The acceptance and adoption of virtual investor meetings is the pandemic’s enduring legacy for listed businesses around the world. This has made it easier for companies to attract global shareholders to their register, but has it resulted in a more diversified shareholder base? Alexandra Cain investigates
No one will be surprised to read the stats on in-person meetings from last year: according to IR Magazine research, limitations on human movement as a result of the pandemic led to a substantial reduction in one-on-one, in-person meetings between companies and investors.
The results show that companies held just a handful of face-to-face meetings with investors in the past year: an average of 11 globally, representing just 7 percent of all meetings during 2021. This number would be even lower were it not for Asian firms, which held an average of 20 in-person investor meetings in the past year, compared with six held by European companies and just three by North American firms.
Instead, there was a stunning shift to online: virtual meetings accounted for 14 of every 15 meetings with investors in the past year. What impact, if any, did this have on the way companies reach out to, and interact with, existing and new shareholders?
Shifting registers There was certainly movement in global investor allocations to listed assets through 2020 and 2021. But with so much going on in the markets, it’s hard to point to how much of a role the online meeting revolution played in that change.
Lucas Scheer, president of LS Global Advisors in Japan, notes that virtual meetings and videoconferences were rarely used in the country pre-Covid. Although this has changed completely, the attraction of foreign investors to US companies has always been there.
‘Virtual meetings were frowned upon [in Japan] due to security concerns and general corporate policies prohibiting them,’ Scheer explains. ‘The pandemic means foreign travel to Japan is still highly restricted. My clients have realized they must allow for virtual videoconferences so we can have the conversations and communication we need to have with investors, given that in-person travel is limited. In Japan, virtual conferencing and communications probably have been brought to the forefront 10 years earlier than they would have been without Covid.’
Scheer adds that while the US investor base has attracted more foreign ownership through the pandemic, it’s not just due to the rise of virtual communication. ‘That’s helped, but the US is also the most attractive place to invest money, which means there has been a concentration of capital in US businesses and more foreign capital going into US businesses,’ he says.
In the same vein, Ross Moffat, head of IR at Australian supply chain software firm WiseTech, agrees virtual meetings have made outreach easier, but demurs when asked whether this has led to a change in the shareholder mix on the register. ‘What it has enabled is broader outreach and more efficient use of management’s time,’ he says. ‘Investors still go through the same thorough process to make their investment decisions, no matter whether meetings are virtual or in person.’
Lucas Scheer, LS Global Advisors
IR Magazine’s research points to a dilution of domestic investors in US companies through 2021. The percentage of shares held by local investors in US businesses dropped from 88 percent in 2020 to 84 percent in 2021. The data shows the vast proportion of listed US businesses remain in the hands of institutional investors, which hold a 69 percent interest in listed US companies, down from 71 percent in 2020.
Similarly, two thirds of the equity in European companies is held by institutions in the region, with just under a quarter held by North American investors. These figures are largely unchanged year on year. By contrast, Asian investor ownership in businesses in this region has become more concentrated through the pandemic, rising by 12 percent as North American and European investors left Asian companies’ registers. Just three in 10 shares in Asian companies are held by institutional investors.
In France we saw investors sell international shares and use the funds to buy domestic assets
A strong dollar There are opportunistic reasons for the movement within shareholder bases, especially as international institutional investors took advantage of opportunities to buy well-priced shares when markets first plunged at the start of the pandemic.
‘BlackRock is a good example. When many investors were selling, we saw BlackRock buying, picking up a lot of value. That was really interesting in the initial stage,’ says Patrick Mitchell, managing partner of market intelligence firm Investor Update.
‘In some cases, hedge funds near the top of the register were supportive. Those that had been on a register for three or four years topped up their shareholding, because they understood the market downturn was transient and felt comfortable supporting the company, even if it had shut down for several months.’
In many instances, shareholder bases have completely turned around over the past 18 months as investors sought to repatriate capital to their home markets, he adds. ‘For example, in France we saw investors sell international shares and use the funds to buy domestic assets, although this varied greatly from company to company,' he says.
'Some companies were truly tested and businesses that were heavily impacted by the restrictions suffered the most, with shareholders selling down stock. Others, such as technology businesses, benefited as investors increased their allocation of funds to these firms. So it’s not like across the board investors pulled money back home, the fast money took advantage of market conditions and long-only funds didn’t. It really wasn’t like that.’
Mitchell notes that during this time, many listed businesses’ share registers became more diversified. ‘Rather than the top 20 shareholders controlling between 40 percent and 60 percent of the company, now often the top 20 shareholders control less than 50 percent of the business, which is positive in the long run,’ he explains.
‘The number of investors on the register has gone up for most listed firms, in some cases dramatically. Investors don’t want to place too many big bets in a risky situation like a pandemic, so they’re diversifying across a broader set of investment options.’
Michael Miller, director of investor relations advisory for market intelligence firm IHS Markit, says his experience suggests EMEA and Asia-Pacific investors increased portfolio allocations to North American firms over the past two years. At the same time, among North American asset managers, there was a drop in portfolio allocation to international holdings.
‘While we can only speculate about the impact of virtual meetings relative to other factors, this does suggest that European and Asian investors have been able to regularly meet with North American companies,’ Miller says. ‘Further, they have had enough confidence throughout the pandemic to increase their holdings in these firms.’
