Mifid II begins to bite in Canada

May 07, 2019
European regulation was the main talking point at last month’s IR Magazine Forum in Toronto

Canadian issuers are beginning to notice the impact of Mifid II on their marketing calendars, sell-side coverage and quality of conferences, according to the panelists at last month’s IR Magazine Forum in Toronto.

While Mifid II has long been a talking point at IR Magazine events, the Canadian community has been less spooked than its counterparts in the US and Europe until now, due to a range of factors including the tight-knit nature of the Canadian investment community and concerns closer to home about US-Canadian trade.

Simon Rose, CEO and founder of Rose & Co, explained that as the investment community in the US moves closer to a European model, that will affect coverage of Canadian stocks. ‘US banks have dedicated sales teams that sell Canadian stocks. Most of those banks are down to zero, one or two salespeople among the bulge bracket firms,’ he said.

It’s not just the volume of coverage that is declining, Rose added: the quality of the conferences and non-deal roadshows being organized is also falling. ‘There’s enormous redundancy of the same people from the same accounts seeing the same people,’ he said. ‘The level of discontent coming from IR and the C-suite is becoming fiercer.’

Direct engagement

Rose explained that this puts more pressure on investor relations professionals to set up meetings themselves. ‘Whereas before it was incumbent on Wall Street to create connectivity between the investor and the company, now the IR team has to do it,’ he said.

He cited statistics from IR Magazine’s IR Resources report, which shows that IR budgets globally fell by $1,000 between 2016 and 2018, while team sizes in North America fell from 2.8 people to 2.2 people.

Malcolm White, portfolio manager at CI Investments, noted that the same change is occurring on the buy side, referencing Norges Bank Investment Management’s decision not to pay for non-deal roadshows and build out its corporate access team.

‘Other firms are considering this type of strategy,’ White said. ‘For us, we’re looking at shared services. We’re a collection of multiple managers and we look for ways to consolidate resources. Corporate access is one idea.’

He added that there is now more pressure on him as a portfolio manager to make up for some of the information he typically would have received from sell-side research: ‘As traditional IR channels decline, we need to fill in those voids. We’re looking at artificial intelligence and machine-learning data, sentiment analysis, satellite imagery and then services that bundle traditional sell-side research together.’

Technology tools

Several panelists talked about how technology can assist IR teams with the job of marketing and amplifying their company story, amid the Mifid II disruption. Taylor Thoen, CEO and executive producer of BTV, talked about the power of recording video interviews or scripted videos with company executives around key events and earnings announcements. By focusing on the message you want to convey in a short, sharp video, you also focus your mind on the story you want to tell more broadly, she said.

Similarly, representatives from the TMX Group and OTC Markets talked about how they were investing in videoconferencing facilities to assist their listed companies with setting up virtual investor meetings.

White explained that the buy side is softening on the use of videoconferencing for meetings with issuers. ‘A few years ago, I’d hear other portfolio managers saying they wouldn’t want video meetings,’ he said. ‘Now with the decline in non-deal roadshows, portfolio managers are saying, I’ll take anything. What’s really important to me is not that they’re here, but that I have a chance to hear them answer my questions.’

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