‘It’s important to filter out the noise’: IROs and advisers on tracking market moves
Stock markets largely trended down in the first half of 2022, buffeted by a range of macro headwinds and weakening fundamentals in some sectors.
In this environment, management teams want to know more than ever what’s happening with the stock – so what’s the best way to keep senior leaders informed?
That was one of the topics of discussion during a recent IR Magazine Webinar, where experienced IROs and corporate advisers talked about the importance of cutting out short-term noise to deliver the most important trading insights to executives and the board.
‘It’s important to filter out the noise,’ said Tom Margadonna, senior director of capital markets intelligence at Morrow Sodali. ‘Years ago, the problem was that there wasn’t enough data. Today, there are bigger challenges; in some ways, there’s too much data.’
Gerry Davis, managing director of capital markets intelligence at Morrow Sodali, noted that around 50 percent-60 percent of trading in the market today is by computers. ‘You need to look through that and see if there’s actual accumulations going on,’ he said.
When reporting on market moves, Margadonna suggested two categories for IROs to bear in mind. The first is day-to-day changes, which IR teams need to have ready in case they receive queries from above.
‘Always be prepared for the question: why is the stock up? Or why is the stock down?’ he said, noting that trading can be affected by a wide range of issues, from rumors and industry news to peer announcements and technical factors.
The second category is regular reporting to management and the board, which should happen monthly or quarterly and focus on significant, longer-term changes to the shareholder base. ‘You want to focus on trends and themes at a higher level,’ said Margadonna.
Chip Newcom, director of IR at Equinix, said his company organizes a meeting with the CEO, CFO, chairman and a couple of other key leaders every quarter to discuss changes to the investor base.
‘We’re trying to avoid focusing on the volatility of any given day or any given week,’ he explained. The aim is to show senior leaders ‘any key flows’, such as specific mutual funds transitioning in or out of the stock.
Friederike Edelmann, vice president of IR at Central Garden & Pet, also produces a report for management every three months. ‘In our case, we have a quarterly report where we talk about who came into the stock [and] who got out,’ she said.
‘For us, it’s more interesting to see whether we finally managed to get more active investors in our stock, as opposed to just passive investors – it’s a quarterly report that reflects this. But we also have an annual perception study, where we try to understand what investors’ concerns are.’
To listen to a recording of the webinar, please click here.