The week in investor relations: Ending weather halts to Hong Kong trading, women-led hedge funds and Robinhood’s in-app IPO
– ‘I was like: we’re not opening? What’s happening?’ Bloomberg News (paywall) quoted Nicolas Aguzin, CEO of Hong Kong Exchanges & Clearing, as saying this week, as he discussed the impact the weather can have on trading in the city. Whenever inclement weather hits Hong Kong early in the morning, the city’s stock traders turn to the local observatory website to see if they need to go to work or not, explained the news organization. Hong Kong has a detailed series of weather alerts that determine whether businesses, schools and public transport operate. This includes the stock market – the world’s third largest and where more than $24 bn worth of shares change hands on average every day. Bloomberg says this sensitivity to weather is something Aguzin, who took over from Charles Li as the exchange’s top regulator in May this year, is struggling to understand. The news agency reported that Aguzin is exploring ending the bad weather trading halt after being told the $6.8 tn market wouldn’t open because the Black Rainstorm Signal was raised on June 28.
– The Financial Times (paywall) reported that UBS is targeting women-only hedge funds with a new portfolio launch as it seeks to tap the interest of large investors seeking greater diversity. The Swiss bank’s asset management arm launched the Carmen portfolio in recent weeks after trials, people familiar with the matter told the paper. It will aim to pick 10-15 funds globally where a woman has sole or joint discretion over the investment of the assets. The launch comes at a time of growing investor interest in funds led by women and minorities, with US pension plans and other large allocators increasingly looking to make investments based on ESG criteria.
– Describing the stock trading app as a ‘guinea pig for upending public offerings’, the Wall Street Journal (paywall) reported that Robinhood plans to sell as much as a third of its offering, or $770 mn of shares, directly to customers through its app. The company said anyone can participate in a special livestream of its investor presentations tomorrow (July 24). The paper said Robinhood’s plans are ‘highly unusual and upend the traditional IPO process.’ No company has ever offered so many shares to everyday investors at the outset, it noted, adding that firms typically reserve just 1 percent or 2 percent of their shares for customers. ‘And investor presentations usually take place behind closed doors with Wall Street firms, which have long had the most access to public offerings,’ the paper stated.
– The 8K trading gap is back in the spotlight, reported Cooley PubCo. In 2015 an academic study showed that corporate insiders consistently beat the market in their companies’ shares in the four days preceding 8K filings, the period the researchers called the ‘8K trading gap’. Five years later, in January 2020, by ‘an unusually bipartisan vote’ of 384 to 7, the US House of Representatives passed the 8K Trading Gap Act of 2019. A substantially similar bill was introduced in the Senate. ‘But then the bill disappeared into the vapor’, said Cooley PubCo. This week Cooley PubCo reported that a similar bill, the 8K Trading Gap Act of 2021, has been introduced in the House and in the Senate. It quoted Senator Chris Van Hollen, who put forward the Senate bill, as saying: ‘Time and again we’ve seen corporate executives take advantage of the 8K trading gap by selling off bundles of shares prior to a major announcement. It’s clear this gap gives corporate insiders a massive unfair advantage over the public… Our legislation will close this harmful loophole and provide fairness to everyday shareholders.’
– Bloomberg noted that BlackRock voted against more than four times the number of board directors during the recent proxy season than it did in 2020, on the grounds that they failed to act on climate issues. The firm rejected 255 directors in the period ending June 30, up from 55 a year earlier, according to its latest stewardship report. It also did not support the management of 319 companies for climate-related reasons, compared with 53 in 2020. BlackRock said it supported 35 percent of 843 shareholder proposals it voted on in the recent proxy season, compared with 17 percent in the previous year. Of those, it backed about two thirds of the environmental resolutions, and about a third of the social and governance proposals, according to the report. Last year, BlackRock said it supported 11 percent of environmental proposals, 7 percent of social resolutions and 20 percent of those on governance matters. The asset manager said it held more than 2,300 conversations with company executives on climate and natural capital in the year ending June 30. The report did not give a corresponding number for the previous year.
– According to the WSJ, Nasdaq is teaming up with a group of banks including Goldman Sachs and Morgan Stanley to spin out its marketplace for shares of private companies. The deal could help drive more transactions to Nasdaq Private Market, the exchange operator’s trading platform for shares of companies that haven’t yet had an IPO. Trading in pre-IPO shares has increased in recent years as start-ups have waited longer to go public. Employees of such companies often seek to cash out of their shares, while investors may want to get in on a fast-growing technology start-up.
– Indonesian e-commerce firm Bukalapak raised $1.5 bn in its initial public offering, marking the country’s largest issue, after pricing it at the top of an indicated price range, ‘three sources familiar with the matter’ told Reuters this week. The IPO by Indonesia’s fourth-biggest e-commerce company – which is backed by Singapore sovereign investor GIC and Microsoft, among others – came as Indonesia’s $40 bn e-commerce market is benefiting from strong pandemic-driven demand, Reuters added. Two of the sources said order books for the IPO, the first by an Indonesian tech unicorn, were multiple times covered, with one saying the issue received more than $6 bn of demand. The sources asked not to be identified as they were not authorized to talk publicly about the matter, and Bukalapak declined to comment, the news agency said.
– Royal Dutch Shell confirmed that it will appeal against the landmark Dutch court ruling calling for the oil company to cut its carbon emissions faster, The Guardian reported. A court in The Hague reached the verdict in May after Friends of the Earth and more than 17,000 co-plaintiffs successfully argued that Shell had been aware of the dangerous consequences of carbon dioxide emissions for decades, and that its climate targets did not go far enough. Shell CEO Ben van Beurden said the company agrees ‘urgent action is needed’ to reduce carbon emissions and vowed to accelerate its progress toward becoming a net-zero carbon company but said Shell would still appeal against the ruling ‘because a court judgment, against a single company, is not effective’. Friends of the Earth Netherlands said the appeal would send ‘the wrong signal’ and confirm Shell’s ‘lack of commitment’ to tackling the global climate crisis.