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May 01, 2020

The week in investor relations: Dividend cuts, retail investors and warning shots

This week’s other IR-related stories that we didn’t cover on

– Royal Dutch Shell announced it will cut its dividend by two thirds, the first time it has reduced the payout since the 1940s, reported the Guardian. ‘Given the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty, we are taking further prudent steps to bolster our resilience, underpin the strength of our balance sheet and support the long-term value creation of Shell,’ said CEO Ben van Beurden.

– Market volatility caused by the Covid-19 outbreak is attracting record numbers of retail investors to the stock market, according to the Wall Street Journal. The newspaper said ‘individual investors have flocked to platforms such as TD Ameritrade Holdings and E*TRADE Financial’, encouraged by markedly lower prices, commission-free trading and an increase in time on their hands given lockdown restrictions.

– The Financial Conduct Authority (FCA), the UK’s financial regulator, sent a warning to banks saying they should not pressure companies to take up other services when negotiating debt issues, reported Reuters. ‘In particular, we have heard reports that banks may have used their lending relationship to exert pressure on corporate clients to secure roles on equity mandates the issuer would not otherwise appoint them to,’ said the FCA in the letter, which was sent to bank CEOs.

– The Covid-19 pandemic has shifted investor attention to social issues, explained the Financial Times (pay wall). The S in ESG has often taken a back seat compared with environmental and governance issues, but the impact of the virus on workforces and communities is set to change that. ‘There has been real resistance from some asset managers to taking meaningful action. [But] I would expect it to rocket up the agenda as a result of the current crisis,’ said Sébastien Thevoux-Chabuel, a portfolio manager at French firm Comgest. 

– Proxy adviser Glass Lewis took the ‘rare’ move of recommending that shareholders in HC2 Holdings vote to replace the whole board with nominees proposed by activist MG Capital, noted Reuters. The news service said proxy advisers ‘rarely recommend dissidents be awarded a majority of board seats’. Institutional Shareholder Services, another proxy adviser, has called for shareholders to back three of the activist’s proposed directors.

– Sachem Head Capital Management has been anointed the ‘king of activists’ by a new study that tracks activist campaigns over the last 15 years, reported BloombergQuint. The research, by The Edge Consulting Group, finds that after Sachem takes a position in a company, the stock price goes up by almost 100 percent on average over the next two years.