More than half (55 percent) of IROs globally say they are already making use of tech tools for their targeting, according to the Investor Targeting report from IR Magazine.
A further 23 percent say they don’t currently employ these tools but would consider doing so, while 22 percent globally say they wouldn’t use tech platforms for investor targeting.
‘The use of tech platforms for investor targeting is particularly prevalent in North America, where nearly three quarters (73 percent) of companies use such platforms, compared with 38 percent of companies in Europe and 33 percent of firms in Asia,’ writes Lloyd Bevan, report author and IR Magazine head of research. ‘According to company size, small caps are the least likely to use tech platforms for investor targeting. But they also have one of the highest percentages of IR professionals who don’t use such platforms saying they would consider doing so, suggesting their lack of use is more an issue of resources than desire.’
A more formalized approach to targeting
One IR professional who has recently begun using the targeting tool offered by corporate access platform ingage is Jonny Armstrong, head of IR at UK-based Pets at Home.
This is the first time Armstrong has undertaken a formal targeting project, after what he describes as ‘a bit of a rollercoaster ride on the share price’ since the Cheshire-headquartered firm went public five years ago.
Originally signing up to the ingage platform for its CRM system and using it over the past 12 months or so for roadshow itineraries and investor feedback, among other things, Armstrong says he sees the company’s targeting project as a two-stage process.
‘A first step is to find out what the universe looks like for us,’ he explains. ‘I think how we anticipate this playing out for us is that we’ll use the tool to make certain cuts – so run a few different targeting scenarios. For example, if we’re going to the US, who would we want to meet that we haven’t met before? Or who have we met recently that we should look to build up our relationship with?
‘But I see this as very much a two-stage process, so the ingage platform applies the science and we would then use our brokers to help with the art. Looking at what the platform spits out but based on our day-to-day conversations with investors and the brokers’ interactions with the investors they speak to, how should we then refine that list? And even within the institutions the platform spits out, who is the right individual to speak to at those places? What I hope is that this two-step overlay will give us a nice, manageable list at the end.’
As he’s looking to create a more formalized approach to targeting, how will Armstrong be assessing the success of his efforts? A buy-in is always nice, but Armstrong says feedback from investors is also a mark of success after a meeting.
‘We might be speaking to investors that haven’t yet bought in but the feedback we’re getting from those interactions can still be very helpful for us – it could perhaps shine a light on why they haven’t taken that position yet,’ he explains. ‘Is there a part of our story that they maybe can’t quite get their heads around, for example? If we hear that same message repeatedly, that’s quite powerful for us and shows we probably need to think about how we’re addressing that part of the business.
‘At Pets at Home, a good example of this would be that we’re currently in the middle of recalibrating part of our business – our Vet Group – and a lot of analysts and investors get what we’re trying to do but, based on the level of detail we’ve given them so far, there are still some question marks.’
Armstrong adds that, separate from the targeting tool, ‘the response rate we’ve seen [through the ingage platform] is really quite high and the insight it is giving us and the board is super-helpful because it shines a light on the things we are doing well and anything we should maybe think about doing differently in the future.’
For Patrick Kiss, head of IR at Germany’s Deutsche EuroShop, there are some barriers to using tech platforms for targeting. Deutsche EuroShop is a client of WeConvene, another corporate access platform, and Kiss says that for corporate access at least, it has so far been a real hit.
‘We have already organized two roadshows and one site visit with it and we are currently organizing our capital markets day with the online tool,’ he says. ‘It’s really easy and efficient, as long as you have prepared it well: the tagging of investors is important to filter and cluster them. And investors like it as it is easy and a perfect answer to Mifid II issues.’
Showing just what a success the tool has been for Deutsche EuroShop so far, Kiss adds that when the company offered a roadshow day in London ‘the slots were filled within less than 10 minutes’, with investors on the verge of complaining that they hadn’t been fast enough.
London is, he notes, ‘probably the best place for using this technology at the moment’ as ‘many investors know the platform and are happy if they can meet the company without paying a broker.’
Explaining how it works in practice, Kiss says IR has to ‘cluster’ the investors, which is part of the reason London works well. ‘If you want to offer six slots for meetings on a one-day roadshow, you obviously want to avoid travelling from the West End to Canary Wharf before going back to the West End and on to the City,’ he points out.
‘So you tag investors according to their office address and offer them only the slots that allow you to travel from west to east through London. Alternatively, you rent a meeting room and invite all investors to visit you there.’
While Kiss is clearly happy with the corporate access element of tech tools, when it comes to targeting, he feels regulation has got in the way.
‘I once tried to use the tool for targeting new investors, but it was a really basic targeting approach: we filtered all investors in Dubai and Abu Dhabi that invest in real estate companies,’ he explains. ‘We offered meetings to approximately 50 investors via the system and got zero reactions. Fortunately, we had a broker that organized a successful tour in the traditional way.’
The reason for this lack of response could be cultural, in that investors in the Middle East are used to personal contact, or it could be that as they’re not bound by Mifid II, paying a broker simply isn’t a problem so investors are less inclined to use a targeting tool in this way. Or it could be something else entirely. Either way, it wasn’t a success for Deutsche EuroShop in that instance.
Even in Europe, however, Kiss has encountered challenges caused by GDPR, another EU-wide regulation. ‘When we targeted potential investors in Dubai and Abu Dhabi, GDPR was not applicable,’ he says. ‘But when we use the platform to engage with European investors, we contact only those investors we’ve already met before, investors we can guarantee we have GDPR-conformity for – which is important in my view because you if you use an online tool, you store personal data in a digital way, and you need permission to do this.’
This of course makes it difficult to target new investors. ‘I know this is maybe the strictest way to look at this – and I know some of my peers feel that since both sides have a professional interest, GDPR isn’t a big issue. In my view, however, this is the safest approach.’