The Rapidly Evolving Landscape of Investor Outreach During the COVID-19 Era
It is not breaking news that IR teams have been seeking new ways to step up their investor outreach strategies in response to rapid and dramatic shifts in the investment landscape – MIFID II and its effects on traditional engagement models, the rapidly growing share of passive investing, ESG-dedicated investors who require additional disclosure and communications adjustments. But we are now in the midst of an abrupt, seismic shift in how we engage within the financial community – the coronavirus pandemic is requiring management and IR teams to adjust to new levels and frequency of disclosure, as well as think outside of the box and proactively employ new outreach methods. Here is a look at what is changing in the market right now.
Hands-on approach towards disclosure
The number of coronavirus-related material facts and market notices published by global issuers reporting to the U.S. SEC is growing at a rapid clip, with almost 249 filings on the matter between February 12 and March 26. There were 27 filings on March 25 as compared to one on February 12. (Source: Factset)
Based on work with our Latam clients over the last month and market observations, major topics covered in filings include: guidance updates and cancellations, postponement of scheduled share buyback programs and general meetings, suspension of dividends, cost savings measures, restructuring and drawdowns of credit lines, plant shutdowns, and sensitivity analysis for undergoing M&A. In an upcoming note, we will discuss in more detail the disclosure / filing trends over the last month.
Given the principal role of credibility in investment decisions, communications of issuers’ contingency plans are vital in demonstrating management’s preparedness and resilience in tackling huge financial and nonfinancial challenges they are facing as a result of COVID-19.
High-touch outreach to the investment community
Strong connectivity has always been the cornerstone of the issuer-investor dynamic, and today’s crisis is proving no different. The market’s highly adaptable nature, powered by agile technology tools, is showing a fast and broad transition from in-person interactions to fully virtual settings, given the current “lockdown” restrictions that prevent travel. Investors still want to talk with company management and issuers, therefore, are not going silent. They are leveraging this unique context to strengthen their relationship-building process with existing and potential investors. How has this rapid and dramatic migration to a fully virtual world been evolving?
In early March, an article in the Financial Times announced substantially reduced investor contact due to cancelled roadshows, conferences and capital markets days. But the market has quickly turned this situation around, with quality online interactions being organized between issuers and institutional investors. Our Investor Access team has facilitated and is closely monitoring outreach trends between issuers, the buy-side and the sell-side. Activities in Brazil include:
- Independent or broker-led virtual group meetings with institutional investors in Brazil have more than doubled in a week’s time, most of them with issuers from sectors most hit by Covid-19, the majority of attendees being local investors.
- Given the need for timely interactions in the face of sharp and rapid portfolio rotation, unsettling equity market volatility, sector regulation changes and new federal/state rulings, virtual sessions have been held at varying times, from early in the morning to late hours to the weekend, a far different scenario than the strict protocol that had been followed for in-person gatherings.
- As these are times when extraordinary leaders make the difference in sustaining their businesses, valuation and brands, most virtual sessions have issuers’ C-level representatives “in the room.”And, many CEOs are taking the lead, given the more time efficient virtual context. Depending on the industry, issuers are also exposing officers from different divisions, and the market has welcomed such initiatives, aware that senior management does not have answers to all questions.
- A major shift in tone is prevailing during virtual meetings: from the traditional and formal slide presentation to more engaging and natural formats. Some investors are now saying that this virtual format might become the “new normal,” not only in terms of more frequent engagement but also as regards productivity and efficiency.
- Are we facing a paradigm shift on the Investor Access front, triggered by the COVID-19 pandemic and the wide availability of online meeting platforms like Zoom? Early signs indicate that this shift could become the norm, but we continue monitoring the situation. However, under any circumstances we continue to urge issuers to be mindful of fair disclosure practices when discussing potentially material information. And as such, management should continue to carefully prepare for these discussions and ensure that team members not previously exposed to the markets are well-trained in advance.
As Investor Access experts in both the offline and online channels, and based on our experience participating in the latest virtual investor events, we highlight some important variables pertaining to the virtual realm:
- Choosing the right channel matters. A recent study by McKinsey, based on China’s experience with virtual engagements, shows that videoconferencing tools are great for discussing complex topics in real-time and for creating a sense of community, but they require wide testing, multifaceted coordination and focus.
- Strategic planning and execution are fundamental. Here, there is no difference between in-person and online meetings or events. Effective results require careful planning (agenda, marketing, target audience, Q&A dynamics, host/speaker training) and execution expertise – from picking the most suitable virtual meeting solution to ensuring seamless streaming. Equally important is targeting the right investors and robust marketing to attract the highest number of them.
- Content is king. Virtual events rely most entirely on content, so it is critical to tailor content to the online mode, including advising speakers on engaging ways to lead the event, regardless of its duration.
Here at InspIR Group, we always remain alert to developments in the capital markets that impact how companies communicate with investors and how best to reach them and attract their capital. We endeavor to provide the best strategic advice and timely support for our clients, including how to successfully engage investors, no matter the conditions of the capital markets. Stay safe and stay connected!
Investor Access Contacts:
Monique Skruzny, New York – monique@inspirgroup.com, +1 212.661.2243
Priscila Nannetti, São Paulo – priscila@inspirgroup.com, +55 (11) 96586.9310
