Costa del IR: Inside Spanish investor relations
The Spanish capital markets are relatively young – the Comisión Nacional del Mercado de Valores, Spain’s version of the SEC, was created as recently as 1989 – and the pool of public companies that make up the Iberian IR community isn’t large: at time of writing there are 167 companies listed on the Bolsa Madrid. Of this number, Javier Rodríguez-Vega, managing director of the Spanish IR association Aeri, says his feeling is that only around half of those ‘really do’ IR; there are still several family-owned businesses and Rodríguez-Vega says ‘many’ real estate investment trusts on the exchange go public only for tax purposes.
Yet from that relatively small pool, the firms that do invest in IR manage to do it so well that between 2005 and 2018, Spanish companies took home 45 trophies at the IR Magazine Awards – Europe and were short-listed more than 80 times.
Javier Rodríguez-Vega &
A crash course in IR
Despite starting late, the Spanish capital markets have had something of a crash course in crisis management, helping shape both the equity market and IR, explains Manuel Enrich, Aeri chairman and head of IR at real estate firm Sareb – a company born out of the global financial crisis as a vehicle for managing real estate assets that had been transferred from the country’s ‘distressed’ banks.
From liquidity constraints in the 1990s that Enrich says pushed many family- owned companies to go public, to the tech bubble of 2000 that saw the IBEX 35 crash from a never-seen-again high of 16,000 points, to the global financial crisis that hit Spain twice – first in 2007/2008 and then again when government cash stopped flowing in 2011/2012 and the EU provided a rescue package – IROs have had many opportunities to cut their teeth in the profession. ‘The different crises we have faced since 1989 have proved to be important for the development of our equity market,’ says Enrich.
Of the global financial crisis, he recalls that ‘international interest in Spanish companies plummeted, as did the market value of those companies, with the IBEX 35 dropping to the 6,000-point level. That, again, had a big impact on the role of the IR function.’ Even the state had a go at IR, he says, establishing a Spain Investors Day in 2010 to try to reignite interest.
‘In this really stressed environment, investor relations was key for traded firms,’ continues Enrich. ‘Transparency had to become the norm and those companies with best-in-class IR continued to shine in the international arena.’
The jewels in the crown
The start of the 1990s also saw a spate of both friendly and hostile M&A activity in Spain, most notably in the banking and utilities sectors. Again, IR was key, says Enrich, particularly in communicating around some of the ultimately failed hostile bids, many of which saw an international spotlight placed on those involved.
Diego Morón & Ignacio Cuenca
While Iberdrola was at the center of a number of these M&A deals, when it comes to the financial crisis, Ignacio Cuenca and Diego Morón describe the utilities giant as ‘a refuge stock’ that wasn’t affected in the way many of its national peers were. But while the stock might not have suffered the same hit, the pair – arguably the jewels in the Spanish IR crown – note that the crisis really highlighted the value of the company’s long-running investment in IR.
‘There was a point during the crisis when we were the only Spanish company that was able to issue debt,’ says head of IR Cuenca. ‘It was much more expensive than usual but at that time no Spanish company was able to issue to the market except Iberdrola.’
And while this was exceptional, the pair already knew their long-term IR policy of treating investors and analysts like clients went a long way, regularly affording the firm better rates on the cost of capital.
‘If you are transparent, accessible and proactive with your clients, the cost of capital for your company is going to be lower,’ says Cuenca. ‘We have tested this over many years: any time we issue debt to the fixed-income market, Iberdrola obtains lower rates than its peers. One of the reasons for this is the success of our investor relations activity.’
And the two-man equity IR team (Iberdrola has another two IROs on the debt side) is very successful indeed, having topped IR Magazine’s Euro Top 100, been named in the Global Top 50 several times – last year taking home the global award for best in utilities – and having won the award for best overall IR as both a small-cap firm back in 2003 and as a large cap for the first time in 2017 and again in 2018.
So what drives this success? Partly it is down to Iberdrola’s management team – which has been in place for 18 years and which Morón says is probably one of the longest-running in the sector – which came into the firm with a strong focus on investor relations. ‘That is now part of the DNA of the company,’ he observes.