Louis Cordone, senior vice president of data strategy at professional services firm AST, says that while the pandemic may have prompted a rise in foreign investors taking positions in US companies, this is a trend that has been in place for a decade.
‘Covid-19 has had an effect, but the strength of the US dollar is another component of international investing,’ he says. ‘Investors are seeking access to growth and a mature market, but they also took advantage of an opportunity to buy into that market when the US dollar index fell during Covid.’
Mark Loehr, OpenExchange
The ESG factor Although many factors play into the movement of any one company’s share register, the extraordinary shift to virtual meetings during the pandemic has changed investor behavior forever, says Mark Loehr, CEO of videoconferencing firm OpenExchange, especially because virtual allows investors to check in on companies more frequently.
‘Our experience suggests investor attendance for some of the biggest conferences is up by 40 percent versus the pre-Covid era when physical conferences were the norm,’ he notes.
OpenExchange handled 180,000 virtual meetings and 595 conferences in 2021 between companies, banks and investors, many of which were international. In 2020 this figure was 100,000. In 2021 the firm was also involved in 24,000 non-deal roadshows and 14,000 investor days.
Loehr says virtual meetings are here to stay, in part because they provide a better return on investment for investors and executives in terms of allocation of their time. Live streams allow investors to watch from a distance and get to know a company before meeting management. This also helps them to develop a body of knowledge about a business and to ask more informed questions when they do meet.
‘CEOs recognize they can accomplish much of their investor outreach from their own time zone and office,’ says Loehr. ‘They’ll still do some special conferences, but not nearly as many as before. The buy side also really appreciates the ability to manage its time and not be on planes as much. But there is an audience of smaller investors, as well as smaller companies, that prefer one-to-one, physical meetings, so preference for virtual meetings is not universal.
The number of investors on the register has gone up for most listed firms, in some cases dramatically
‘We’re definitely seeing a change in investor behavior around AGMs, particularly if you can tie the virtual meeting into the voting process. A lot of people go to ballrooms, but not much really happens; it’s more a chance to say hello to management. These are likely to go virtual within the next two to three years and be more interactive because it is a somewhat closed environment in that ballroom.’
OpenExchange’s data is borne out by corporate experience. Victoria Hyde-Dunn, vice president of investor relations for cloud data management business Informatica, says the widespread shift to virtual meetings means there is now more opportunity to engage with current shareholders and target new investors.
‘We can now cover more cities, use a broader set of executives and reduce travel spending to the cost of a virtual meeting platform,’ she says.
Hyde-Dunn notes that this has also made it easier to engage a broader range of contacts, including sell-side corporate access and direct outreach to and from the buy side, especially in Europe. She agrees virtual engagement has been a great approach for check-ins and information-gathering.
‘From a relationship-building perspective, it also helps to bring new investors up to speed on your company and your story, and builds strong relationships with investors through frequent contact,’ she adds. ‘Seeing and understanding body language can help build a long-term, trusting relationship and you can accomplish this virtually.’
Nevertheless, she acknowledges an element of ‘Zoom fatigue’, partly due to the need to accommodate time differences when talking to investors in different regions.
But there’s another element at play. ESG has also been a Covid winner, with the focus on sustainability massively increasing over the past 18 months or so. Virtual meetings now play a significant part in companies' desire to reduce their environmental footprint to help meet ESG targets and wider stakeholder expectations.
‘Some of the biggest global fund managers in the world say that by around 2030, they are only going to invest in companies with net-zero emissions,’ Loehr says. ‘And one of the ways you can dramatically cut your carbon footprint is to cut out air travel. Increasingly, investors are going to look askance at management teams that bring three or four people across the world just to see them.’
New IR skills Companies will continue to be flexible in their approaches to investor engagement through 2022 and beyond.
‘Whether in person or virtual, IR teams will need to ensure they are providing adequate information and management access to both domestic and international investors,’ says Miller, who adds that IHS Markit’s research indicates most IR teams expect to return to at least some in-person investor engagement this year, depending on travel and other restrictions, company policies and executive team preferences.
We can now cover more cities, use a broader set of executives and reduce travel spending to the cost of a virtual meeting platform
Hyde-Dunn says there is a desire to have a hybrid approach this year, involving virtual and physical meetings with corporates and investors.
‘At the end of last year, a number of corporates restarted physical roadshow plans and conferences, although some went virtual at the last minute,’ she notes. ‘So far in 2022, we’ve been invited to a slew of in-person tech conferences, all in the US. Conferences will follow state and local protocols, requiring proof of vaccination and booster shots, plus a negative Covid test before the event.’
Conversely, Moffat doesn’t expect a return to pre-pandemic global roadshow practices any time soon. WiseTech held virtual meetings for domestic and international shareholders for its most recent profit announcement in February.
‘It’s difficult to predict when in-person meetings will start up again,’ Moffat says. ‘Potentially it could be in the second half of the calendar year, depending on borders.’
It isn’t just about the easing of restrictions, though – IR professionals have streamlined the way they manage meetings and roadshows, picking up new skills along the way.
Toby Langley, executive general manager of investor relations at accounting software pioneer Xero, suggests it may be prudent to continue to expect the unexpected. ‘We have started conducting some meetings face to face with domestic investors,’ he says.
‘But greater use of virtual interactions will remain part of the Xero IR program and help to make us more efficient. There are several new tools and skills that we have picked up that are simply too useful not to use as part of our approach to engagement.’
Victoria Hyde-Dunn, Informatica
