments made by governments across the globe and the launch of thousands of green funds, ESG now seems to be taking at least a partial backseat in the investment agenda.  

Everybody has a podcast – even activist investors: Matt Levine

Podcasts are the latest media craze, and everyone from industry leaders to social media stars are getting in on the action. Matt Levine of Bloomberg writes that even activist investors are jumping on the bandwagon. Elliot Management has launched an activist investor podcast targeting Southwest Airlines. The series, “Stronger Southwest” features interviews with Elliot’s nominees for the airline’s board of directors to bolster public support. The author predicts that activists will use podcasts to build public support and exert pressure on corporations, with increasing tenacity. If this trajectory continues, maybe one day we will see a reality show where activist investors compete to come up with the most outrageous corporate takeover strategy, or a rap battle between rival hedge fund managers. Whatever is next, it’s clear the world of activism is going to get more entertaining.

UK small-caps face ‘existential threat’ 

Asset manager abrdn is sounding the alarm on UK small-cap stocks, warning of an ‘existential threat’ as the sector continues to shrink. It appears the London market’s smaller players are feeling the squeeze, with 600 companies valued under £1bn delisting over the past two decades. As flagged in the Financial Times, a report by think-tank New Financial places the blame on the dramatic exodus of demand from UK pension funds. As it stands, only one local government scheme has a specific holding in UK small-caps — compared with 18 schemes just over a decade ago. The future of London’s small-cap market is increasingly uncertain and the fate of AIM hangs in the balance. abrdn’s proposed solution? Abolish the 0.5% stamp duty on FTSE 250 shares and expand the Mansion House compact to incentivise investment in smaller UK businesses. 

And finally… fat finger of the week award 

ASML, Europe’s largest tech company, found itself in an unexpected spotlight last week when it accidentally released its Q3 earnings report ahead of schedule. Reuters reports that the premature disclosure, which included a downgrade in sales and bookings forecasts for 2025, led to ASML’s biggest share sell-off in 20 years. It seems the market waits for no one – even when the news arrives early! CEO Christophe Fouquet swiftly apologised for the mishap during an analyst call but offered no indication as to whether any further investigations will be launched. The Dutch shareholder organisation VEB expressed surprise at the incident noting that, while the early disclosure raised eyebrows, it was the forecast itself that moved the market. Nonetheless, it’s important to remember that in the stock market, as in comedy, it’s all about the delivery.

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