The week in investor relations: Potential profit in Russia ADR delistings, Mifid II made research less competitive and Musk in Twitter buyout offer
– Reuters said that Russian companies and a number of global banks could profit if Moscow moves to de-list Russian companies’ depositary receipts from foreign exchanges, citing ‘two people familiar with the matter’. The potential windfall is due to the fees that bank issuers of depositary receipts can contractually charge investors when they cancel the product, explained the news agency, adding that ‘it is unclear how much companies and banks could make or if banks will charge the fees and risk angering investors who say it would be unfair given the extraordinary circumstances which have been triggered by Russia’s invasion of Ukraine’.
– The TRADE reported on the findings of a survey that shows competition for the provision of investment research has decreased due to Mifid II, ‘with bulge-bracket providers dominating’. According to the study from Substantive Research, 52 percent of research budgets went to the top 10 providers in 2019, dropping to 51.6 percent in 2020. But in 2021, this jumped again to 53.1 percent – ‘suggesting that the incumbents are actually getting more powerful, and competition is decreasing as a result of Mifid II’.
– In the week that The Wall Street Journal (paywall) reported Elon Musk had decided not to join the company’s board of directors, and that Musk has been sued for the delayed disclosure of his stake in Twitter, Reuters reported that Musk had offered to buy the social media company outright for $41.39 bn, according to a regulatory filing. The news agency said Musk’s offer price of $54.20 per share represents a 38 percent premium to the closing price of Twitter’s stock on April 1, the last trading day before the Tesla CEO’s 9.2 percent investment in the company was publicly announced.
– A growing number of studies prove the payoff from focusing on long-term value and ESG, wrote former Unilever CEO Paul Polman and sustainable business advisor Andrew Winston in Harvard Business Review. Just Capital, for example has created a list of companies prioritizing stakeholders (not just shareholders) that it calls the Just 100. This group has outperformed the market. It should also be clear that there’s also a big upside waiting for those who embrace the world’s shift to ESG: multi-trillion-dollar markets in clean energy, electric and autonomous vehicles, plant-based proteins, precision agriculture, AI-driven efficiency technologies, and much more. Still, the pair asked why so many in business still feel that sustainability doesn’t ‘pencil out’?
– The Financial Times (paywall) reported that profits at JPMorgan Chase were down 42 percent in the first quarter – impacted by a slowdown in dealmaking, an increase in reserves to protect against a US recession and a $524 mn loss suffered ‘amid market turbulence unleashed by the war in Ukraine’. The largest US bank by assets kicked off bank earnings season this week by reporting $8.28 bn in net income for the first three months of 2022, significantly down on the same period last year.
– In other investment banking news, the FT, reported that in a previously ‘unthinkable’ move for a blockbuster German IPO, Volkswagen has chosen a US-only quartet of Goldman Sachs, Bank of America, JPMorgan and Citi to act as global coordinators on the planned partial flotation of Porsche. ‘The IPO will probably eclipse Deutsche Telekom’s record-breaking 1996 offering in terms of cash raised and any other German IPO in terms of media excitement,’ said the paper.
– Nikkei Asia reported that overseas money is ‘starting to pull out of Chinese markets after the risk of investing in autocratic countries was starkly highlighted by sharp drops in Russia’s currency and securities prices following its invasion of Ukraine’. It said market data showed foreign investors sold a net 38.4 bn yuan ($6.04 bn) of Chinese stocks and bonds in the January-March period, one of the highest such quarterly figures on record.
– ‘This M&A boom isn’t like the last one,’ declared The Economist, describing how the pandemic has ‘reinvented’ deal making. ‘It was once thought that investment bankers, like sharks, needed to keep on the move to survive,’ it said. Then pandemic lockdowns put paid to that ‘perpetual motion’ between headquarters, airports and meetings. Greasing the wheels of M&A took a backseat to corporate concerns about survival. Deals were scrapped or put on hold and bankers focused on clients that they knew already. Virtual dealmaking became the norm. The publication asks: ‘As in-person interaction returns, will the new ways of working persist?’