IR Monitor – 6th April 2022

This week’s news

Starbucks suspends share buybacks to invest in operations 

Starbucks Corp has said that it is suspending billions of dollars in share repurchases, a move that CEO Howard Schultz pledged would free up cash to invest in cafes and employees. Pausing the buyback programme, which Starbucks initiated last year, represents the best way for the company to invest in its next phase of growth. This was the message Mr Schultz told employees in a letter coinciding with his return on Monday as the coffee giant’s CEO, and as reported by the Wall Street Journal. The move by Starbucks bucks the trend, to some extent, in a year when companies are spending more money on dividends and share buybacks.

Opening bell: Trustpilot’s Derek Brown talks London IPO

IRO of Trustpilot Derek Brown has spoken to IR Magazine about his experience of going public in March 2021. Although Trustpilot was the first continental European company to list in the City since the UK left the EU, Brown has suggested that Brexit didn’t really figure in the calculations; the company’s IPO in London was not for political point-scoring but because the extra regulation served the company well. Brown claimed that London was the ‘goldilocks’ spot for them, since the company was too small for the US but too big for other European markets. His advice to anyone contemplating an IPO: “make sure you have the best assistance possible – listen to that advice – but make sure you’re in control of the processes and of the messaging.”

S.E.C. takes aim at SPACs

The S.E.C. voted on 30th March to propose new rules for Special Purpose Acquisition Companies (SPACs). According to the New York Times, this casts an ever-bigger shadow on the once-booming market and, if adopted, these public shell companies (formed to acquire a business and take it public without the fuss of the traditional I.P.O process) would have to provide more investor disclosure, especially about their ownership and performance forecasts. These rules would give SPAC and I.P.O investors a similar level of protection and, for SPAC advisors, this could require a complete business model revamp.

Bill Ackman to abandon public battles for quieter investment approach

The FT has reported on billionaire investor Bill Ackman abandoning his use of aggressive activist campaigns to publicly shame company boards and executives. He has a new, quieter approach to bring about change and bolster share prices, he said in an annual report to investors. Perishing Square Capital Management’s founder said on Tuesday that he planned to be a less vocal shareholder, buying large blocks of publicly traded companies and working behind the scenes on any concerns or strategies. The announcement formalises a shift in how Ackman invests, after making his name on Wall Street running bruising campaigns against companies such as retailer JCPenney, payrolls provider ADP and Canadian Pacific Railways.  The new approach will come as a relief to some.

An inconvenient truth about ESG 

The Harvard Business Review has suggested that, as of December 2021, assets under management at funds that publicity set ESG objectives amounted to more than $2.7 trillion but that, overall, investors have fared ‘not that well’ and that ESG funds have performed poorly in financial terms. The HBR refers to a Journal of Finance paper where the University of Chicago researchers analysed the Morningstar sustainability ratings of more than 20,000 mutual funds, representing over $8 trillion of investor savings. Although the highest rated funds in terms of sustainability attracted more capital than the lowest rated funds, none of the higher-rated sustainability funds outperformed any of the lowest-rated funds. Why? Part of the explanation may be that an express focus on ESG is redundant. In competitive labour markets, corporate managers trying to maximise long-term shareholder value should of their own accord pay attention to employee, consumer and environmental interests.

And finally… life goes back to normal 

The IR Society has reported that, although the effects of COVID-19 are still being felt, the FCA considers that issuers and their advisors have now adjusted to all the implications arising from the pandemic. This means that issuers can return to previous practices and methods of publishing appropriate financial information to support their decision-making. The FCA will therefore be withdrawing the temporary measures introduced during the pandemic, including the extended filing deadlines and the easements around working capital statements and general meetings that were put into place to assist companies raising new share capital. Life goes back to normal.

Contact Us

To be added to the distribution list for the IR Monitor, or for further information on the dedicated investor relations team at FTI, please contact [email protected].