Four trends and a tip for investor outreach
1. IROs as top-level advisers
There was a time when institutions couldn’t be bothered to take a meeting unless the CEO or CFO were present. Indeed, over half (51 percent) of buy-side analysts and investors surveyed for the IR Magazine Europe Awards – coming up in London on June 30 – still say a meeting with the CEO or CFO is highly important before making an investment.
But there is now increasing acceptance of IROs as top-level spokespeople. As one German investor points out, talking to IR at some companies is as good as talking to senior management. A German sell-side analyst makes this point: ‘It depends on how good the IRO’s connection is with management. If he or she really knows what’s going on, then I’m happy to speak to him/her.’
Diane Faulks, EMEA head of IR advisory for Citi’s Depositary Receipt Services, has seen a trend toward having people in the IR role who act more as advisers to management – individuals with proven financial market expertise who are ‘plugged into the story.’ Faulks will be one of the session leaders at the IR Magazine Euro Leaders Think Tank on June 30, addressing the topic of investor outreach.
2. Tapping more management layers
Investors are more hungry for face time than ever, and their interests stretch beyond IR and top management. ‘It’s not necessarily the CEO that a large investor wants to see. It could be the head of a division, a country head for the company or a product head,’ Faulks points out. ‘I see companies exposing a lot more management layers, and it can be a lot more effective than just offering the same people.’
3. Reverse roadshows are picking up – but they’re not for everybody
IR magazine’s latest Europe awards research finds that less than half of the respondents (41 percent) have taken part in a reverse roadshow (a group of investors goes to meet several companies as opposed to a traditional roadshow with a company going around meeting investors). Of these, however, 85 percent say reverse roadshows are a good use of their time.
Faulks believes reverse roadshows, though not a new phenomenon, are more prevalent today, and are especially useful when investors are looking to get a handle on a whole market, not just on specific companies. One caveat: certain investors will never take part, such as some state pension funds whose mandate prevents them from spending their beneficiaries’ money on travel.
4. More options for using the sell side
‘There’s a lot more choice for IROs these days, with brokers approaching them to get involved in conferences, do reverse roadshows or go out on the road,’ Faulks observes
In all cases, IROs have a range of approaches from letting the sell side decide on all the meetings to dictating the entire target list. ‘I think the best way is a medium road, saying here are some investors we want to see – give us suggestions for the other slots,’ Faulks advises. ‘But always make sure there is a very good reason why you should spend your management’s time in front of a particular investor.’
Tip: Hit the road well after results
Companies traditionally go on non-deal roadshows shortly after issuing results, but there might be a better way. ‘Think about it: you’re talking about results and you’ve got so much information out in the market right then. And you want investors to focus on the longer term’ Faulks says. ‘Wouldn’t it be better to use all your online tools around reporting time and then go on the road later so you can talk about longer-term strategy?'