I have been thinking about this for a while now, but this post by Philip Dorgan, who spent 30 years as a retail analyst before taking over the IR role at Poundland, clarified a few things in my mind.
In this post, Philip points out that PLCs will experience a reduction in the quality of advice they receive from their brokers, and increased difficulty in getting their equity story across, as fewer investment bankers devote the resources to outlining it to the investment community. His answer to this is very simple – the PLCs need to pay more for a better sevice, and they need to get out and do more themselves.
As such, the emergence of more IR platforms is good news. Companies such as
now really come into their own. They offer a service that benefits both PLCs and investors, as historically brokers have tended to ignore investors who won’t trade through them. These companies will not only put you in front of different investors, but they are now profiling them by perception, rather than just numbers. Thus making it easier for the company’s IR to pinpoint market sentiment and directly target those issues.
As part of IR Magazine’s 2016 Global Roadshow Report, they state that:
“European companies have seen drops in both roadshow and investor conference activity, with roadshow travelers going on one trip fewer this year and the 92 percent of investor conference attendees doing so on average 7.9 times, compared with 8.6 times in 2015.”
Unfortunately they haven’t delved into the reasoning behind this shift in activity.
In their paper Do Investors Benefit from Selective Access to Management?, Brian Bushee of Wharton, Michael Jung of Leonard N. Stern School of Business and Greg Miller of The University of Michigan discover that:
“firms providing off-line access [to investors] experience significantly greater potential trading gains over three- to 30-day horizons after the presentation than firms only providing presentations.”
Tathagat Mukhopadhyay of London Business School looks into the positive effect of management meeting with investors.
“Using international investor conferences as the setting, I find that foreign investors domiciled in countries that host such conferences use the information they obtain at these events to increase their shareholding of participant firms. This increase in shareholding is the result of both new foreign investors buying shares in the firm and existing foreign shareholders increasing their preconference ownership.”
In future, companies are going to have to step up their game when it comes to servicing Investor’s needs and, as per my previous post, they will definitely need a professional to help them organise these roadshows for them.