Amid declining support from brokers, stock exchanges are building out their corporate access services, finds Tim Human
The corporate access industry is in flux. With the sell side on the back foot, companies are looking for new ways to get management in front of the right investors – and one group responding to this need is stock exchanges. Over the last few years, the world’s exchanges have bolstered the number of events, roadshows and IR tools they offer to the market.
Of course, there’s nothing new in stock exchanges providing corporate access services. For decades, the world’s bourses have supported meeting activity through their event programs and corporate services. They have, however, recently upped their game. The continuing decline of the cash equities business – accelerated recently by Mifid II – has led to fewer investment conferences and difficulties when it comes to filling roadshows. Stock exchanges see an opportunity to step in and provide a valuable service.
‘Banks have scaled back resources across equity sales, trading, research and corporate access,’ says Robert Brinberg, president at Rose & Co, an IR advisory firm. ‘Corporate access activities are also focused on maximizing commissions from a bank’s core hedge fund clients. For the corporate, this means fewer opportunities to see the right kind of investors.’
In addition, technology is creating new opportunities. In recent years, several online corporate access platforms have emerged that help to link companies and investors, either directly or via sell-side support. Exchanges are partnering with these platforms to widen their service offering. For example, last year Nasdaq signed a deal with corporate access platform WeConvene to provide meeting technology to its listed companies. Closir, another platform that focuses on emerging markets, has worked with a number of exchanges, such as those in Warsaw and Moscow.
Finally, good old competition is also helping to drive developments. In each region, the major stock exchange groups don’t want to be outshone by the competition. ‘In the US, for example, the NYSE and Nasdaq are in a constant battle to offer value-added post-listing services,’ says Brinberg.
Many of the latest initiatives are targeted at small and mid-caps because these are the companies viewed as most likely to miss out on developments on the sell side.
‘Since Mifid II, some companies have told us that brokers’ support in investor access has been decreasing,’ explains Mathieu Caron, head of corporate services at Euronext. ‘In particular, mid-sized companies organizing roadshows with a European broker may be struggling with filling the agenda, whereas two years ago that agenda was full of meetings.’
Another reason smaller issuers may need a boost is the huge growth in passive investment.
‘[With] a lot of the trends in the marketplace – passive investing, ETF investing – the benefit really accrues to large-cap and mega-cap companies,’ explains Chris Taylor, vice president of listings and services at the NYSE. ‘And folks left out of those trends are small and – to a certain degree – mid-cap companies.’
Conference game Since late 2018, the NYSE has put on a series of sector-based conferences at its New York headquarters. The events are designed to feel like bank-sponsored conferences, with high-end service and meeting rooms.
Taylor says the genesis of the idea came from the NYSE’s buy-side advisory committee, which meets several times a year. ‘Early in 2018, the committee told us that it really thought the NYSE was well positioned to help the buy side – and, of course, issuer companies – get together and have high-quality meetings,’ he says.
The first full year of conferences in 2019 saw eight events, covering major industry sectors such as energy, financials and healthcare. Neither companies nor investors need to pay to attend, with the conferences positioned as an additional benefit to NYSE-listed issuers and the buy side.
Taylor acknowledges that it can be hard to cut through and get investors’ attention, given how many messages they receive in their inbox each day. ‘We’re looking to get the attendees from our issuers locked down earlier, so we can go out to the buy side earlier, and it can get events on its calendar as well,’ he says.
Nasdaq, the NYSE’s great rival in the US market, is also building out its corporate access services. Through its partnership with WeConvene, it has added new features to its investor relations platform that allow companies to book meetings directly with the buy side and the sell side.
Since the launch, small caps have ‘dipped their toe in the water’ but larger companies have been ‘more progressive’ in organizing their own meetings, says Michael Stiller, global head of Nasdaq’s Strategic Capital Intelligence division. ‘They have deep teams and can assign someone to specifically schedule meetings,’ he explains.
Talking specifics Aside from technology, Nasdaq is providing more advice to companies about selecting brokers and engaging with investors. ‘Which bank do you leverage in a particular market?’ says Stiller. ‘In the world of Mifid II, it becomes more important. Twenty years ago, it didn’t matter as much because every buy-side firm used every sell-side bank.’
For investors open to direct contact – a growing trend across larger buy-side firms – companies may need support understanding how the different internal corporate access teams work, says Stiller. ‘We help companies think about what the message looks like, how they craft the email, and so on,’ he says.
While the sell side remains the primary partner for companies going on the road, the burden on IR teams to do more themselves is expected to increase. With broker revenues still falling, especially in Europe, this year should see more cutbacks and restructurings. ‘To go out and be more direct to investors means turning IR into a more sales-driven role,’ says Stiller. ‘And some IR folks are not quite ready for that. It’s a behavioral shift. So advice and technology to help ease that transition is where we’re focused.’
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