How can IR teams get the best investor feedback?
‘Doing a roadshow without providing the feedback is kind of missing the point of the whole thing,’ states a broker from the corporate access department at a multinational investment bank, who wishes to remain anonymous.
And while feedback is undoubtedly useful to IROs, past interviews on the subject have shown that many have relatively low expectations of either the quantity or the quality of the investor feedback they receive.
In part, explains the broker, this is because a number of institutions are reluctant to provide such feedback to intermediaries. ‘Especially in London, we’re seeing quite an increase in institutions that now don’t give feedback as policy,’ she explains. ‘So they won’t give feedback to the brokers but they will give feedback to the company – in that case, the IROs would have to get in touch with them directly.’
Institutions that have made public their ‘no-feedback’ policies include, among others, global funds Blackrock, Capital and Wellington; Allianz and Deka in Germany; and Artisan, Eaton Vance, Harris Associates and First Eagle in the US,’ she says. ‘I would assume this is because, in the past, the brokers have maybe manipulated that information a bit or [the institutions] just don’t want the brokers to be hounding them on the trading floor.’
That isn’t to say that brokers don’t continue to offer vital post-meeting information. The broker explains that her bank provides feedback in two ways: post-roadshow and post-initiation. ‘We collate all the direct feedback from investors after a roadshow, package that up and send it off to the IRO,’ she says. This can then be presented to management ‘to show that the roadshow was worthwhile’.
It’s in the bank’s interest to make feedback as in-depth as possible, says the broker – though it can take up to a week to contact the investors and get any comments to the IRO. ‘Occasionally [this feedback] will give some indication as to whether the investor is likely to make any movements, whether they're likely to buy or sell any stock or whether they remain unconvinced. And whether management needs to improve anything specific in their presentation style or if the company needs to work on something around their performance, for example.’
Then there’s the post-initiation feedback. ‘If we’ve got one of our analysts writing an initiation piece or a big update piece, we’ll usually collect the feedback from our sales guys, package that up and send it to the IRO as well.’
In many ways, post-initiation feedback is in the broker’s own interests as it shows both that they are broking the stock and who they are talking to; and she says it will often raise common themes. Sometimes these will already be known to the IRO, ‘but sometimes it’s something completely out of the blue’ which might suggest they should be doing roadshows in a particular region ‘to correct what they see as a misconception or even to make some kind of announcement to put aside people’s fears.’
Going it alone
Rodney Liu, Delta Electronics
‘I encouraged [investors] to write a formal letter to the board’
Of course, the corporate access firm isn’t the only avenue for investor feedback and, as this broker points out, a number of institutions are no longer happy to provide such information to firms like hers. Rodney Liu, head of investor relations at IR Magazine Award-winning Taiwanese large cap Delta Electronics, takes a direct and innovative approach to getting feedback by asking the company’s big investors to write formal letters to the board, as well as using traditional channels.
Delta first began asking investors to write these letters in 2010, explains Liu. ‘One of our biggest institutional investors expressed an opinion on dividend policy that was different from the company’s,’ he says. ‘So I encouraged them to write a formal letter to the board to initiate a formal discussion.’ Since then, ‘investors [have written] letters to the board on different issues, such as investment strategy, succession plans and corporate governance practices.’
As well as being beneficial to the company, investors appreciate the opportunity to write to the board, the chairman and CEO, adds Liu. ‘By way of a written letter we can also avoid any misunderstanding or misinterpretation of investors’ opinions.’
And, he adds, much of what was suggested by institutions was also in-line with the board’s own plans, with only one item of feedback failing to make it into company policy.
Making tech work
Going it alone isn’t the only option. As technology evolves and regulation shakes up the corporate access landscape, new possibilities are being developed. For example, clients signing up to corporate access tech start-up ingage can also use the firm’s encrypted IT platform – which offers an ‘unconflicted’ feedback service.
‘Feedback is one of the main reasons ultimately, why companies go out – they want to hear what their shareholders think,’ says Michael Hufton, ingage managing director. ‘But in the current system this is more and more problematic because investors don’t want to give it, which means that the companies aren’t getting it – and when they do, it’s often very bland and doesn’t really say anything at all.’