But it’s not just the disproportionate pile of trophies that makes the Spanish table stand out at the IR Magazine Awards each year. It’s also the clear sense of community, camaraderie and shared celebration on show. And while Cuenca and Morón say they can’t speak for IR successes at other companies, Cuenca does say that ‘as Spaniards, we are very friendly and open. But what is really underneath this is the sense that we are colleagues: we understand each other and we know how hard it is to be sitting at that table.’
And then there’s the role of Aeri to take into account. Rodríguez-Vega says creating a sense of community has always been key to the association, in part because of the relatively small Spanish IR scene.
As well as the usual briefings around key trends such as ESG or Mifid II, or macro issues such as the potential impact of yet more elections in Spain, Aeri organizes investor meetings for its members and many events that are simply designed to foster a shared sense of community. The highlight of the year is arguably the summer open day, which has been running for 10 years, and which has seen IR professionals come together to play golf, tour the Teatro Real opera house or just hang out and play table tennis – all followed by the excellent Spanish food, wine and conversation you might expect.
‘When you offer IROs the possibility of talking to each other in a more relaxed environment, they can open up and have much more interesting conversations,’ says Rodríguez-Vega, adding that he has heard ‘rival’ IROs offering roadshow tips and other advice at these informal events. ‘That’s the moment where you see that feeling of community being developed.’
And indeed, the ‘Spanish table’ at the IR Magazine Awards is also largely Aeri’s doing. But Rodríguez-Vega and Enrich don’t just invite companies short-listed for an award – they also encourage members who have never been nominated, giving them an opportunity to further expand their network of IR peers across Europe. In fact, Rodríguez-Vega half-jokes that the association feels almost as if it has a 1 percent claim on each award handed out to Spanish companies.
It could be easy to paint this as some old boys’ club where established IROs get together for a jolly. But there’s a genuine interest in helping newcomers join the community, too – as Argentinian Juan Gomez-Vega discovered when he made the move from private equity to chief IRO at Spanish developer Neinor following its IPO. ‘I was working with Lone Star, the fund that acquired this small developer in 2014,’ he recalls. ‘We grew it at a stratospheric pace and then we took it public in March 2017.’
The firm had an aggressive growth plan, Gomez-Vega says, with goals that included expanding the investor base in the US, a coverage goal of 20-25 analysts and plans to become an IBEX 35 firm within two years. ‘We said, Let’s do it like Repsol or Iberdrola – let’s forget we are a €1 bn ($1.1 bn) company,’ he says.
Despite a great first year, things didn’t quite go as expected, and a profit warning in February 2018 saw the firm lose big parts of some big names including Fidelity, Wellington Management and Norges.
What Gomez-Vega says the company didn’t lose, however, was analysts, or the relationships he had built with the firm’s biggest investors. So while Neinor might not be on track to hit its two-year goal of joining the IBEX 35, it has continued diversifying its shareholder base and kept analysts onside. And Gomez-Vega cites these relationships as the highlight of the role: ‘Today I can call the top 20 or top 30 investors on their mobiles. Everyone knows me and I spend time with them.’ He adds that Neinor also knew it had to buck the stereotype of the Spanish developer, where communications have traditionally been ‘murky and opaque’.
Learning the ropes
Gomez-Vega admits, however, that when the company went public, he was ‘at a bit of a loss’ when it came to IR. So in the midst of such a fast-paced, aggressive first year, followed by a profit warning and a shift to ‘a defensive position’, how did he learn the IR ropes? It comes back to contacts and the open, helpful Spanish IR community. Gomez-Vega says he already had a personal relationship with Enrich, and was introduced to Sergio Gámez of Banco Santander – another multi-award winner.
The vibe among the Spanish IR community is ‘very Spanish, very southern Europe,’ says Gomez-Vega, echoing Cuenca’s point that everyone very much feels like colleagues. ‘And Aeri is almost a forum where you can share your pain!
‘If you are humble, and you need help, this group of people will give you everything. They will show you how to use the Bloomberg terminal or give you roadshow advice and say, Don’t go to Frankfurt on that day – I went last year and it was terrible. This makes the whole IR profession in Spain better.’
This article was published in the summer 2019 issue of IR Magazine