The week in investor relations: Omicron IPO party threat, transparency push for private firms and the purpose of mayonnaise
– Covid-19’s rapidly spreading Omicron variant is throwing a spanner in the works for IPO coming-out parties, said the Wall Street Journal (paywall). The current wave of the pandemic is ‘sending Americans back into retreat,’ according to the paper, which added that companies that are on deck for IPOs are re-evaluating their listing-day plans and, in some cases, delaying debuts. The NYSE and Nasdaq are still allowing some in-person bell ringing, the paper said, noting that these events are ‘highly coveted – and sometimes fought over’. But guests of New York’s exchanges must now show proof of vaccination and submit a negative Covid-19 test up to 24 hours before their scheduled visit, putting a dampener on IPO parties.
– The WSJ reported that the SEC is planning to require more transparency from big private companies, with regulators concerned about the lack of oversight of the private fund-raising that has fueled their rise. The number of so-called unicorns – private companies valued at $1 bn or more – has continued to grow even amid the recent boom in IPOs. The SEC has begun work on a plan to require more private companies to routinely disclose information about their finances and operations, according to a semi-annual rule-making agenda and people familiar with the matter. It is also considering tightening the qualifications investors must meet to access private markets and increasing the amount of information some non-public companies must file with the agency.
‘When they’re big firms, they can have a huge impact on thousands of people’s lives with absolutely no visibility for investors, employees and their unions, regulators or the public,’ said commissioner Allison Herren Lee, who has called for the change. ‘I’m not interested in forcing medium and small-sized companies into the reporting regime.’
– ‘Unilever seems to be laboring under the weight of a management that is obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business,’ noted Terry Smith’s annual letter to shareholders. CityWire reported that his £28.9 bn ($39.7 bn) Fundsmith Equity Fund, the UK’s largest retail vehicle, ‘delivered a rare, although very marginal, underperformance of global markets in 2021’, with Unilever among the top five detractors, according to the letter.
‘A company [that] feels it has to define the purpose of Hellmann’s mayonnaise has, in our view, clearly lost the plot. The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler alert: salads and sandwiches),’ Smith wrote.
– ‘Bullish finance directors are ready to spend again,’ declared The Times (paywall). Thirty-seven percent of CFOs surveyed by Deloitte said that increasing capital expenditure – the money used to buy fixed assets such as land, machinery or buildings – was a priority for 2022. It is the highest figure recorded by the accounting firm in its quarterly survey since it first asked the question in 2009. The appetite for growth is almost double the level recorded at the beginning of the pandemic recovery in March last year, said the paper. The survey was conducted between December 1 and December 14 last year, when the Omicron variant had already emerged.
– The Financial Times (paywall), however, reported that funds investing in UK businesses saw record outflows last year and now ‘face an uphill battle to regain popularity among retail investors in their home market… despite some early optimism for London markets in 2022.’ Net sales of mutual funds investing in British companies to retail buyers swung sharply into negative territory following the UK’s vote to leave the EU, noted the paper. These outflows amount to £21 bn in lost cash for UK equity funds since 2016, it said, citing data from the Investment Association.
– While UK-focused funds were suffering, CityWire reported that hedge funds enjoyed their second-best year since 2010. It cited the latest hedge fund index data from Eurekahedge, which finished the year 9.38 percent higher as managers reversed November losses and registered a 0.91 percent gain in December. The December figures were bolstered by robust returns in equity markets, noted CityWire, adding that North American and Japanese funds had the best returns.
– According to the WSJ, a group of large banks including Bank of America, Wells Fargo & Co and Royal Bank of Canada have formed a consortium to jointly address climate-related risks. The consortium, formed by 19 banks and the Risk Management Association (RMA), intends to develop standards for measuring and managing climate risk. The group plans to develop consistent frameworks and standards for climate risk management, RMA said. Nancy Foster, president and chief executive of RMA, said banks could eventually be involved not only in determining, for example, what assets have exposure to weather events, but also in collecting data on their clients’ carbon emissions. She compared the expected scrutiny from banks to their role in combating money laundering by criminals.
– In other climate-change news, Reuters reported that following its landmark win at ExxonMobil over climate concerns last year, activist investor Engine No 1 is broadening its sights to press companies on diversity and workforce issues in 2022. Michael O’Leary, who oversees investment stewardship at the firm, said it will want more explanation from portfolio companies about their obligations to employees as stakeholders, their workforce demographics and other matters.
‘You saw the way something can go from being seen as a gadfly proposal to being truly understood as a core value driver. Just as with climate, we expect to see that spread to other issues like the workforce and racial diversity,’ O’Leary said.
– US-headquartered governance, risk, compliance and ESG firm Diligent this week acquired Insightia, an activism and proxy voting analytics firms formed in 2020 through the merger of Activist Insight and Proxy Insight, both of which are now Diligent brands. Financial terms of the transaction were not disclosed.