Michael Hufton, ingage
‘Feedback is one of the main reasons companies go out’
Hufton’s service allows investors to provide feedback directly to corporates via the platform without ingage being able to see it. ‘The whole idea is to try to create a virtuous circle whereby suddenly the investor is willing to give feedback because nobody else is going to see it,’ he explains. ‘And because our meeting allocation system is controlled by the company, not by us, what this should mean is that investors are encouraged to provide good feedback, which in turn means the company really gets something out of meeting with them and is encouraged to give them meetings next time round.’
As well as improving the quality of the feedback received, Hufton hopes that ingage’s electronic system – where feedback forms include closed questions as much as possible – will also bring in feedback faster and allow IROs to use the data in better ways. ‘Suddenly it’s a quantifiable rather than a qualitative result,’ he states.
The ingage system is also trying to turn feedback into a two-way stream so that corporates also begin rating the quality of the meetings they have and providing feedback to the institutions. ‘Over time, this should help for targeting,’ he says. ‘We’ll be able to say to corporates Look, you really should go to see these guys because look how well rated they are by other companies in your sector, for example.’
So far, the system seems to be serving its users well – largely because ingage doesn’t exclude non-clients. Rather, it seeks feedback from all investors its client companies meet with and allows its users a sort of mix-and-match service. So, for example, after hospitality firm Whitbread’s first half roadshow in Edinburgh, the company received feedback – in some form – from everyone. ‘They said they’d never had that happen before,’ he says. ‘Sometimes, that response can be someone like a Blackrock saying We have a no feedback policy, I’ll tell the company something in the meeting but at least you get a response so the company knows what’s going on.’
Like Blackrock, ingage’s latest sign-up Schroders is hesitant to offer its feedback to brokers. This, says Angus Bogle, co-head of equities management, played a part in the £319.5 bn ($500.3 bn) asset manager’s decision to sign up with the tech firm.
‘There is a substantial risk that any feedback that we give to companies via their broker or adviser is filtered and even diluted,’ he says. ‘We are therefore reluctant to channel feedback via this route. However, ingage offers us a simple, unconflicted way of passing feedback to the companies we meet – whether attributed or not.
‘Moreover, they are able to feed back their thoughts on us as investors and how well we were prepared for the meeting, which helps us improve the way we interact with the companies we meet.’
Putting feedback to use
Of course, once you have feedback, you need to put it to use and the way you use it will depend on a number of factors: the industry you work in, the strength of the stock and, of course, the nature of the feedback.
The data offered via the ingage model means companies can find trends – in the way highlighted by the broker – to present to management. ‘You can slice and dice that data however you like,’ explains Hufton. ‘You can look at the difference between long-only and long-short investors or between people based in the US and in the UK and how that has varied year on year. You can suddenly do some really interesting stuff with that data that you simply can’t do when feedback is a PDF of comments.’
Wherever your feedback comes from and however it is presented, it can be invaluable – even if the ultimate indicator of a successful roadshow comes down to whether or not the investor buys the stock.
‘Feedback can be [presented to management to] show what the investors need talking to about, or what investors are thinking – or quite often it will be things that the investors think management need to do to improve the company’s performance or stock performance,’ says our anonymous broker.
‘It can be something really minimal from The CFO is a really boring presenter – maybe he shouldn’t be doing meetings to You need to change your strategy on this or that. It really varies and it depends on the company and what’s going on with it. If the company is on a consensus sell rating or hold rating, for example, and it gets the right kind of feedback, this can show it how to fix things through the strategy or just through its communication with investors.’
She also offers some advice to IRO: ‘Save yourself time; use the brokers as much as possible. Chances are the brokers will be speaking to more investors than an IRO ever could and if they’re a good and impartial broker they’ll be able to tell you which investors are looking at your stock and which ones you really shouldn’t bother with. If the broker you’re using isn’t willing to give you that information, then they’re not the right one for you.’