The week in investor relations: Digital dollar ‘inevitable,’ mom and pop bail and Saudi Arabia crowned king of Middle East IPOs

– The US is likely as little as a few years from a central bank digital currency (CBDC), according to Bank of America, reported Treasury & Risk. The bank predicts that the US will issue government-backed digital coins at some point between 2025 and 2030. CBDCs ‘are an inevitable evolution of today’s electronic currencies,’ wrote Bank of America strategists Alkesh Shah and Andrew Moss in a report. In the meantime, use of digital currencies issued by private entities will probably grow, they said.

The Federal Reserve discussed developing its own coin in a 35-page paper last week, saying the paper was just a first step and it didn’t intend to proceed without support from the White House and Congress. It pointed to a number of benefits, such as cheaper and faster cross-border payments but also noted several potential risks, including possible runs on financial firms and a reduction in the number of deposits in the banking system.

– ‘Wondering what the force was that turned an orderly decline into a full-blown rout [Monday] morning?’ asked Bloomberg (paywall). The answer: ‘Mom and pop bailing’. In a ‘spasm of panicked selling’ early Monday, retail investors offloaded a net $1.36 bn worth of stock by noon – most of it in the first hour – according to data compiled by JPMorgan Chase & Co strategist Peng Cheng. By his estimate, share disposals were 3.9 standard deviations heavier than the full-day average in the previous 12 months, the company added. While ‘the rush for the exits’ drove down the Nasdaq 100 by almost 5 percent in Monday morning trading, Bloomberg also noted the news could be a sign ‘of seller exhaustion’. Major averages staged a ‘breathtaking reversal in the hours after the wave of sell orders landed,’ it said, with stocks actually ending higher.

– Bloomberg reported that, according to Goldman Sachs, Saudi Arabia will remain the busiest of the Middle East’s stock markets, even as the UAE pushes more companies to go public. John Wilkinson, the bank’s London-based head of emerging market equity capital markets, described 2021 as a ‘standout year’ for the Persian Gulf. Initial public offerings by ACWA Power, Solutions by STC and Saudi Tadawul Group in Saudi Arabia, as well as several others in Abu Dhabi, pushed Middle Eastern and North African equity issuance to about $23 bn last year. Riyadh had more listings than any of its Gulf rivals in the past year, added Bloomberg. Saudi Arabia’s economy, the biggest in the Middle East, has been boosted by the surge in oil prices to more than $85 a barrel and the government’s easing of coronavirus restrictions. The Tadawul All Share Index is up 8 percent this year, according to Bloomberg data, making it one of the world’s best performers.

– The Financial Times (paywall) reported that international banks have warned Beijing over its plans for new overseas listings rules. Banks said an overhaul of the regime for listing Chinese businesses overseas may deter them from advising on IPOs, which would ‘imperil a source of funding that has powered some of the country’s best-known companies,’ according to the paper. Asia Securities Industry and Financial Markets Association, the region’s top banking lobby group whose members include Goldman Sachs, Morgan Stanley and JPMorgan Chase, wrote to Chinese regulators seeking clarity about rules that were proposed after the calamitous listing of ride-hailing app DiDi Chuxing in New York last year, according to two people familiar with the matter.

– The SEC reopened the comment period on proposed rules under the Dodd-Frank Act requiring disclosure of information reflecting the relationship between executive compensation paid by a company and the company’s financial performance. The reopening is due in part to certain developments since 2015 when the proposing release was issued, including developments in executive compensation practices, according to the agency. 

‘If adopted, this proposed rule would strengthen the transparency and quality of executive compensation disclosure,’ said SEC chair Gary Gensler in a statement. ‘The commission has long recognized the value of information on executive compensation to investors. In 2015, [it] proposed rules to implement the Dodd-Frank Act’s ‘pay versus performance’ requirement. In this reopening release, we are considering whether additional performance metrics would better reflect Congress’ intention in the Dodd-Frank Act and would provide shareholders with information they need to evaluate a company’s executive compensation policies.’

– Dow Jones added its own ESG data to the growing information available to investors, reported Markets Media. The new dataset provides sustainability scores and sentiment on more than 6,000 publicly traded companies, Dow Jones said, with a scoring model aligned with SASB standards, covering five sustainability dimensions and 26 categories. To differentiate itself from the many ESG ratings providers now on the market, Dow Jones will combine ‘company-disclosed data with news from thousands of global sources,’ said Markets Media, creating a ‘uniquely news-driven’ service.

– The FT reported that, according to the Conference Board, fewer than 10 out of almost 12,000 eligible companies have demonstrated that they are ready to comply with new environmental reporting rules brought into force in Europe at the start of the year. The group warned that the majority of European companies it had analyzed could fail to provide data at their financial year-end about capital spending on key issues such as renewable energy.

The new EU rules require any listed company with more than 500 staff to publish the percentage of revenue, capital expenditure and operating costs from activities covered by the green taxonomy – a classification system that defines environmentally sustainable activities in line with the EU’s climate change objectives. The global assessment found ‘only a handful’ had published taxonomy audits. There was widespread ignorance, said Anuj Saush, leader of the governance and sustainability center of the Conference Board, which is sending almost 200 members a briefing on how to comply.

– The Wall Street Journal (paywall) reported that the SEC proposed measures that would significantly increase its insight into private equity funds and some hedge funds, the first in a range of plans to expand the agency’s oversight of private markets. The proposal would increase the amount and timeliness of confidential information that private equity and hedge funds report to the agency on a document known as Form PF. The main goal, said SEC chair Gensler, is to allow regulators to better identify risks building up in private markets.

Net assets managed by private funds rose to $11.7 tn in the first quarter of last year from $5.3 tn in 2013, according to the SEC. This growth has raised concerns from some policy makers about the potential for unseen risks to accumulate in a corner of the market that is far less transparent than mutual funds or publicly traded companies.

– London Metal Exchange chief Matthew Chamberlain is quitting after five years in the role to join a crypto start-up, reported City AM. Chamberlain will become the chief executive officer of digital asset custodian Komainu, a company that safeguards $5 bn worth of crypto on behalf of its clients. Commenting on his appointment, Chamberlain said: ‘I have always been passionate about building safe and efficient solutions to ensure global markets function as effectively as possible.’ He described Komainu’s model as combining ‘the best of traditional and decentralized finance, and truly [representing] the natural evolution of our industry.’

Chamberlain is the latest experienced executive from traditional markets to be ‘lured into the crypto space,’ added the paper, noting that last year, former UK chancellor Philip Hammond joined digital asset custodian Copper as an adviser. City AM said the move signaled ‘a collision between the worlds of traditional and decentralized finance’.

– Gryphon Advisors has become Morrow Sodali (Canada) following the December 2021 acquisition of the Canadian proxy solicitation firm by global corporate advisory Morrow Sodali. The deal bolsters Morrow Sodali’s Canadian offering, with the company noting in a statement that the firm ranked first among activist advisers in the Canadian market, according to Bloomberg’s 2021 Global Activism Review. Morrow Sodali was also ranked number one M&A proxy solicitor by The Deal (US) and Mergermarket (globally) for both 2021 and 2020, the firm added.