This article, which argues that investor meetings are much more diverse than you may think, was sponsored by HSBC
There has been much discussion recently in the UK press about the ‘Dear CEO’ letter from the UK’s former financial regulator, the Financial Services Authority, to the buy side, regarding how it pays for corporate access. This article will not address that issue, except to say that corporate access is not going away. The issue is how the buy side pays for such services. Should you be concerned? No. But you should be aware there is an ongoing discussion.
Going back to basics, the buy side still rates meeting management as one of its highest-value factors in making investment decisions. From the strength of a handshake to asking the tough questions, face-to-face meetings are very insightful and cannot be replaced by conference calls or information in annual reports. You still need to visit existing shareholders and market to prospective investors.
Given that, what is the best way to see shareholders? In discussions with IR professionals, many believe conferences are a great way to expand the investor base, but roadshows are better for targeting existing and new shareholders. Let’s explore this a little further. Conferences are a very efficient way of seeing many investors – in effect, they constitute a volume game – but the market is awash with them, and it can be hard to control which investors you meet.
There are a couple of ways to get around this. Firstly, choose your conferences wisely. There are mega-conferences – almost like supermarkets for investors – and there are smaller sector, industry and country conferences, which are more like health food stores. Which will fit you better? Investors attending the smaller events are generally the analysts responsible for the relevant country or sector, or portfolio managers with a particular interest or large holding in that country or sector. Either way, they will likely be well educated on your sector or country.
The mega-conferences tend to attract all types, with all interests. Let’s look at it from the buy side’s point of view: if you’re a portfolio manager attending a sector day, you’re basically meeting a lot of companies from the same sector. On the other hand, if you’re attending a larger conference, you will see a broader array of firms, but may jump from a meeting with a Chinese retailer to one with a Russian oil company. From a corporate’s point of view, you will likely meet a more diverse crowd at a larger conference than at a more targeted event. Either can work.
The second way to get around this – as always – is to work with a broker to select the investors you most want to meet with. This is a negotiation process: we represent investors that would like to meet with you and you may often have a track record with certain investors. Differences can easily be resolved.
The same goes for roadshows. You tell us, the broker, who you would like to meet with, and we can share with you the interest we have received from the buy side. After negotiation, we can narrow down a target list and take it from there. In the end, we’re the middleman, and corporate access is a service we want to provide to both sides to ensure a long-lasting relationship. One size doesn’t fit all in corporate access but an open conversation with your broker can yield a mutually beneficial result.
Alex Lupis is director and head of corporate access and client management for Asia-Pacific at HSBC.
