The week in investor relations: Companies on abortion access, worst first half in 50 years for US stocks and new ETFs go after the ‘night effect’
– Reuters (paywall) reported that a growing number of large US companies have said they will cover travel costs for employees who must leave their home states to access abortions, but these new policies could expose businesses to lawsuits and even potential criminal liability, according to legal experts. Amazon.com, Apple, Lyft, Microsoft and JPMorgan Chase & Co were among companies that announced plans to provide those benefits through their health insurance plans in anticipation of the US Supreme Court decision overturning the landmark Roe vs Wade ruling that had legalized abortion nationwide.
Within an hour of the decision being released, Conde Nast CEO Roger Lynch sent a memo to staff announcing a travel reimbursement policy and calling the court’s ruling ‘a crushing blow to reproductive rights’. Walt Disney Co unveiled a similar policy, telling employees that it recognizes the impact of the abortion ruling but remains committed to providing comprehensive access to quality healthcare, according to a spokesperson.
The New York Times’ DealBook noted, however, that while ‘several companies have pledged to help employees travel across state lines for abortions… many of those firms have also donated to political campaigns that actively worked to undercut Roe.’
– The Financial Times (paywall) reported that US stocks have recorded their worst first half in more than 50 years after a rout triggered by the Federal Reserve’s attempt to curb persistent inflation and exacerbated by gathering concerns over global growth. The S&P 500 fell 0.9 percent on Thursday, leaving the blue-chip index down by 20.6 percent in the first six months of 2022, said the paper. Wall Street equities have not endured such a punishing start to a year since 1970, when equities were sold off in response to a recession that ended what was, up to that point, the longest period of economic expansion in American history. The pullback in US stocks has ‘eviscerated’ more than $9 tn in market value since the end of 2021, said the paper, citing Bloomberg data on the S&P 1500 index, a broader gauge that tracks small, mid and large-cap groups.
– The FT also noted that corporate fund-raising had ‘cooled sharply’ in the first half of 2022 as market conditions left bankers and corporate finance chiefs wary of issuing new stocks and debt. Businesses globally raised $4.9 tn through new bonds, loans and equity in the first half of 2022, down 25 percent from the $6.6 tn raised in the first half of 2021, which was a record-setting period, according to data provider Refinitiv.
– A new ETF launch from NightShares seeks to exploit a little-known phenomenon in the stock market that has historically delivered outsized gains, reported Business Insider. The NightShares 500 ETF seeks to replicate the strategy of buying the stock market at the 4.00 pm close, and then selling the position the next day at the market’s 9.30 am open. ‘And then rinse and repeat, as the strategy doesn’t hold exposure to the stock market during the bulk of its intraday trading hours,’ noted Business Insider.
A body of academic research has backed up the strategy, showing that most – if not all – of the stock market’s gains over the past 30 years have been delivered during the overnight trading sessions rather than during the day.
– CNBC reported that Russian energy giant Gazprom lost more than a quarter of its market value after the state-owned company decided not to pay out dividends – the first time the firm will not pay a dividend since 1998. The move reportedly reverses a board recommendation to pay a dividend of 52.53 rubles ($1) per share. Gazprom’s stock price crashed 27 percent before Moscow’s stock exchange intervened to halt trading. The news outlet said Gazprom reported record earnings in 2021 thanks to ‘soaring commodity prices’ but a ‘barrage of economic sanctions in the wake of Russia’s onslaught in Ukraine threatens to cut its revenues’.
– A wave of mega-deals carried global M&A volumes to $2 tn in the first half of the year, even as inflation, interest rate rises and the Ukraine war have ravaged confidence and caused significant deals to fall through, reported the FT. It said 25 deals worth more than $10 bn had been announced in the first half of 2022, up 12 percent compared with the same period last year – though overall deal volume fell by a fifth, according to figures from Refinitiv. The paper added that ‘concern has also arisen that some of the biggest deals that have buoyed the market might fall through or take longer to close than anticipated.’
– The WSJ said that according to a study commissioned by the UN-affiliated Race To Zero climate campaign, many big companies working in agriculture and other sectors that drive deforestation won’t hit their climate targets without immediate action to protect forests. The study analyzed the environmental programs of 350 companies in the forestry, land use and agriculture sectors that have a major impact on the world’s forests. It found that 148 of those companies have committed to net-zero but judged that only nine were making strong progress on curbing deforestation.
‘These companies play a huge role in the sector, which is more impactful than steel and cement,’ said Nigel Topping, who works to spur action by businesses, investors and cities as part of the UN climate process. Companies generally set net-zero targets for decades into the future. Nevertheless, Topping said, those goals could be out of reach unless companies act on deforestation urgently. Companies should commit to stopping deforestation by 2025, and lenders and investors should prioritize the issue, he said.
– ‘Traditional asset managers, hedge funds and wealth managers may be surprised to learn just how much more they are paying to license an index than their competitors,’ stated Institutional Investor. Some firms are paying more than twice as much as their peers, according to the latest study by Substantive Research. The firm, which provides analytics on the investment research market for asset managers, also found the amount an index provider charges its clients for a single index differs by an average of 21 percent. Investors’ budgets for index services range from 0.55 basis points to 1.27 basis points of their assets under management, according to the study.
– Grayscale, which manages the world’s largest Bitcoin fund, said it would sue the SEC after regulators turned down its bid to convert the investment vehicle into an exchange-traded fund, reported CNBC. The SEC on Wednesday rejected Grayscale’s application for a spot Bitcoin ETF, citing a failure by the investment manager to answer questions about concerns around market manipulation. The watchdog is concerned investors would lack sufficient protections under the Grayscale proposal. The decision has wider repercussions for the crypto industry and the crisis it is currently facing: converting Grayscale into an ETF would make it easier and quicker for shareholders to redeem their holdings and potentially stabilize the price of Bitcoin.
– Wall Street banks are rethinking their involvement in the listings of special purpose acquisition companies (Spacs) in the Middle East’s nascent market, said the WSJ, as new liability guidelines from US regulators ‘chill the once red-hot industry’. Middle East Spac sponsors such as Gulf Capital and Investcorp were initially in talks with Citigroup and Bank of America, respectively, but they are likely to rely on local banks to finalize the deal, said the paper, citing people familiar with the matter. It’s unclear what role either US bank will play, if any.
– Elsewhere, the WSJ also reported that a political agreement struck by EU lawmakers and designed to target Chinese firms has sparked concern from some US business groups. New rules for companies that reap financial benefits from governments outside the bloc, primarily targeting companies from China and elsewhere with government backing, would allow the European Commission, the EU’s executive body, to block such businesses from making certain acquisitions or winning large public contracts if they previously benefited from foreign subsidies that regulators deem to be distortive. The rules are designed to avoid subsidized foreign firms gaining an unfair advantage over EU companies, but the paper reported that some US business groups argue that the original proposal, put forward last year, was broad enough that a range of US and other multinational companies could be affected because of how the text defines subsidies.