The big takeaways from the IR Magazine Forum – Small Cap, the IR Magazine Think Tank – West Coast II and the IR Magazine Forum – Europe
To pay or not to pay: Small-cap forum talks commissioned researchThe question of how to boost analyst coverage is always front of mind for small-cap companies and was on the agenda at the in-person IR Magazine Forum – Small Cap, held in New York on September 20.
Moderator Steven Wade, head of event content at IR Magazine, steered panelists Adele Carey, vice president of IR at BTCS, Stan Kovler, vice president of corporate strategy and IR at Extreme Networks, and John Nunziati, IR partner at Q4, through a conversation that included the benefits of bringing in ‘non-traditional’ elements of IR to help target retail investors, as well as tactics to help secure additional sell-side coverage.
An opportunity to try something newTalking about both traditional and non-traditional IR, Carey and Nunziati said the current environment allows companies to experiment a bit more.
‘That’s maybe one of the most important things a head of IR at a small-cap company can think about: trying to find unique and creative ways [to target investors and attract analysts],’ said Nunziati. ‘From a targeting perspective, it’s a different environment now and… I think there’s a ton of opportunity to do that.’
But does this new openness to new things apply to commissioned research as well? If the audience poll was anything to go by, it would seem the answer is ‘yes’. Paid-for or company-commissioned analyst research has traditionally come with a degree of stigma but a notable number of audience members have used this route to get research written about their company – and they seem happy with the results.
While a third of audience members said they had not considered commissioned research – and wouldn’t consider it – a higher proportion (36 percent) said it was something they would consider. Just under a third (31 percent) said they had already used paid-for analyst research, while 28 percent of those casting votes said they had both used this option and were happy with the results. Just 3 percent were unhappy with the results of their commissioned research.
What’s the click-through rate?Finally on the topic, Nunziati had some advice for small-cap companies considering the paid-for research route. ‘If you only have two analysts covering you, I think you probably have to consider this,’ he said. ‘It’s very tough to get what you would think of as a good sampling of opinions if there are only two to sample from.
‘First of all, though, you have to have exhausted all other efforts to get traditional sell-side coverage. And if you are in that situation, then I think you really have to look for someone who can be treated as a somewhat unbiased expert. Maybe he or she came from the sell side and is also an expert in your industry. Because he or she is going to need that credibility to overcome the bias – or the perceived bias – of being paid.’
Nunziati advised companies to consider the quality of commissioned-report providers, noting that ‘some are better than others’.
‘You should ask about their following,’ he said. ‘Ask what the open rate is for your research. Ask: How many people is this sent out to? How many open it and really look at it?’ Going back to the poll findings, he added that it was interesting to see just how many people had tried commissioned research and how many were happy with the results. ‘For those who have used it, it seems like it’s a good experience,’ Nunziati concluded.
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With no end in sight for 2022’s bear market, IR professionals gathered in Palo Alto for the IR Magazine Think Tank – West Coast II on September 23 to review the state of play. Adam Frederick, global president at Morrow Sodali, kicked off the day with a look at capital market and macroeconomic trends to prepare for in 2023 – and issued a warning.
He pointed out that, during the prior down-market cycles in 2000 and 2007, the major US stock market indexes fell 50 percent on average. ‘If you look at it from that perspective, you could maybe make the correlation that… we’re only halfway through it,’ he said.
In this environment, access to capital will be more challenging on both the debt and equity side, said Frederick, but it also provides IR teams with the chance to expand their influence. ‘It gives you the opportunity to really have a seat at the table with the senior management team [and] the board,’ he said. ‘Understand where your weaknesses are and [make sure] your management team is fully aware of them and owns them.’
The next session heard from IR professionals about how the role of IR changes in a volatile environment. While the basic activities of the job may not shift dramatically, the intensity of the work does, the audience was told.
‘We’re working twice as hard just to keep up with that flow,’ said Jill Sawyer, vice president of IR at real estate investment trust Prologis. ‘And we’re the bellwether in our industry so anything we say in terms of messaging… you really have to look at every word carefully for the read-through.’
Next came a key part of IR Magazine’s events: the roundtables. Here, attendees chatted about the issues being discussed on stage at their own tables, providing an opportunity for candid conversation and knowledge sharing among the IROs present. Other roundtable discussions were scattered throughout the day.
