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Mar 10, 2023

The week in IR: US investors accept lower valuations in stock sales, Canada lags on reporting Scope 3 emissions and activist Oasis targets TRG boss

Our pick of the IR stories from around the web you might have missed this week

– Corporate America and its biggest investors are finally accepting lower valuations in stock sales, sparking a sudden rebound in secondary offerings after more than a year of nearly non-existent share issuance in the US, according to Bloomberg (paywall). Over the past 10 days alone, US companies raised more than $6 bn in equity sales, their biggest windfall in more than a year, according to data compiled by Bloomberg. The deals are providing long-awaited relief to balance sheets and a chance for existing holders to sell large stakes that were overdue for liquidation.

The jump is largely due to sellers toning down their expectations on valuation after more than a year of holding out for levels that at least approached those seen in 2021, dealmakers say. The S&P 500 remains down 16 percent since the start of last year despite a 4 percent recovery in 2023.

– Making it mandatory for Canadian companies to report their largest and most material Scope 3 emissions categories will set them up for success in the global energy transition, the Canadian Climate Institute (CCI) concluded in a blog post reported by The Energy Mix.

To remain competitive in the global energy transition, Canadian businesses need to disclose their material Scope 3 emissions, research analyst Arthur Zhang wrote on the CCI’s 440 Megatonnes microsite. These disclosures provide a full picture of a company’s emissions, which helps investors and policy-makers make better decisions around funding and policy design. If a company is not explicitly addressing material emissions both upstream and downstream, this can present transition-related risks, Zhang added – risks both investors and policy-makers need to be aware of to make sound decisions.

– The Financial Times (paywall) reported that activist hedge fund Oasis Management threatened to push for the removal of the boss of Wagamama owner The Restaurant Group (TRG) unless he delivers a shake-up of the struggling UK casual dining operator, according to two people with direct knowledge of the fund’s plans. A person close to the Hong Kong-based investor said its ambition was to put TRG in a ‘virtuous circle’ where it can ‘reduce debt, reduce interest, resume dividends… get a higher stock rating [and] better market cap [and] attract better people’. The warning came after TRG rejected Oasis’ requests for a strategic review of the company led by an independent bank and for a board seat when the fund went public with its 6.5 percent stake last month.

– Shares in manufacturers of artificial intelligence (AI) products zoomed last Friday, Reuters (paywall) reported, as a strong forecast from retail darling amplified an ongoing euphoria in the segment driven by the launch of OpenAI’s ChatGPT. forecast better-than-expected revenue and profit for both the fourth quarter and fiscal year 2023, after its third-quarter results topped Wall Street estimates. Shares of the AI software provider were up 16 percent at $24.80, and were one of the top five trending stocks on StockTwits. If the gains hold, the stock is set to notch its strongest one-day gain in a month.

– Credit Suisse shares dropped close to a record low after the Swiss bank said it was delaying publication of its annual report following a last-minute query by US regulators over previous financial statements, Bloomberg reported. The shares fell as much as 6.4 percent to CHF2.50 ($2.70) in Zurich, with the bank’s market capitalization edging close to the $10 bn mark. Credit Suisse has lost about 9 percent of its value so far this year.

The Zurich-based lender was due to publish the reports on Thursday morning but received a late call from the SEC on Wednesday evening. Officials there were querying revisions Credit Suisse made to cash-flow statements related to the financial years 2019 and 2020, as well as related controls, the bank said.

– Sell-side institutions have long been advocating direct connectivity for fixed income as a means to sidestepping the major venues that hold a monopoly over execution in these markets, according to The Trade. The process of direct connectivity, or single-dealer platforms, allows a buy-side institution to directly connect to a smaller number of sell-side brokers, or even just one. Many argue the process reduces impact as firms are not revealing their hand to the wider market. The argument can also be made that it reduces costs firstly by removing the need for firms to pay fees to trading venues and secondly because it gives them greater control over their valuable transaction data.

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