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Jan 10, 2019

Small and mid-cap companies reveal favorite brokers

This year marks the first time there has been a tie for the firms favored by small and mid-caps

Credit Suisse, Deutsche Bank and JPMorgan Chase have tied in first place as the most commonly used brokers for small and mid-cap companies hitting the road, according to new IR Magazine research.

The IR Magazine Global Roadshow Report 2018, which polled 615 IR practitioners and gathered information on their experiences with roadshows over the past 12 months, focuses on practices as well as preferences.

Since IR Magazine started reporting on roadshow patterns, this is the first time there has been a tie for the most-used broker for roadshows among small and mid-cap companies globally. The report shows that 16.9 percent of small and mid-cap respondents to the survey name Credit Suisse, Deutsche Bank and JPMorgan Chase as their most-used broker for 2018.

The report notes, however, that Credit Suisse has dropped out of favor among larger companies, falling out of the top five in 2018. Additionally, Citi has fallen back from its 2017 standing among small and mid-cap companies, while Bank of America Merrill Lynch has risen from fifth place to fourth.

The report also shows that the number of smaller companies going on the road continues to rise, with the level of roadshow participation among small-cap businesses reaching 88 percent in 2018, having incrementally increased over the past four years from 77 percent in 2015. With many small and mid-cap companies reportedly suffering from a Mifid II-prompted sell-side contraction, the report hints that they’re looking to market themselves more aggressively.

‘It is becoming more and more difficult for the smaller and micro-cap company to gain access to the buy-side community,’ Jeffrey Goldberger, managing partner at KCSA Strategic Communications, tells IR Magazine.

‘The buy-side [community] is being a little more selective, reviewing a little more of its own due diligence so it is going outside of what the traditional IR community usually does by doing its own proprietary research.’

Asked whether the changes are making conditions harder for small and mid-cap companies, Goldberger says it is actually causing these particular firms ‘to be a little bit smarter’ on how they position themselves. ‘They need to raise the interest level of themselves in the buy-side community – so just being a little more professional in terms of their communication effort is important,’ he says.

Matthew Ward, head of mid-cap equity research at HSBC, agrees that firms are feeling the Mifid II pinch. ‘Mid-cap companies are upping the number of investor meetings and roadshows they are doing,’ he tells IR Magazine. ‘There are fewer analysts, many are less experienced, and the number of companies covered per analyst is rising.’

This means companies are keener than ever to secure solid investor understanding of their business model, market positioning and investment cases by going to the investor directly, Ward adds.