IR Monitor – 28th September 2022

This week’s news

Who would bother voting shares? 

“Retail shareholders don’t vote” according to Bloomberg. Apparently, retail shareholders do not vote for multiple reasons; they are busy, they receive a lot of spam mail, and there is an ever growing volume of literature on proxy voting which is partly driven by regulatory requirements. The voting task is indeed time consuming, with proxy statements up to 100 pages long.  However, some binding votes are important – and retail shareholders should be voting. On the other hand, large asset managers like BlackRock have significantly more power and resources to do their research and vote shares. And in the middle lie other asset managers, who lack the resources to effectively vote but should be voting in line with their clients’ best interest. This is important given the recent decision by the SEC to impose a settlement charge on an asset management firm for not taking steps to make sure they voted in the best interest of clients.

How effective is your IR website when it comes to engaging retail investors?

Continuing the retail investor theme, IR Magazine collected some useful tips from IROs last week on how IR professionals use their websites to engage effectively with retail investors. Traditionally, IROs have paid greater attention to institutional investors, but websites are a key channel for IR to address the retail community and communicate the company story. 62% of IR professionals find IR web pages to be an effective tool in communicating with retail investors, and top IR professionals have called IR web pages “not only your business card to the investor world but also the one place of truth.” Evidently, the IR website can play a leading role in communications with the retail investors.

‘SPAC King’ Palihapitiya closing two SPACs after failing to find deals

Chamath Palihapitiya, also known as the ‘SPAC King’, is shutting down two vehicles that together hold more than $1.6 billion, wiping out tens of billions in start-up market value and punishing individual investors, according to the Wall Street Journal. The venture capitalist’s reign may be coming to an end, as the share prices of companies he took public, like Virgin Galactic and SoFi Technologies, are down by more than 60%. What’s more, SPAC investors have been pulling money out of his deals lately, making it difficult to complete mergers. This is in the context of bleak capital market conditions, and the closure of the two SPACS occurs as the usual two-year timeframe to find M&A opportunities is now over. It is worth noting that Palihapitiya still has two SPACs focused on biotech companies. However, as many companies have preferred to raise capital privately recently, the existence of SPACs is increasingly challenged.

Loudmouth activist investors become less vocal following recent changes

Reuters writes that a new mode of operating is being ushered in mellowing vocal investors such as Bill Ackman and Dan Loeb. With recent regulatory changes making shareholder campaigns easier and less expensive to pursue, getting access to company directors will make all the difference. Recent changes mean that universal proxy cards now require all board nominees to be appointed together rather than separately. The article also stresses the high cost of activist campaigns and suggests that the newly introduced changes are expected to make them less expensive. In turn, activists may have to operate more collaboratively with board rooms to stand out and make their ideas heard.

Research encourages firms to take the time to meet travelling analysts

In a paper published last month called, “ All in a day’s work: What do we learn from Analysts’ Bloomberg Usage?,” Azi Ben-Rephael, Bruce Carlin, Zhi Da and Ryan Israelsen use data on analysts’ usage of the Bloomberg terminal to characterise their work patterns and how they impact their earnings forecasts. Focusing on the different activities performed by an analyst (working at a computer or travelling to meet corporate managers and clients), the article finds out that the higher the Average Workday Length (AWL), the higher the quantity and the timeliness of analyst forecasts. Meanwhile, the higher the Percentage Away Day (PAD), the lower the number of forecasts provided. However, AWL and PAD are found to be both positively correlated to forecast accuracy and the article stresses that travelling analysts suffered a significant reduction in forecast accuracy during COVID lockdowns – implying that face-to-face interactions does contribute significantly to quality of financial modelling.

And finally… ESG has a new enemy. He is a cartoon character and his name is Dilbert

The creator of the now famous ‘Dilbert’ cartoon Scott Adams has taken aim at investment strategies focused on ESG risks, comparing them to a “colicky” baby with “firehose diarrhoea”. In a YouTube video published earlier this month, Adams promised that he would “take a shot” at ESG. He wasn’t lying. “What is this ESG thing I keep hearing about?” asks Dilbert. “Imagine if a crooked politician and a crooked financial adviser got married and had a baby”, says Dogbert. Whatever your opinion of it, a week-long appearance in the Dilbert strip is a sure sign that ESG has gone mainstream.

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