IR Monitor – 23rd February 2022

This week’s news

The ever-changing face of IR

According to a webinar held by Edison last week, and a survey they conducted, the average bonus for those in IR is 45% of salary. The majority of the survey’s respondents reported that they enjoy their role with 74% of IROs seeing themselves in IR for the next 5-10 years – while the remaining 26% have their longer-term focus set on the executive management team, or on the CFO role. On investor targeting and diversification, despite the hype, only 35% target retail investors. On location, 27% of IR plans were reported to include Scandinavia, while 43% opted for Australasia and Asia. North America remained the most popular roadshow destination with 68% including the US in plans. Emphasis was placed on the need for face to face conferences although a hybrid set up was considered likely to continue. In relation to virtual meetings, 32% of respondents believe them to be more effective now. The most popular channel to communicate was found to be email (94%) but the second was social media, reflecting the younger investors coming in. The face of IR is ever changing.

Hearts, minds & algorithms: How your press releases are influencing trading

There are now two broad audiences being addressed by online communication – the algorithm and the living, breathing institutional or retail investor. Indeed, it’s estimated that 60 percent to 70 percent of overall equity trading is now being done algorithmically with AI processing millions of words and making buy/sell decisions in milliseconds. In this case, IR Magazine has asked whether Investor Relations officers should be flooding the wires to try to increase their stock prices. No, is the short answer. You’ll lose both your digital and human audience, it’s a waste of resource and investors may start to question the validity of the business if they think the leadership team is spending too much time releasing mediocre news rather than taking on important business decisions. Instead, issuing press releases for the right reasons and using keywords that are likely to attract both algorithms and human investors are the keys to success for a modern press release strategy.

A big business on Wall Street faces scrutiny

Changes on the shareholder register are relatively incremental, for the most part, and the job of IR  is therefore a relatively consistent challenge. But just occasionally, thanks to the dark arts of block trading, investors can come and go very rapidly. DealBook has reported on the news that the S.E.C. and US Justice Department are examining whether investment banks handling block trades improperly tip off hedge funds to the transactions. The S.E.C has subpoenaed Morgan Stanley and Goldman Sachs, and federal prosecutors are also inquiring into the practice. Block trades are typically used by investors looking to buy or sell a large amount of stock quietly. Banks arrange those trades, soliciting buyers or sellers and often pocketing a lucrative fee. It has become big business for Wall Street, reaching $71 billion last year, with Morgan Stanley and Goldman Sachs having dominated the business in recent years. Regulators are investigating whether bankers have tipped off top clients, who have then taken advantage by betting against the companies whose stock was being sold. Share prices often fall because of the huge amount of shares hitting the market, but those drops have sometimes come hours before the block trades take place.

Justice Dept targets ‘spoofing’ and ‘scalping’ in short seller investigation

Federal prosecutors are investigating whether short sellers have conspired to drive down stock prices by sharing damaging research reports ahead of time and engaging in illegal trading tactics, The Wall Street Journal has reported. The U.S. Justice Department has seized hardware, trading records and private communications in an effort to prove a wide-ranging conspiracy among investors who bet against shares. One tactic under investigation is “spoofing,” an illegal ploy that involves flooding the market with fake orders in an effort to push a stock price up or down and was outlawed in 2010. Another is “scalping,” where activist short sellers cash out their positions without disclosing it. Never the most popular camp on Wall Street, short sellers have had a particularly bruising few years and now may have to defend themselves against a federal investigation, which is being led in part by the U.S. Attorney’s Office in LA, an office known for prosecuting organized crime rings.

Falling out of love with stakeholder capitalism

New research led by Lucian Bebchuk, published in the FT, has called out the corporate stakeholder mantras established during the pandemic. Bebchuk has long been a staunch supporter of Milton Friedman’s shareholder principles and he sees the new stakeholder capitalism mantra as dangerously ambiguous, if not deceptive. Bebchuk’s research looked into what happened with more than 100 public company acquisitions worth more than $700 billion that were announced during the pandemic. Many of these companies were promoting ESG values at the time and Bebchuk sees the pandemic as a “peak ESG” moment. However, the researchers discovered that the “terms provided large gains for target shareholders as well as for corporate leaders themselves” in these mergers and acquisitions. The average takeover premium for shareholders was around 34%, and almost all of the transactions rewarded CEOs. Despite the fact that many transactions were viewed as posing significant post-deal risks for employees, the report suggests that corporate leaders did not bargain for employee protections in general. Worse, the trio concludes, “they also did not negotiate for any protections for customers, suppliers, communities, the environment, or other stakeholders”.

And finally … Spot the Dog

t is not often that the tables are turned in a way that allows companies to poke fun at investors. According to Bestinvest’s biannual Spot the Dog report, published in Investment Week, Schroders-managed funds are the largest group of underperforming products in terms of both assets under management and tally. While the largest of Schroders’ five own-brand funds (Schroders UK Equity) is worth £348m, management of both Scottish Widows and HBOS funds propels the group to the top of the table. The £3.8bn and £1.9bn HBOS UK Growth and UK Equity Income funds, which have not left the Bestinvest list since Schroders took them on in 2018, are a particularly troublesome pair of dogs.

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].