The week in investor relations: BlackRock’s power, Loeb’s investor meeting rejection and Hong Kong’s ‘hot market’
– When BlackRock tweaked some models back in May, it triggered a wave of buying and selling, reported The Wall Street Journal (paywall), which said the investment giant’s moves set off flow of more than $1 bn to one relatively small ETF in just a few days. Citing BlackRock documents and ‘people familiar with the matter’, the WSJ noted that BlackRock had sent instructions to brokerages and other financial platforms to alter a series of ‘model portfolios’ to include the iShares GSCI Commodity Dynamic Roll Strategy ETF, which the paper described as ‘an obscure BlackRock commodities fund’. The result was that the fund saw its biggest one-day influx of new cash on record, according to FactSet data, with the surge helping the ETF more than double its assets under management to more than $2 bn.
– The £1 bn ($1.4 bn) UK investment company Third Point this week denied investors a meeting to tackle its share price discount and claimed doing so would be legally ‘ineffective’, according to City AM. Dan Loeb’s Third Point Investors (TPIL) hit back at a group of activist investors in the latest clash over how the firm is run, rejecting their calls for a shareholder meeting. Asset Value Investors (AVI) and three other shareholders accounting for 17 percent of TPIL’s shares and 10 percent of voting rights requested an emergency general meeting (EGM) earlier this month to address the firm’s investment policy. AVI published a letter in May criticizing TPIL’s governance and share price discount, and sought to use the requested EGM to narrow the gap between the fund’s share price and the value of its assets.
– Hong Kong’s ‘hot market’ saw its busiest day for IPOs in six months this week, according to Nikkei Asia. Five companies began trading on the city’s stock exchange, after raising a combined $630 mn, making today the biggest day for IPO listings since January 8, 2021, and reinforcing the city’s role as a listings venue when regulators in both China and the US are putting a chill on foreign IPOs of mainland Chinese firms. Thirteen companies have priced Hong Kong offerings so far this month – already the most since January, said Nikkei Asia, citing data from Dealogic. The city’s busiest day came as the South China Morning Post reported that US President Joe Biden was planning to issue a new advisory warning American companies about the risks of doing business in Hong Kong.
– The Financial Times (paywall) reported that global investors’ exposure to Chinese assets had surged to $800 bn, with investors ‘snapping up stocks and bonds at record pace despite Beijing’s geopolitical belligerence.’ Global holdings of Chinese stocks and bonds have surged about 40 percent over the past year, said the paper. Offshore investors have bought a net $35.3 bn of Chinese stocks in the year to date via trading platforms that link Hong Kong with exchanges in Shanghai and Shenzhen, according to FT calculations based on Bloomberg data. That was about 49 percent higher than a year earlier, it noted.
– CNBC reported this week that some of China’s biggest tech companies are deeply invested in listings by country peers in the US. Tencent is by far the dominating corporate shareholder, with significant stakes in half of the 25 largest fund-raises by Chinese companies issuing ADRs in the US since 2017, said the news agency, citing its own analysis of publicly available data accessed through Wind Information and S&P Capital IQ. Tencent’s holdings in publicly listed companies are so large, CNBC said they rose last year by more than the company made in profit.
– The Bank of England (BoE) scrapped its remaining pandemic curbs on dividends paid by HSBC, Barclays and other top lenders, according to Reuters, which reported the BoE as saying its stress tests showed big banks could cope with the fallout from Covid-19 on the economy. BoE governor Andrew Bailey said Britain’s rapid vaccination rollout had led to an improvement in the economic outlook, allowing the central bank to relax its controls on how much lenders can pay to shareholders. ‘But risks to the recovery remain. Households and businesses are likely to need continuing support from the financial system as the economy recovers and the government’s support measures unwind over the coming months,’ Bailey said in a statement.
– MarketWatch reported on the news that the SEC brought charges of misleading claims and inadequate due diligence in a special purpose acquisition company (Spac) transaction. The Spac in question, Stable Road, agreed to merge with Momentus, an early-stage space-exploration company, last fall at an enterprise value of about $1.2 bn. The SEC said in a release this week that former Momentus chief executive Mikhail Kokorich claimed the company had successfully tested its technology in space, but in fact its only in-space test had failed. It also said that both Momentus and Stable Road misrepresented national security concerns about Kokorich that could preclude the company from receiving government contracts, with all of the false claims included in SEC filings. Stable Road’s shares fell 10 percent on the news, with Kokorich facing charges while Momentus and Stable Road agreed to pay more than $8 mn and face other penalties for allegedly misrepresenting tech and risk factors.
– In other Spac news, the FT reported that France’s billionaire Pinault family joined the ‘growing line of sponsors’ of European Spacs, aiming to raise as much as €300 mn ($355 mn) for a blank-check company that will focus on the entertainment and leisure industries. The Spac vehicle, named I2PO, was launched in Paris on Wednesday. It is backed by Centerview Partners banker Matthieu Pigasse and will be headed by former WarnerMedia executive Iris Knobloch. Just three Spacs were launched in Europe last year, raising $500 mn, the paper said, citing Refinitiv data. So far this year, 21 Spacs have raised $5.4 bn in Europe, though activity remains far higher in the US, at 365 Spacs so far in 2021.
– Swiss markets watchdog Finma, which is stepping up pressure on banks and insurers to disclose climate risks to their businesses, picked Zurich Insurance’s chief investment officer Urban Angehrn as its new boss, Reuters reported. Angehrn spent 14 years at Zurich after jobs at Winterthur Group, Credit Suisse and JPMorgan. He succeeds Mark Branson, who was named president of the German financial regulator BaFin in March.
– CNBC reported that Ford Motor Company’s board voted recently to amend the company’s bylaws to ‘adopt gender-neutral language throughout’, including using ‘chair’ in place of ‘chairman’, according to a regulatory filing. As a result, Bill Ford is no longer chairman of the board of directors, but he is its chair. The changes come after many companies have promised employees and investors that they will be more inclusive and focus on diversity efforts following social unrest in the wake of the #MeToo movement and George Floyd’s murder last year. ‘Our roles at Ford aren’t gender-exclusive and these changes help limit ambiguity and contribute to the inclusive and equitable culture we’re creating,’ a Ford spokesperson said.
– In other equality news, CNBC said gender parity on UK company boards has suffered a setback in the wake of the pandemic, with a report by consultancy The Pipeline finding it will take an additional four years before this is achieved. The predicted year for gender parity on boards at major publicly listed UK firms has gone up by four years to 2036, according to the research. ‘The pandemic provided an opportunity to push forward with meaningful change, but instead we have gone backwards and the prospect for women seeking advancement to the senior echelons of FTSE 350 companies looks as desolate as ever,’ the firm said in a statement. The Pipeline’s Women Count report showed that companies where at least 50 percent of the board was female experienced a profit margin of 21.2 percent. On the other hand, companies without women on their executive committees saw a drop in profits of 17.5 percent.