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Jun 03, 2019

Small caps likely to suffer from Mifid II roadshow disruption

Roadshow trends revealed in the ninth IR Magazine Global Roadshow Report

More than two fifths of IR professionals plan to go on more roadshows this year than last year, according to the ninth IR Magazine Global Roadshow Report. The survey of 615 IROs from North America, Europe and Asia shows that 94 percent of respondents went on the road in 2018. Poll participants believe roadshows are more rewarding than site visits, investor days or conference days, as meetings can be more focused.

And integral to a successful roadshow is investor targeting. Those polled say this is because it allows them to structurally plan shareholder meetings and have proactive engagements on investment opportunities. Data from the report indicates that more than half of all roadshow targets were typically selected by the investor relations department in 2018, up from 42 percent the previous year.

Although this figure varies little by region, IR departments in larger companies (73 percent) are more likely to select their own roadshow targets than those in smaller companies (45 percent). Roadshow targets are selected by 43 percent of mid-cap company IR teams.

But with many small and mid-cap companies reportedly suffering the effects of a Mifid II-prompted sell-side contraction, the report suggests they are looking to market themselves more aggressively. Highlighting the main challenges around shareholder targeting today, Darrell Heaps, Q4 CEO, told IR Magazine earlier this year that there are two main issues affecting the current landscape.

‘This first is regulatory change: Mifid II. There’s an overall decline in the number of sell-side brokers serving the broader corporate markets,’ he explained.

‘Brokers are still helping larger companies, but there is also a far greater responsibility on IR teams to identify and connect with targets themselves. This is particularly visible in Europe, but it is also affecting the US and North America in general.

‘The second is the evolving nature of today’s investor, which is making the traditional method of simply matching, for example, a growth stock with a growth investor harder to achieve. Markets and investors have both evolved and, as a result, how investors are classified on traditional databases and how they actually behave are not always in sync.’

IR teams should focus on doing all they can to identify potential investors that are a good match on a number of levels, not just ones based on broad style classifications or peer analysis, he recommends.

Case Study: Petra Diamonds

Salisha Ilyas, senior investor relations and communications professional at Channel Islands-headquartered mining group Petra Diamonds, tells IR Magazine that the firm typically participates in non-deal roadshows following the release of its interim and preliminary results.

‘These are mostly focused on the UK, North America and Europe, where the company’s top shareholders and investor targets are located,’ Ilyas says. ‘Around 15-17 days are spent on the road: five days allocated to the interim results roadshow and the balance allocated to the preliminary results roadshow, with our CEO, CFO, COO and IRO participating in the meetings.’

The roadshows are organized by Petra’s three corporate brokers. Ilyas says they work with Petra’s IR team to identify targets and book meetings. ‘Priority is first given to Petra’s top shareholders: large fixed-income investors,’ she explains. ‘Meetings we are unable to fit into the schedule or accommodate during these roadshows are often scheduled at industry conferences that Petra participates in throughout the year.’

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