IR Monitor – 26 July 2023

In this week’s newsletter:

• Investor support for E&S Proposals has dropped significantly in 2023. Writing in the Harvard Law School Forum, our colleagues Garrett and Hetal explain why
• How to optimise your IR website to better serve investors. Expert tips from IR Magazine to tell your corporate story most effectively online
• If companies are going to buy back shares, they should pay a fair price. Some are entering into oblique contracts with brokers that cost far more than purchasing on the open market
• Threads update: what have we learnt from an IR perspective? Our digital team explains
• Post-MiFID, UK reforms should target independent research too. Plans to wrap the cost of research into trading charges aim to boost coverage of small companies. A better goal, in the opinion of Bloomberg, would be the promotion of unconflicted research
• And finally … who can say what Odysseus means? asks Matt Levine

This week’s news

Investor support for E&S Proposals has dropped significantly in 2023

2023 has seen a significant drop in investor support for environmental and social proposals, and the reasons run deeper than we thought. FTI Consulting’s Garrett Muzikowski and Hetal Kanji have examined macro, regional, and issue specific factors driving this trend, including the rising anti-ESG sentiment in the US which is affecting investor action globally. The authors uncover how the reduced support for environmental proposals in the US differs from the picture in EMEA. Overall,  it seems as though today’s investors are more likely to “support environmental disclosure requests than to push companies to take a specific action,” in line with a general preference from investors to review increased reporting as opposed to directly manage investee companies. In addition to the factors impeding shareholder activism generally, there are some limitations on shareholder interference in strategic matters that seem to play a crucial role specifically with regard to environmental proposals.  The question now arises: will rising support for E&S proposals make a comeback, and how will activists adapt their strategies in order to hold companies to account?

How to optimise your IR website

The digital age of IR necessitates a compelling and transparent website that captivates investors. IR magazine suggests prioritising the essentials by featuring critical information prominently, i.e. earnings announcements, call recordings and regulatory filings— in a user-friendly layout and experience. Inspire with a forward-looking vision which connects short-term plans with long-term strategies. Embrace the growing importance of ESG initiatives, showing your commitment to responsible investing. Speak plainly, avoid jargon and make sure the IR website remains consistent with the broader corporate website. The message is clear: don’t wait to revamp and optimise your IR website. It can serve as an extremely powerful platform which paints a clear and exciting picture of your brand and its vision for success.

If companies are going to buy back shares, they should pay a fair price

Global buybacks hit $1.3tn last year and often make the headlines. Activist investors hail them as a quick cash prize for shareholders, but critics worry about short-term profiteering at the expense of long-term growth, reports the FT. Amid this controversy, a new study by two Goldman Sachs alumni reveals a worrying trend for corporates and ultimately their shareholders. Over 10% of companies are resorting to “complex contracts” with investment banks, known as accelerated share repurchase agreements. At first glance, these deals seem appealing—the bank promises a specific discount on the volume-weighted average price over a four-month period, shielding the company from daily market swings. But the researchers warn that brokers can game the system. The result? Companies end up with fewer shares than expected, and brokers pocket hefty commissions. In fact, the Securities and Exchange Commission has recently changed disclosure rules, which now allow investors to uncover if companies are getting short-changed on their share repurchases.

Threads update: what have we learnt from an IR perspective?

The Meta-owned Threads app has now been downloaded over 150 million times, making it the fastest app of all time to reach that figure (faster even than Chat GPT). FTI’s Digital & Insights team in London offers a few relevant observations for IROs. Almost a quarter of FTSE 100 companies now have a corporate presence on Threads, but only eight have posted anything, and thus far only one (Ocado) has posted financial results on the platform. It is, of course, early days and the app remains unavailable in the EU, due to what Meta describes as “upcoming regulatory uncertainty”. FTI view: from a user perspective, Threads is not yet the complete app it aims to be to see mass active adoption; from a company perspective, the lack of search – including lack of hashtags – also hugely diminishes the ability for corporate content to be discovered. Meta is said to be working on all of these areas though, so watch this space. To learn more from our Digital & Insights team contact [email protected]

Post-MiFID, UK reforms should target independent research too

In an opinion piece for Bloomberg, Chris Hughes welcomes the reform to equity research rules, in the context of a broader regulatory push to stop the trend of listings moving away from London. Hughes suggests, however, that these reforms are unlikely to achieve this on their own. Although MiFID II was introduced with the objective of ending so-called “thank you” trades and retaining the principle that trades should be carried out by those offering the lowest cost, it has had the effect of consolidating research among the biggest investment banks, who are able to bear the cost of (admittedly) unprofitable research departments. Recommendations from lawyer Rachel Kent, which are to be reviewed by the Financial Conduct Authority, will aim primarily to increase coverage of smaller companies which have been in sharp decline post MiFID. The importance of supporting independent research providers, who now produce less than 10% of all research, is also emphasised, just like the need to establish an independent research platform to reduce gaps in the market.  As the author suggests, “this will be about making things better, not perfect”.

And finally… Who can say what Odysseus means? When poetry and IR collide

Writing in Money Stuff, Matt Levine notes a striking IR case study related to BridgeBio, who announced positive results from a critical phase 3 clinical trial on a Monday, following a usual “save the date” notification the preceding Friday. Unusually, between the two announcements, the company’s CEO shared an excerpt of a translation from Homer’s Odyssey on LinkedIn – the one where Odysseus finally reaches land after many struggles. This was, he said in an interview, prior to learning the trial results… which proved to be “consistently positive” and resulted in a 5% share price increase on the Monday. Levine did not need more to suggest (ironically) an alternative “fun strategy” for IR would be to share a “cryptic but inspirational” passage remotely alluding to upcoming success – in turn raising the stock price – before ultimately disclosing bad results. Can insiders quote poetry during close periods?

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