IR Monitor – 26th April

This week’s news

Targeting new regions for capital

Last week your FTI correspondent attended the IR society masterclass on how to target new regions for capital. The session focused on Scandinavia, Australia, UK private wealth managers and US OTC Markets. Equity sales teams discussed the merits of travelling to Scandinavia, where investors are keen to engage companies in person and remain open to the idea of meeting IROs as a starting point. Recent new fund launches, the internalisation of externally managed mandates and a significant ESG focus for investors were prevalent themes for the Nordics. Unsurprisingly, Australian investors are keen to meet virtually, given significant travel restrictions. They also remain on high alert for offshore diversification opportunities, due to some saturation in their home market, whilst the trend of externally managed mandates being moved in-house was also reported in the region. UK private wealth managers were also identified as an interesting targeting opportunity, but beware to keep your investment message crisp and concise for a largely generalist and active investor audience. Lastly, listing on a traditional US exchange often implies significant regulatory costs, and the OTCQX market was described as a credible alternative for any company with a foreign primary listing. Providing access to significant pockets of investors who are unable to invest in offshore companies, OTCQX enables foreign companies to comply with US securities law, reduce trading restrictions and ultimately maximise international liquidity and visibility.

Who’s afraid of activist investors?

According to Forbes, activist investing is on the rise, particularly among large cap companies. Indeed, one out of three companies in the FTSE 100 has an activist on its share register. Forbes attributes the surge in shareholder activism to three big trends: volatile markets and low valuations have created ample opportunities for activists; established activists, such as Paul Singer, have raised record funds; and the number of activists only continues to grow. However, Ed Hammond has written for Bloomberg arguing that, while they may be rising in numbers, the formerly fear-inspiring rhetoric of activist investors has lost its bite. Activism’s reputation as every board’s worst nightmare has guaranteed the presence of buzzwords such as “swarming” and “attack” throughout media coverage on the investors. Yet, according to Hammond, activist investors are increasingly less a coordinated act and more a group of out-of-sync individuals ‘fumbling around in the chaos’, uncertain about what is happening – much like the rest of investors. Accordingly, the language of fear assigned to activists may be due a re-evaluation as their formidable image appears to be wearing thin.

Harvard Law on proxy season 2023

Harvard Law School have distilled four main perspectives that they believe will define the 2023 proxy season in relation to companies’ ESG programmes, labelling it a period of “increased expectations and unintended consequences”. First, the article expects limited impact via proxy voting on ESG policies, and that market-first approaches, overfocusing on thematic objectives, without considering industry and context, will fail to regain support levels from pre-2022. Secondly, while proxy voting on its own may be insufficient to ignite change, it could provide a reliable signal that a company is underperforming its peers. Third, there is evidence of growing disconnect between companies targeted for insufficient environmental and social performance relative to a target rather than relative to industry peers. Lastly, investors and stakeholders must seek balance between company objectives across ESG KPIs and taking nuances such as industry risk and opportunity into account. The article also suggests that despite pullback in shareholder proposal support, the perceived softening of companies’ ESG priorities is unlikely to dampen stakeholder advocacy in 2023, and the diversity of shareholder views on environmental topics likely means a turn towards scientifically-set, realistic targets.

Make your investor day stand out

Last week, your FTI team attended an IR Magazine panel on how to differentiate an Investor Day. As the investment market gradually recovers, the session took note of what investor day planners found to be the most challenging; 40% said that the primary challenges were communicating macroeconomic changes to investors, as well as the hybrid/virtual decision. Expectations around hybrid or virtual events are still very new and finding providers that comprehensively support what IR teams want to create for attendees is difficult; offering an in-person option may aid in building a relationship. Regarding common best practices to make your investor day stand out, the panel advised that IR teams must first define what they view as “success”, by distilling clear objectives well in advance, working towards a singular focus in delivering a central message, and aligning the day with the firm’s long-term strategy. Multimedia is shown to be effective in engaging audiences, as well as tangible products & demonstrations; reducing the length of investor days retains the attention of investors; developing reusable content that can be extended or flexibly repurposed beyond the single-day event is also increasingly important. Finally, the experts emphasised the importance of getting the basics done correctly; thorough planning, including formulating contingency plans, remains critical.

As shareholders demand more, boardrooms need to learn to listen

With news of a BP shareholder expressing displeasure at the rumoured re-election of Chairman Helge Lund over the environmental strategy of the oil producer, The Times looks at how shareholders are becoming a factor that companies cannot afford to ignore. As technology enables companies to do more to address stakeholder concerns, as well as enhance channels of communication between parties, shareholders are increasingly empowered to own a communal voice in corporate strategy. The piece suggests that this empowerment can be a double-edged sword; while investors making positive impacts and encouraging the company to move in unison is undoubtedly beneficial to all involved, the negative can also manifest, as the overload of information and opinion may lead to counterproductive interests working against each other. An environment where public conversation is harnessed must be cultivated by forward-looking companies, because shareholder democracy is now inevitable.

And finally… is investor feedback made up?

Last week FTI hosted Robert Pickering to discuss his new book: ‘Blue Blood: Cazenove in the age of global banking.’ Robert was CEO of Cazenove, before its acquisition by JP Morgan, at a time when it was the pivotal intermediary in London between companies & their investors. The book is interesting throughout but here is just one quote on the difficulties of IR: “Our sales team were constantly badgered for feedback from their clients which we could then pass on to the corporates. The sales team, who measured their success by the size of their daily order sheet, regarded this as a terrible chore and resented anything which took them away from the important business of phoning their clients and asking for orders. I never understood how other firms tackled this problem as they had no competitive advantage over us in this respect. I concluded that they made most of their feedback up”.

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