Stock exchanges are getting more competitive and showering listed companies with new tools
Last year, when NYSE Euronext announced plans to offer listed companies a wide range of freebies from IR providers Thomson Reuters and Ipreo, the plan was derided as ‘the NYSE gift card’ and a group of vendors publicly cried foul. NYSE Euronext then clarified that it intended to work with multiple vendors, and the tempest subsided.
‘If there’s one option that’s free and everything else you’ve got to pay for, [public companies are] likely to use the free option,’ says Darrell Heaps, chief executive of Toronto-based Q4 Web Systems.
Now that the NYSE Euronext model includes a choice of vendors, Heaps is pleased to be offering subsidized IR website and web-hosting services to companies listed on the Big Board.
The storm over NYSE Euronext’s service offerings quickly passed but it highlights a new reality: stock exchanges everywhere are facing such intense global competition that they need to find novel ways to entice new customers as well as hold tight to their existing base. One approach is to wow public companies with impressive services.
Dr Ioannis Kokkoris, professor at the University of Reading in the UK, anticipates that the trend for exchanges to offer more generous and innovative investor relations, PR and board-related services will almost certainly continue.
‘Fees from listings are not what drive the exchange business,’ he explains. He likens stock exchanges to Facebook, the success of which depends upon having a large number of users sign on – and stay on.
Exchanges develop IR programs
In 2007 NASDAQ OMX pioneered Corporate Solutions, a suite of services designed to provide investor relations, corporate communications and board support for public firms. Today, Corporate Solutions has a $90 mn annual revenue stream, with 25 percent of overall revenue coming from outside the US, according to NASDAQ OMX senior vice president Demetrios Skalkotos.
In its offerings, NASDAQ has focused on many traditional IR tasks, including targeting and market intelligence. In 2007, for instance, the exchange rolled out Pinpoint Market Intelligence, a stock surveillance service, and expanded that offering the following year with the bolt-on acquisition of Bloom Partners.
To date, NASDAQ has built IR websites for more than 1,500 clients and offers public companies a board portal through Directors Desk. The exchange also helps public companies webcast earnings calls and provides a workflow solution for managing investor contacts, targeting prospects and planning roadshow itineraries.
And in October 2011 NASDAQ acquired London-based Glide Technologies, which specializes in PR, media monitoring, targeting and sector analysis.
‘Public firms need all these types of services to assist with regulatory requirements and investor needs,’ says Skalkotos. ‘We’ve invested in this business and we are organically developing it to provide a single solution to help companies be better companies.’
NYSE Euronext is offering some similar services but through a very different business model. Instead of acquiring IR shops or building services internally, NYSE Euronext partners with ‘best in class’ providers of IR and capital markets services, says Jean-Marc Levy, senior vice president and head of global issuer services.
Some of the vendors NYSE Euronext works with include BusinessWire, Corporate Executive Board, eventvestor, FactSet, Ipreo, PR Newswire, SNL Financial and Thomson.
Levy emphasizes that NYSE Euronext’s services fall into three broad categories: market intelligence tools and analytics delivered over NYSE Connect; advisory services, webinars and peer exchanges that range from intimate events (20 companies in a region swapping stories of their experiences) to an annual senior IR summit; and strategic alliances with external vendors in surveillance, market analytics, webcasting and web hosting.
Working with third-party vendors allows NYSE Euronext to enter some novel terrain. For instance, it just partnered with the Receivables Exchange to provide large corporations with an efficient channel for monetizing trade receivables and achieving short-term liquidity.
‘We believe this is a unique service, and we make it available at no cost. [Our listed companies] can decide whether they want to use it or not,’ says Levy.
Freebies and fee-based programs
When it comes to IR services, pricing is a critical differentiator. NASDAQ has some free services but charges for the lion’s share of its IR and PR solutions.
Because NASDAQ is selling its offerings, these products are available to all public companies, regardless of what exchange they’re listed on. In fact, 50 percent of the Dow and the S&P 500 use at least some offerings from Corporate Solutions, says Skalkotos.
That said, NASDAQ is using its ever-expanding IR and PR toolkit as an enticement to attract IPOs and to woo companies away from other exchanges. In some circumstances, NASDAQ is offering free IR and PR services worth approximately $169,000.
At NYSE Euronext, on the other hand, most services to listed companies are free and reserved exclusively for clients. Levy emphasizes that placing a value on these services – which include educational opportunities – is tremendously difficult.
Estimates for the price tag these services might command range from $100,000 a year for new issuers with more than $400 mn in market cap to $60,000 a year for larger existing issuers.
‘We believe an enormous component of the value of being listed on the NYSE is being part of the community,’ says Levy. ‘The value of that community is the ability to establish links between peers and have the community assist you in learning about the best-in-class practices, tools and analytics.’
In Europe, one important perk of NYSE Euronext membership is access to expertise and advice. Marc Lefèvre, the exchange’s head of European coverage, notes that NYSE Euronext performs an advocacy function, ‘defending the interests of our clients at the national and pan-European levels.’
Specifically, he says the exchange has focused on the Transparency Directive, MiFID 2 and the Prospectus Directive. ‘We answer questions and liaise with issuers to determine their positions so we can be the voice of our issuers on these subjects,’ Lefèvre says.
Last December, TMX, which operates Toronto Stock Exchange, bought ir2020, an online provider of shareholder data and targeting services. That adds to TMX’s purchase of the Equicom Group, a Canadian IR company, in 2007.
While none of the services offered by these acquisitions are free, all TMX issuers do have complimentary access to InfoSuite, a market data tool.
Loui Anastasopoulos, director of relationship management and product development at TMX, says the in-house focus has been driven by several factors.
‘It’s about providing better service, being able to provide a more competitive price point to the issuers and having more control over new developments in the products,’ he says. ‘When you own it, you can make things happen a lot more quickly.’
Anastasopoulos says the group is looking to expand the range of services it offers, but would not be drawn on details. ‘Anything an issuer uses as a public company, we’d like to eventually have some kind of footprint in that space, whether it’s a partnership or corporate development,’ he adds.
Beyond the US
Although North American exchanges are arguably offering listed companies the most comprehensive list of IR services, some Asian exchanges are getting in on the act, too. Skalkotos notes that NASDAQ has partnered with Singapore Exchange (SGX) to resell Corporate Solutions into South East Asia. SGX also continues to run a subsidized research program for companies, which has been in place since 2003.
In 2011 the Australian Securities Exchange (ASX) began offering ASX IR Intelligence, an initiative developed with Orient Capital, says Matthew Gibbs, the Sydney-based exchange’s communications manager. The program lets listed companies access comprehensive details of price, volume, trading and broker activity online.
An exchange might also target a specific group of IPOs and do its best to market services specially tailored to them. On the London Stock Exchange, Russian IPOs have a dedicated site (www.russianipo.com).
‘London has long been a listing home for internationally focused Russian firms,’ explains Darko Hajdukovic, manager of primary markets for the London Stock Exchange Group. ‘Creating a resource specifically aimed at Russian and CIS companies was a natural evolution in the expansion of that community.’
Whether it’s special communities for stocks from a geographic region, stock surveillance, advocacy opportunities or products designed to integrate IR and PR, in the coming years IROs will almost certainly be looking to exchanges for innovations in how to run their businesses.
‘The competitive market for listings in the US is one of the fiercest that exists, and it’s just going to get more competitive,’ concludes Heaps. ‘What we’re seeing in the US is likely just a precursor to the global competitive market that’s emerging. These programs aren’t going away.’