ESG engagementAfter a coffee break, the next panel discussion tackled revamping ESG engagement strategy to meet increasing investor expectations. Katie Schmitz Eulitt, director of investor relationships at the IFRS, talked about the recent merger of several sustainability reporting standards and frameworks under the International Sustainability Standards Board, but also the push for new rule-making in different jurisdictions.
‘There is tremendous momentum across markets for regulatory policymaking activity,’ she said. ‘So it’s really important that just as these voluntary standards and frameworks are coalescing, rationalizing and simmering down into fewer letters in the alphabet soup, we try to avoid regulatory fragmentation.’
Catherine Buan, head of IR, sustainability and ESG reporting at Asana, pointed out that companies around the world will need to adapt to the growing demands of regulators.
‘We’re all going to have to report it,’ she said. ‘All these operational units that have been independently running, doing social impact [and] policy [work]... we have to be the stewards of that information.’
With stocks on course for one of the worst years on record and dark clouds continuing to gather over the global economy, the IR Magazine Forum – Europe, held in Paris on October 6, could have been a gloomy affair.
But the mood at the Paris Marriott Champs Elysees Hotel bucked market conditions. After more than two years of virtual events, the atmosphere was upbeat as attendees reunited with old friends and shared tips for getting through the bear market.
The day kicked off with a fireside chat, where Joanna Darlington, partner in capital markets advisory at FGS Global, drew on more than three decades of capital markets experience to discuss the role of IR in a downturn.
‘The important thing is to engage with investors and continue to communicate as transparently and regularly as possible,’ she told the audience. Companies are going through a hard time, but so are investors and their clients, so it’s important ’to keep lines of communication very open,’ she added.
Next, two IROs from mid-cap companies discussed the challenge of conducting your investor marketing at a time of dwindling support from the sell side. Thomas France, investor communications partner at DS NORDEN, the Danish shipping company, said he is trying to support sell-side analysts with their workload.
‘Even the ones who cover you don't necessarily spend that much time on you, at least from our mid-cap perspective,’ he said.
‘We’re trying to cater to their needs, visiting them, participating in morning meetings and meeting with their investment banking colleagues.’
After a coffee break, attendees returned to the conference hall to hear a panel on ESG during a bear market. This year has seen sustainable funds underperform, mainly due to their lack of oil and gas holdings, while the growing focus on ESG issues has come under attack from different quarters. Speakers were asked whether this backdrop meant firms and investors would start to view ESG differently.
The answer was a resounding ‘no’ from Sarah Spray, head of investor relations at shipping business AP Moller-Maersk. ‘We are seeing, of course, the coming challenges from an economic perspective and an operating perspective,’ she said. ‘At the same time, however, there is no doubt that the company will remain steadfast in its goals, in particular to be the leader in decarbonizing shipping.’
The company’s action on emissions will ultimately ‘give us a competitive advantage,’ added Spray, ‘because our Scope 1 [emissions], which we can control, are the Scope 3 of our customers, so we are in a somewhat unique situation. Even though we do see all these different levels of pushback, I’m quite sure the company will remain true to those goals. In fact, we’ve just announced some more capex in that area, so [we are] putting our money where our mouth is.’
‘You don't want to burn them’After a break for lunch, the afternoon sessions began with a look at targeting and engagement during a down cycle. Panelists agreed that, first and foremost, companies should stay close to their key shareholders and ask for feedback about what further information or disclosure is desirable.
Turning to prospective investors, Daniel Alvarez, IR associate director at HelloFresh, the German food delivery company, said timing is an important consideration. If you are ‘potentially going to have a couple of quarters that may be trickier from a macro point of view, you need to be very selective as to who you target, because you don't want to burn them,’ he said.
The penultimate session of the day featured a fireside chat with Louis Igonet, head of IR at listed asset manager Tikehau Capital, about IR careers. The interview covered topics such as career paths, professional qualifications, moving up the pay scale and IR at small versus large companies.
The kind of issuer you would like to work for is a very personal decision, said Igonet. For him, working at a mid-cap was ‘much more satisfying’ than at a larger, CAC 40 business. ‘My own experience of IR in a mid-cap company is that you actually do more than just investor relations: you are involved on many more topics,’ he said.
