Globalization of capital is helping Canadian equities
The rotation of money from domestic portfolios to much more global platforms has benefited Canadian equities dramatically. It used to be that certain pockets of money could have only a small percentage in Canadian stocks; today, global portfolio managers can invest anywhere. For a long time they were focused on emerging markets, but now they’re rushing into safer havens, and Canada is perceived as a very safe pro-business country.
This is a rough time for targeting European investors because of outflows diverted into safer havens or cash. Also, certain institutions are stressed because of poor performance and constrained by how much they can invest. When targeting investors, you should try to keep in mind who’s performing well compared with who is performing poorly, and what their recent activity has been like.
Does China live up to the hype? Not yet, but it will. It’s early days, so don’t expect to go and amass a large new Chinese shareholder base straightaway. But people are developing relationships there because they know Chinese investors are going to be big. For now China is still working on building an institutional investing platform like we have here. Companies that are going there are planting the seed and getting Asian investors familiar with their story and the Canadian market in general.
It’s easier to build an overseas investor base if you’re listed there. Before doing a secondary listing, however, consider the regulatory requirements and disclosure demands, and whether you have the time and resources. Our company is listed in Toronto and on the Alternative Investment Market (AIM) in London, but I find that AIM’s requirements in terms of press releases and filings almost outweigh any value the listing brings.
We’re doing IR in Asia but we’re having a hard time penetrating the investment base there. Instead, we’re meeting Asian investors in New York. We started to do a lot more IR events in Asia, using our management teams on the ground there, but a lot of the time we just see North American investors looking at the Asian operations of western companies. At the same time, sophisticated Asian investors are setting up offices in North America.
I put my analysts under the gun. If I feel I didn’t get traction in a particular city, I tell them I don’t think it went well, I don’t think it was worth it, it was a waste of management’s time and, if they don’t prove me wrong, we’re not going back there. Then it’s up to them to convince me otherwise.
No one wants a proxy fight. It’s time-consuming, very expensive and there’s a lot of negative energy. For us as a catalyst investor, doing something in the public eye is an absolutely last resort. The vast majority of the time we engage with management behind closed doors. The Canadian Coalition for Good Governance and the backing of large Canadian institutions have really made a difference, and a lot more deals now get done in private.
I’ve read lots of proxies in my life. When you read the same thing over and over again, it starts to mean nothing. Conversation, on the other hand, is the richest form of communication, allowing for instant interaction and feedback.
We have tried to engage with US companies but it’s more difficult. In Canada, it’s a very open and non- threatening environment. In the US, there’s fear rooted in the history of litigation. US companies really don’t want us talking to the chairman.
We arranged for our board chairman or chair of our HR committee to meet with investors without anyone from management present. These were high-level discussions about corporate governance structure and compensation, presenting our programs and plans and getting feedback. The meetings were in person or on the phone, and then the themes were shared with me so I could track them.
We don’t use social media for IR but we do have a lot of blogs on our company website. They’re product and industry-focused, so there isn’t much concern there will be a disclosure breach. Plus, the bloggers are senior and they’ve been briefed. Because they’re higher up the food chain, they’re very aware of what they can or cannot say.
Whenever I join a new firm, I review the disclosure policy. First I gather all the disclosure policies of our peers as well as from companies well above and outside our peer set. I also look up the latest Globe and Mail report on corporate governance. Then I prepare a comparison table covering different elements of the policies, looking at what our peers have and where we are lacking, and I draft a new disclosure policy to circulate to our management and board.
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