IR Monitor – 27th October 2021

This week’s news

The calm after the storm: Europe’s IPO boom plateaus

The decision of UK roofing company Marley and popular fitness chain Pure Gym to hold off on plans to go public is a sign of Europe’s recent IPO boom plateauing, according to Pitchbook. This comes in the wake of recent offerings underperforming, including Eurowag, a Czech trucking services company whose shares fell by 10% on its first day of trading. The current market volatility is directly linked to investor hesitation as the world looks towards a post-Covid economy. Such uncertainty resonates with senior Pitchbook analyst Dominick Mondesir who believes investors are favouring a “wait-and-see approach”.

Targeting International Investors: the how-to webinar 

Last Wednesday, FTI dialed in to hear from different experts in IR on how they perceive the current and future ways of targeting international investors. Daniel Gavaria gave compelling insight into the role of NDRs as Head of North America Corporate Access at Morgan Stanley. As a representative of the sell side, he emphasized that the return of roadshows after a year of lockdowns would reinstate the power of in person networking. Meanwhile, Eva Hatfield, an IR Executive at Ninety One, relayed the heightened expectations surrounding ESG, with hybrid working challenging the necessity of travel. In terms of international outlook, she cited clear interest from institutions on the US West coast which had previously been untargeted. Finally Patrick Mitchell, a Managing Partner at Investor Update, observed a lot of repatriation of equity back to home markets but also equal waves of new opportunities – markets like Australia have outgrown their domestic investment so look elsewhere now and Japanese investors have also increased their positions in UK corporates. Watch the full webinar here.

Ponder don’t panic: how to consider the index fund phenomenon

The unstoppable rise in popularity of index funds warrants scrutiny rather than concern, says the Economist. Unlike many ideas which became unruly as they surged in popularity (think railway bonds or sliced-and-diced mortgages), the growing phenomenon of passive investing does not pose as much risk as one might think. There are obvious pitfalls to the $26trn worth of passive investments lodged into these mammoth portfolios: it hands power to the companies who compile the indices, passive investors might lack the scrutiny required to effectively own such assets, and companies owned by the same passive fund may not compete as energetically as true competitors. The Economist acknowledges these risks but insists index funds are not worth panicking about as they are nowhere near dominating the market. Active managers are still by far the biggest player, especially among retail investment, private equity and venture capitalists.

Feeling the disclosure-bloat? Here’s the solution

Disclosures are becoming increasingly difficult to navigate, bulky, and as a result: less informative. Aswath Damodaran, Professor of Finance at NYU, proposes a solution to this growing dilemma. He calls for an overhaul to the way we approach disclosures and suggests a “triggered” process should be instigated, whereby a company’s disclosures are tailored to its actions. Contentions made by a company should trigger additional disclosures related to that contention. The concept of materiality should be reframed in terms of value rather than profits, and that should be connected with disclosure requirements which would increase proportionally with the value effect. What’s more, those who write the disclosure rules should be separated from those who make money from disclosure business, to curb disclosure’s rising complexity. Unless we break the cycle of each corporate shortcoming or market upheaval causing a fresh round of disclosure requirements, we are destined to worsen the disclosure-bloat. There will come a point where only computers will be able to read disclosures, due to excessive length and complexity. This could potentially open the door for artificial intelligence into the world of investing, but for all the wrong reasons.

The secrets to IR interview success

The role of an IRO is changing. Companies are hiring fewer IROs from communications backgrounds, and more from investment banking, with MBA and chartered accountant qualifications. Oskar Yasar, managing partner at Broome Yasar Partnership, points this out in his latest interview with IR Magazine. When discussing what to expect from an IR interview, he explains that management style and cultural fit are very important for hiring companies. He suggests that IROs need to be outgoing, robust and headstrong. Yasar thinks CFOs and senior management will ask candidates about their experience of what they’ve done to make a difference, particularly in areas such as ESG and Covid-19 response. Any strategic IR leader should also have shareholder activism as part of their proactive IR platform. The role of IRO has a promising career path, with many going on to CFO roles, and even CEO. It is up to companies to lay out this attractive career roadmap in order to hire the best talent.

And finally… What the City can learn from Succession…

The world of corporate backbiting and indulgent power-plays is back as Succession returns to our screens! City A.M. suggests that, despite the Roy family’s antics, there are professional lessons we can take from the corporate drama. Logan Roy’s battle to survive at the top of his firm in ignorance of his irrelevance shows the infeasibility of insisting on a vice-like grip on a company. Good corporate governance is the key takeaway here. Second, do not forget the value of a trusted ear. Who knows what problems could unravel when you cut loose your closest confidants? Any finally, there is no harm in being pleasant, especially in business – something which the Roy family never seem to remember…

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