IR Monitor – 23rd March 2022

This week’s news

The changing career path of CFOs and what it means for investor relations

With more of the workforce looking to follow a ‘non-linear’ career path, IR Magazine has investigated the potential opportunities this presents for IR professionals. CEOs are now looking beyond individuals with a quantitative headset to those who can also be a business thought partner. This new thinking has led to a huge influx of executives who were previously general managers and presidents of operating groups. IROs can take advantage of this changing landscape by growing their own business acumen and improving their abilities to think more broadly about a business’s needs argues one headhunter in her interview with the publication. An increasing number of IR professionals have stepped up to CFO roles in recent years.

Stock buybacks are on course for another record

Companies keen to make the most of market volatility have revealed plans to repurchase their own shares The Wall Street Journal has reported. Union Pacific Corp was one of the first to outline a stock buyback authorisation valued at approximately $25 billion. PepsiCo Inc and industrial gas company Linde PLC also said that they plan to repurchase up to $10 billion in stock. Consequently, Goldman analysts have revised their 2022 forecasts for buybacks to a record $1 trillion – a 12% rise from last year. These historic repurchases have been precipitated by the S&P 500’s recent 12% plunge. With stocks under scrutiny due to worries about Russia’s invasion of Ukraine and the rate at which the Federal Reserve plans to raise interest rates it is hoped that these buybacks will afford companies some insulation during this period of volatility.

CVC plans Amsterdam listing in blow to London market 

The Financial Times has reported on the latest blow to the London Stock Exchange. CVC Capital Partners, Europe’s biggest private equity group, has unveiled its plans to launch its multi-billion-euro IPO on Amsterdam’s Euronext exchange. The UK has struggled to draw in large successful listings in the aftermath of Brexit, which ended regulatory equivalence for financial services, although CVC rival Bridgepoint floated in London last year raising £300m. Despite no concrete plans being announced, and much depending on developments in the war in Ukraine, should plans proceed CVC would become the first major private equity firm to list on the Amsterdam exchange.

Using SRD II to uncover new insights about your shareholder base 

Last week we attended Proximity’s webinar on the new Shareholder Rights Directive II (SRD II). The directive seeks to level up shareholder transparency and improve engagement between issuers and shareholders. Previously, companies and their owners have struggled to communicate with each other, often employing costly methods to reach out to shareholders with no guarantee of engagement. Despite some initial challenges with implementation (due to lack of preparation in many markets which led to low response rates for initial disclosures) response rates have since improved and average 90 – 95%. An IR Magazine poll revealed that 54% of participants were satisfied with a disclosure request. Under SRD II, companies can gain access to information regarding investors’ locations and IDs which can be used to send communications.

Behind the scenes of share rewards

As annual reporting season approaches and companies prepare to disclose executive pay, Investors’ Chronicle has provided a deep dive into the sometimes secretive world of share awards. Shares awarded to employees can either be new ones issued by the company, repurchased shares or ones bought and stored in an employee benefit trust. When shares are awarded, several issues must be taken into consideration including tax. As HMRC would deem it inequitable to demand tax before a person has the means to pay for it, shares are taxed when they can be sold. While share awards are often better value than a cash award for employees, they typically come with conditions; for instance, executives may lose their award if they resign before they receive their shares. Many directors, including those sitting on remuneration committees, lack a detailed understanding of how share plans operate. To the discerning investor, however, the way firms manage share awards can indicate their risk appetite.

And finally … Stock Volatility and War

An astonishing conclusion has come from recent academic research: U.S. stock volatility is 33 percent lower during wartime and periods of conflict. In the latest NBER working paper series on stock volatility, researchers from the National Bureau of Economic Research have revealed new insights into Schwert’s groundbreaking ‘war puzzle’. The researchers posit that the profits of companies become easier to forecast during periods of war owing to a significant increase in government spending. Analysis of data on more than 100 years of defence spending demonstrates that stock volatility decreases when defence spending is increased. Further study demonstrates that earnings forecasts of defence firms by equity analysts become significantly less dispersed after 9/11 and the invasions of Afghanistan (2001) and Iraq (2003).

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].