IR Monitor – 2nd August 2021

This week’s news

London floats outweigh PE deals

IPOs 54, PE 53. Contrary to popular opinion, the IR community has been a net beneficiary (just) from the comings and goings on the stock market this year. Simon Foy wrote for The Telegraph last week that we needn’t worry about the wave of private equity bids dominating the news agenda, as data shows new listings in London have outstripped private takeover bids (just) in 2021. So far this year, there have been 53 bids for London-listed companies worth a combined value of £71bn, according to Panmure Gordon, including the high-profile swoop for supermarket chain Morrisons. This has sparked fears in some quarters that British household names could fall under foreign private equity ownership, and that the health and attractiveness of the UK stock market may be waning. However, with 54 new companies floating this year at a combined value of £53bn, City commentators are noting that the market is reloading faster than private bidders can drain it. What were we worried about?

Just Eat isn’t delivering for investors

A major investor in Just Eat Takeaway has taken umbrage at the company’s recent share price performance and recommended the food delivery platform explore options for a potential merger. City A.M. has reported that Cat Rock Capital, which holds a 4.7% stake in the group, has slammed management’s “deeply flawed communication” with investors, which it blames for a 28% share price drop this year. The activist investor said the Amsterdam-based company was now at risk of a hostile takeover bid well below market value and called for bosses to explore “strategic combinations with other global players”. Cat Rock said it was “deeply disappointed” with Just Eat’s handling of IR and accused the firm of failing to be transparent about the cost of investments and its impact on profit.

Panel holds firm on policing M&A

The Takeover Panel is refusing to budge on its code for policing mergers and acquisitions despite a campaign arguing that small shareholders kept in the dark during M&A are at risk of losing out financially under the present regime. The campaign, led by Lord Lee of Trafford, arose after a string of deals in which approaches had not been disclosed to shareholders for weeks or, in some cases, months. The Times has written that Lord Lee took up the issue during the takeover battle for Signature Aviation, the private jet services company that was bought out by American private equity firms for £3.5 billion. After bids for the company emerged just before Christmas, it was revealed that Signature had received at least ten proposed offers in the previous ten months. The Takeover Panel, however, insists its regime is still stricter than those of both the US and the EU. It added that greater requirements to disclose could force many more companies into a formal offer period, creating disruption for suppliers and customers.

Covid recovery pays divis for UK plc

According to new figures by the UK Dividend Monitor from Link Group, UK plc has bounced back from the worst of the Covid-19 crisis and is now sharing the proceeds with investors, with a “phenomenal” rise in dividends. Investment Week has reported that UK dividends have risen 51% year-on-year, boosted by the return of banking payouts, “catch-up” special dividends and soaring commodity prices. Whilst Q2 2021 marks the first period to be compared with a pandemic quarter, and was therefore “always destined” to generate favourable comparisons, the 51% jump was “significantly better” than Link Group’s expectations of a 31% rise.

The price of research – still falling

The Financial Times last week reported that independent research providers have complained to regulators in the UK and Europe that their businesses are being hurt by what they say is unfair competition; large banks have slashed the cost of research services in recent years, while the price of corporate research published by independent providers dropped 8% last year. Euro IRP, the trade body which represents 70 independent research providers, estimates that research pricing by independent providers has, on average, declined by about 40% since the introduction of the sweeping package of European market rules, known as Mifid II, in 2018. To quote one independent provider: “How are investors well served when 80% of the recommendations by bank analysts are ‘buys’? The research produced by the sycophants and stenographers at investment banks is part of a promotion machine, advertising other banking services”.

And finally … Tesla CEO Elon Musk to skip most earnings calls

Always a pioneer in matters of IR, Elon Musk has said he will likely no longer appear on the company’s earnings calls unless there is something “important” he needs to say, according to IR Magazine. Making the comments during the Q&A section of the Q2 earnings call, when a private investor asked whether Musk would take part in a YouTube interview once or twice a year, he said “I guess that I’ll do an interview. Just bear in mind [that] if I’m doing interviews tonight I can’t do actual other work. Only so much time in the day. But yeah, I’ll do it once. I won’t do it annually, but I’ll do it once.” He then added that “I will no longer speak, default, during earnings calls. So obviously I’ll do the annual shareholder meetings but, I think going forward, I will most likely not be on earnings calls unless there’s something really important I need to say.”

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