Investor Rela­tions– How do new deal­ing com­mis­sions influ­ence roadshows?

Investor meetings 2.0

By Bar­bara Zäch & Kristin Köhler*

Investor rela­tions are tight­ly aligned to reg­u­la­to­ry changes and new stan­dards. So when it comes to one of IR’s most rel­e­vant tools, the direct con­tact with insti­tu­tion­al investors at road­shows and in one-on-one meet­ings, Euro­pean reg­u­la­tors put com­pa­nies, bro­kers and investors with MiFID II under increas­ing scruti­ny (fur­ther infor­ma­tion: www.fca.org.uk/markets/mifid-ii). That was more than a good rea­son to gath­er insights and opin­ions from all par­ties involved. As you can see from the state­ments, MiFID II has the poten­tial to be a game chang­er when it comes to com­pa­ny-investor engage­ment. Non-bro­ker road­shows will gain impor­tance in the near future and IROs – espe­cial­ly of small- and mid-cap com­pa­nies – have to inten­si­fy their share­hold­er tar­get­ing and vis­i­bil­i­ty at the same time to get in direct con­tact with insti­tu­tion­al investors they wish to meet. At the same time, it pos­es the oppor­tu­ni­ty to address more specif­i­cal­ly investors the com­pa­ny aims for rather than estab­lished con­tacts by their bro­kers. On a strate­gic as well as oper­a­tional lev­el IR gains impor­tance – but of course, resources are need­ed for these addi­tion­al tasks. We fear that small­er com­pa­nies will face dis­ad­van­tages if the impli­ca­tions of MiFID II are not considered.


* Bar­bara Zäch is Man­ag­ing Direc­tor of the IR Club Switzer­land, Dr. Kristin Köh­ler is CEO of the Cen­ter for Cor­po­rate Report­ing (CCR)

About IR Club Switzerland

The IR club Switzer­land is the net­work for investor rela­tions pro­fes­sion­als in Switzer­land, a forum for exchang­ing ideas, tack­ling key IR issues and devel­op­ing best prac­tices. The IR club Switzer­land also aims to estab­lish and pro­mote con­tacts between club mem­bers and investors, asset man­agers and finan­cial ana­lysts both in Switzer­land and abroad. It rep­re­sents the inter­ests of all list­ed com­pa­nies.

Should you wish assis­tance please con­tact us at info@irclub.ch

To read the inter­views in full length please vis­it the IR club Switzer­land web­site (www.irclub.ch)

Michel Ger­ber Head of Investor Rela­tions VAT Group & Pres­i­dent IR Club

Which influ­ences do you see to your road­show work re the upcom­ing com­mis­sions’ regulation?

It is still ear­ly days, how­ev­er, it is obvi­ous that espe­cial­ly for small­er-cap com­pa­nies it will become more and more dif­fi­cult to find bro­kers will­ing to cov­er your stock and on top of it to also show you around with investors in the regions impact­ed by the new reg­u­la­tion. I could imag­ine a sit­u­a­tion where cor­po­rates have to pay (more) to see investors.

What are your key learn­ings from for­mer roadshows?

Investor Rela­tions, obvi­ous­ly, is about build­ing a rela­tion­ship. So if you have been with the same com­pa­ny or in the pro­fes­sion in gen­er­al for a longer time, you real­ly build a con­nec­tion with many peo­ple in the finan­cial com­mu­ni­ty and, as a result, the dis­cus­sions in the meet­ings become less a spread­sheet-focused inter­ro­ga­tion by the investor but rather an open dia­logue based on mutu­al respect and trust.

Urs Beck CFA, Senior Fund Man­ag­er EFG Asset Management

How does the upcom­ing com­mis­sions’ reg­u­la­tion change your approach to com­pa­nies you wish to meet?

In my invest­ment process, man­age­ment meet­ings are a very impor­tant part of our stock pick­ing. Obvi­ous­ly, MiFID hasn’t been carved in stone yet. The vast major­i­ty of 1–1 meet­ings so far were in finan­cial road­shows. I expect com­pa­nies to con­tin­ue see­ing investors after fig­ure releas­es. The orga­ni­za­tion through a sell-side bro­ker is a very effi­cient way for all involved par­ties. Should this become obso­lete, I’d expect both sides – firms and investors – to move to a more pro-active approach to arrange meet­ings. Third-par­ty online tools might play a role, how­ev­er hard to see a busi­ness mod­el, if the buy side is not allowed to allo­cate com­mis­sion for such meet­ings. A sec­ond source have been sell-side-orga­nized con­fer­ences. This could still be a busi­ness mod­el for bro­kers – mov­ing from soft to hard dol­lars – charg­ing a fix fee for the conference.

Peter Romanz­i­na, Head of Bro­ker­age, Vontobel 

How does the upcom­ing com­mis­sions’ reg­u­la­tion change your road­show activities?

We cur­rent­ly do not see a change in our road­show activ­i­ty from the intro­duc­tion of MiFID II. In the UK the FCA already specif­i­cal­ly for­bids investors to pay for cor­po­rate access. This in fact might lead to a cer­tain de-empha­siz­ing of UK road­shows and a change in the incen­tive struc­ture in the future; still, it is dif­fi­cult to assess the exact impact at this point in time already.

Is it as easy to get a road­show from a com­pa­ny you have a sell rec­om­men­da­tion as a buy?

It depends! Some com­pa­nies chose us for our access to investors, our seam­less and end-to-end process and/or the qual­i­ty of our research. