Ben Ashwell explores how corporate access providers shifted quickly, and what it means for the future of interactions between investors and issuers
In mid-March, British Telecom’s (BT) IR team was getting ready for Citigroup’s Communications Services Conference. The week before the event, around the time the IR team would normally be drafting remarks, BT’s CEO Philip Jansen announced that he had tested positive for Covid-19 and was self-isolating. In a sign of what was to come, Jansen agreed to participate in the event virtually, dialing in from the comfort and safety of his own home, while nursing a fever.
After people muddled through events in early to mid-March by tapping elbows instead of shaking hands, repeatedly applying hand sanitizer and looking suspiciously at the lunch buffet, many sell-side conferences were canceled, postponed or converted to virtual events. Company travel bans were imposed and people quickly adjusted to working remotely. The disruption was huge and unprecedented – one company executive was en route to the airport when he was notified at 5.00 am that his planned marketing trip was being canceled due to a company-wide travel ban.
As of late April, most sell-side conferences are being delivered virtually until at least the end of June. Privately, several corporate access professionals have told IR Magazine that they are preparing to host virtual events all the way through until September, but negotiations with event venues and uncertainty about what the next phase of the Covid-19 response will look like mean announcements aren’t being made. Complications arise from the need to balance a busy events calendar during the second half of the year with lingering concerns about a potential second wave of Covid-19 infections.
The sell-side pivot Many corporate access teams on the sell side have hosted virtual events and meetings in the past, but there was a feeling that they didn’t offer the same quality of interaction as in-person meetings. During this forced period of virtual corporate access, this view is softening slightly. It remains to be seen whether interpersonal cues – such as body language – convert effectively to a virtual format. One corporate access professional tells IR Magazine that it’s hard to compare because the contexts are so different: an executive’s body language could be very different on stage in front of hundreds of people compared with in his or her home office in front of a webcam (and potentially with a pet or child making an appearance).
For Mike O’Connor, global head of access strategies at Citigroup, Covid-19 has accelerated – rather than initiated – his adoption of virtual events. Speaking at an IR Magazine virtual event in early April, O’Connor explained that his team first started using virtual meetings in 2016, organizing 4,000 of them. In 2017 that grew to 10,000, in 2018 to 17,000 and last year the team organized 30,000 virtual meetings.
‘Our initial idea was that the demand for meetings between corporates and investors would be higher if the meetings could be done on a more timely basis,’ O’Connor said at the time. ‘We developed the concept from there, adding in virtual elements to existing physical events, and then we started doing small virtual-only events.’
Making the best of it Providers of virtual meeting platforms are, unsurprisingly, reporting unprecedented demand to host events, non-deal roadshows, earnings calls and annual meetings. Mark Loehr, chief executive at OpenExchange, tells IR Magazine that his company delivered 4,000 virtual meetings last year and predicts it will deliver 25,000 in the second quarter of this year alone.
According to a late-April survey from IHS Markit, nine out of 10 IR professionals now have an interest in participating in virtual events, but more than 55 percent of respondents haven’t previously been involved in one. For many, this is an uncomfortable situation. For instance, how often do CEOs personally dial into an earnings call or investor meeting? And how often are those events streamed across personal internet connections that are experiencing greater stress than ever before? Does broadcasting in your living room make you feel more relaxed, less professional – or more at risk of disclosing something that isn’t in the script?
Despite these concerns, there’s also a lot of enthusiasm toward virtual meetings – in the context of the environment we’re all living in. ‘One of the biggest hurdles I was having to get on the road was my management team’s time,’ says Matt Latino, senior director of investor relations at Xylem. ‘Knowing that their schedules are so fluid… opens up more opportunities.’
Complications arise from the need to balance a busy events calendar during the second half of the year with lingering concerns about a potential second wave of Covid-19
The buy-side perspective This sentiment is echoed on the buy side, where corporate access professionals have praised the flexibility of the IR community to help facilitate direct engagement. ‘Our number one priority is staying connected with companies and hearing from them,’ says Jennifer Langieri, senior manager of corporate access at Fidelity Management & Research. ‘There’s been a huge uptick in direct calls.’ Similar comments have been made by corporate access professionals at AllianceBernstein, Ashler Capital, Capital Group, Columbia Threadneedle Investments and Point72.
In some respects, Covid-19 has accelerated trends and practices that were already emerging. Direct engagement between issuers and investors has been on the rise – often in addition to, rather than instead of sell-side activity – and the corporate access professionals on the buy side are tasked with enabling efficiency. Right now, that means consolidating requests for meetings to ensure multiple requests from portfolio managers and analysts are not sent to the same company.
‘We’ve been pushing for that for the last year and a half now,’ says Kathleen Baillie, head of global research relations and corporate access at Columbia Threadneedle Investments. ‘We tell management teams to come back to us if we’re getting more one-off requests. We have 11 different offices and different teams within those offices and we want to be a united front.’
Does broadcasting in your living room make you feel more relaxed, less professional – or more at risk of disclosing something that isn’t in the script?
During the early stages of the Covid-19 shutdown, when records were being set for market volatility and the market-wide circuit breakers were triggered, the preference was for meetings with portfolio companies. Now that the market has stabilized somewhat, there has been an increasing desire to look for opportunities where firms are undervalued.
This is something Latino is acutely aware of. As part of Xylem’s IR strategy during the last couple of years, he has been trying to target European investors and ESG investors. ‘It’s complicated to hop through cities in Europe – it can take time and you get worn down,’ he says. Now he’s beginning to think about how he can access those pools of overseas capital from the comfort of his own house.
The corporate access legacy of Covid-19 None of us knows when the Covid-19 crisis will be over. Even when it is, we may think twice about some of the lifestyle decisions we made unconsciously before. Should I get on this crowded subway car? Do I need to take this flight? For Jocelyn Cheng, global head of corporate access at Capital Group, the lessons learned about virtual meetings will have a lasting effect. ‘We will still do in-person meetings, but this has really opened up our view to take a hybrid approach in the future,’ she says.
Many interviewees suggest Covid-19 will accelerate pre-existing corporate access trends – such as direct engagement, efficient consumption of corporate access and greater creativity regarding the nature of events that are organized – rather than precipitating a wholesale change to the corporate access industry.
But as much as issuers, the buy side and the sell side have been impressed by the effectiveness of video meetings and virtual events, there’s nevertheless an overriding desire to return to the air-conditioned conference rooms that currently sit empty around the world.