Bay Street buzz at the 2013 Canada think tank

Dec 02, 2013
<p>Sound bites from our ninth annual Canada think tank &nbsp;</p>

Targeting in Canada and abroad

Asia is a tough market to find investors. We go every year – but IROs only. That’s key because you have to spend a lot of time explaining the nuts and bolts of your story, and your CEO would get angry after two meetings. We’ve had a really good reception; been in Tokyo about four or five years. We started China, South Korea and Singapore two years ago. We’re growing the trip; last year it was two weeks. I think it’s a good investment.’

Canada tilts toward energy, materials and large financials, and each of those stories has changed over the last year. If you look across international investors that have been net buyers, a lot of the interest is in large dividend payers.’

Canadian companies get compared to issuers elsewhere as domestic pension funds open themselves up to look at assets globally. Now IROs have to differentiate their companies from their US and European counterparts.’

The challenge for financial services companies when targeting investors in Europe – and it’s even worse in the US – is that the accounting is so different. Even if they understand the sector well, it’s hard to explain how our company is really different from a lot of what they see. For some of our large investors in the US, it took us two to three years of meeting with them before they bought in.’

One of the best ways to target is to simply ask a bunch of investors whether they’re interested in seeing you. When you go on the road, make sure the broker is advertising your availability to everyone, and make sure you get that interest list. You may attend a conference and get a list of one-on-ones, but what about the ones that asked to see you and didn’t get on the list?’

Just handing out the New York roadshow for free is wasting an ace up your sleeve.If you asked every broker which cities it wanted to take you to, it’s going to be New York, Boston, London, Toronto and so on. But you should make brokers help you in less popular places like Milwaukee, Minneapolis, Denver, Kansas City or Atlanta, and make the New York roadshow the gift for helping you in those places.’

Opening a window on changes in volume and ownership

There’s so much noise out there today, it’s hard to really see where the true trading is taking place, and yet there’s no major shift in your shareholder base. It’s a challenge for IROs.’

Trying to get a grasp on trading has been challenging, especially given the fluctuations in our industry recently, with some massive selling. Most of our volume is in the US, 2 mn-3 mn shares a day. From what I can tell from the market makers and others, most of it is high-frequency trading (HFT), and not much true volume. More than 60 percent of our shares are held by our top five holders, and they rarely move. But recently there was a big sell-off in our industry, and getting to the bottom of what was true selling, what was shorting and what was HFT was tough. A good understanding of trading volumes is vital; I report on this to our board.’

It’s generally thought that HFT is driving up volatility, or even is the main driver of volatility, but there’s very sparse evidence. In fact, we find HFT to be actually lowering volatility. What’s more, volatility can be good – such as when a stock jumps on good news. What we don’t like to see is prices going up or down as a result of little or no information.’

As regulators, we look at HFT from two perspectives: risks to the market in terms of the impact of erroneous orders or algorithms gone wild; and broader market-quality issues, such as whether the market is being manipulated by front-running orders.’

Canada is unique in that we have full trading data for options, futures and equities in one place. The next phase of the Investment Industry Regulatory Organization of Canada’s study of HFT is being closely watched by other countries. They’re essentially waiting for the verdict because Canada is five steps ahead.’

CIRI is advocating for lowering the early warning thresholdfrom 10 percent to 5 percent, and additional disclosures for every 1 percent increase or decrease. This is part of our push for greater transparency and better corporate governance. The Canadian Securities Administrators recently came out with a rule proposal, and opinion is divided. On the institutional side, people are opposed to having additional disclosure. On the issuer side, they want more transparency.’

Tips & tricks for your IR program

Notice and access came late for Canadian issuers in 2013, so only about 10 percent of firms got to use it to post financial statements and proxy circulars online instead of mailing them. In 2014 20 percent-25 percent of companies will be using it. In the US it led to a drop in the proportion of retail investors voting their proxies; in Canada, that figure actually rose 7 percent.’

Big data is coming to shareholder analytics. Who are your repeat proxy voters? Which kind of investor just doesn’t vote? How did this year’s say-on-pay vote compare with that at other companies in your sector?’

We’re redefining the word social. It’s a big leap right now to use it for disclosure. Instead IROs are taking a passive approach and listening to what’s being said about their brand and their stock. As you go into your earnings call, you can refine your key messages to make sure you’re on target.

I’m not sure the Street always knows what it wants. After we did an all-Q&A investor day, everyone said they never wanted a traditional event again. But while it achieved its objective and got people re-engaged, it didn’t move the needle on how people felt about the firm. Then we did a traditional investor day several months later and the stock moved 30 percent in three days because we laid out a new path.’

IR Magazine Think Tanks are invitation-only events for select groups of corporate IROs. Find out about upcoming think tanks around the world at

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