The week in investor relations: Silver lining at WeWork, hedge funds hunt ‘ESG factor’, and improving retail access to IPOs
- The collapse of WeWork’s IPO plans shows that investors are taking corporate governance seriously, reports Fortune. Last week, the co-working company delayed its IPO following concerns over its approach to governance and high valuation. This week, controversial founder Adam Neumann announced he would step down as CEO, although he will remain as non-executive chair. Fortune quoted corporate governance expert Nell Minow, vice chair of ValueEdge Advisors, as saying: ‘In the past, we had companies like Google and Facebook going public with big governance red flags, and everybody said, Well, that’s a feature, not a bug. That’s what you get with a founder-led entity. But now it seems the market is understanding the risks of poor governance, particularly with some of the self-dealing in this company.’
- Hedge funds are joining the hunt for an ‘ESG factor’ – referring to ESG characteristics about a company that lead to market-beating returns, according to the Financial Times (paywall). With trillions more dollars expected to flow to ESG funds over the coming years, investors think companies with strong ESG characteristics could outperform the market – but investors are being held back by a number of factors. For example, there is a lack of relevant data for fund managers to analyze. And it is hard to correlate ESG factors with market returns. ‘When you start looking at it, most ESG factors are two thirds, or more, something else. The data is problematic,’ says Jason Mitchell, co-head of responsible investment at Man Group, in the FT article.
- The number of retail investors in the Philippines taking part in IPOs has grown to an ‘all-time high’ following the introduction of the Philippine Stock Exchange’s Electronic Allocation System, reports Bloomberg (paywall). The new technology, nicknamed PSE EASy, allows investors to take part in initial offerings online rather than through a ‘tedious process’ that includes visiting kiosks set up by underwriting banks. The country is expecting a large number of IPOs in the second half of 2019.
- Imperial Tobacco suffered a 10 percent share price fall after the company warned investors about potential moves in the US against flavored e-cigarettes, reports the BBC. The company has made some big investments in vaping products but this month US President Donald Trump said he would ban flavored vaping products, with the aim of making them less attractive to younger consumers. Imperial Tobacco said a growing number of firms were ‘not ordering or allowing promotion’ of the products, according to the BBC.
- Two large shareholders have called for the replacement of Gary Heminger as CEO of Marathon Petroleum, reports the Wall Street Journal (paywall). There is already an outstanding proposal by hedge fund Elliott[please note correct spelling] Management to split the US energy company into three units. The two shareholders, which say they own (along with affiliates) 1.7 percent of the company’s shares, sent a letter to Marathon backing the Elliott proposal and noting that the CEO had lost the confidence of major shareholders.
- UK software company Micro Focus has announced an overhaul of its remuneration policy following criticism from shareholders, according to Reuters. Earlier this year, half of its shareholders voted against its pay policy and raised concerns over areas including the structure of incentive schemes. A new pay policy will be put to shareholders at the company’s annual meeting next year.