IR Monitor – 7 August 2024

In this week’s newsletter:

• Is there still a role for Aim? asks The Times. London’s junior market needs a lift
• In praise of investing the old-fashioned way: share certificates, company reports on paper and annual general meetings all have distinct advantages, suggests the FT
• Investor content consumption: research from Greenwich into the habits of institutional investors around the world speaks to a culture of both limited attention spans and the desire for content to be short and to the point
• Skadden on changes to the UK list regime
• Activist investors have sharper claws—and they want board seats, warns Fortune Magazine
• And finally … ‘Sexy is not the right adjective for our industry’: Inside waste disposal firm Clean Harbors’ award-winning investor day

This week’s news

Is there still a role for Aim?

With the AIM market’s 30th anniversary approaching, The Times considers whether the segment has “lost its way”: the number of companies listed on the growth-exchange has more than halved from its 2007 peak, dropping to the lowest level since the early 2000s, whilst a series of scandals have damaged investor confidence and given the market a reputation for volatility and underperformance. Acquisitions, companies choosing to go private, and delistings due to poor performance have all contributed to the exodus. AIM was established to give early-stage companies a platform to raise capital without being encumbered by the heavier rules of the main market, but with rumours that Chancellor Rachel Reeves may remove inheritance tax relief, fears are mounting that investors may be further deterred. The average market value of firms on AIM has reached £105 million, and its backers claim that it remains an essential platform, yet as the Government seeks to balance promoting market confidence with closing tax breaks, we can expect the debate to rumble on. 

Investing the old-fashioned way

Writing in the Financial Times, former fund manager Simon Edelsten reflects on the investment culture of the past – reading share tips in the business pages and focusing on personal engagement with your investments. He notes the benefits of execution-only brokerage services, whereby investors deal directly with company registrars, receive share certificates and can vote at AGMs. Opting for a self-managed portfolio over index-tracking funds has several perks – investors get direct receipt of dividends whilst some companies offer product discounts to their shareholders. Simplicity is perhaps underrated: taking a 1970s style approach to investing – a long-term, equity focused strategy which is aimed at preserving wealth – may be sage advice in inflationary environments. 

A culture of limited attention spans 

Having conducted research into trends in investor content consumption, the message from Coalition Greenwich is clear: keep information digestible, but remember that without data to back it up, analysis is just another opinion. Noting that market insights have never been more accessible than they are today, researchers found that 79% of institutional investors prefer written content and reports which are no longer than 5 pages. In the wake of the Covid-19 pandemic, webinars are building in popularity as a medium of choice; here, too, consumers expressed a preference for short form audio and video, with 53% expressing a preference for content that is under 15 minutes long. In this changing landscape, where information is abundant, the challenge is to ensure that analysis is robust, direct, and unique – investors are, more than ever, looking for quality over quantity. 

Changes to the UK list regime

Skadden has issued a note on the reforms of the UK Listing Rules, which came into effect recently. With the intention of making the UK a more compelling listing venue, the reforms have introduced a new single listing category for commercial companies called the ‘ESCC’ which replaces the previous premium and standard listing segments. Skadden highlights that the most important changes between the listings are that the number of obligations that apply to “significant transactions” and “related party transactions” has been significantly reduced and rules governing dual class share structures have been eased. New eligibility criteria also allow companies with limited to no operating history as well as those with complex financial history to list on the ESCC. Additionally, the new rules state that the board of a company must submit a declaration on internal systems and controls and that companies no longer have to have a written agreement with controlling shareholders. The rules surrounding a sponsor role’s post-IPO have also changed, reducing the instances where an issuer needs to engage a sponsor. Finally, the requirement to adopt the UK Corporate Governance Code on a “comply or explain” basis and the rules surrounding TCFD requirements have continued onto the new ESCC listing category.

Activist investors have sharper claws

Amanda Gerut from Fortune reports that demands from activist investors have increased significantly in the first half of 2024. Data reveals that 449 U.S. companies were subject to demands from activist investors in the period, with more than half of the demands being made to large cap companies. These contests have also been gaining significant media traction, which has ramped up costs for companies. Disney’s dispute with Trian Fund Management for instance has been estimated to cost $65 million or more. Gerut writes that the boost in US activism can be partly credited to the implementation of universal proxy cards, which have raised the chances for activists to get at least one board seat of a company it’s campaigning for. And according to Gerut, this year also saw a record 349 shareholder proposals related to environmental or social issues voted on by investors at annual meetings, which is the highest in a decade. And while markets remain hyper focused on AI, shareholders are increasingly interested in companies’ risk management and governance of Artificial Intelligence.

And finally … ‘Sexy is not the right adjective for our industry’

Laurie Havelock from IR Magazine reports on the importance of storytelling in investor relations. An interview with Jim Buckley, SVP of IR and corporate communications at Clean Harbors, highlights that by finding the ‘right cadence’ and by focusing on a long-term vision, Clean Harbor’s 2023 investor presentation exceeded expectations and won the IR Magazine’s best investor event award. According to Buckley, the presentation stood out because it featured in-depth market information, a live video broadcast and commentary from business leaders and management. Additionally, Buckley states that a focus on sustainability helped engage interest from European investors, many of whom were ESG-related mandated. As part of the presentation, Norwell also held a refinery tour, which was particularly impactful as “Bringing people closer was a good thing. It was very well received and still has traction today, more than a year later.” Buckley ultimately advises that investor presentations should focus on long-term strategy and vision, as this is what helped him create the Norwell’s lasting and successful investor day.

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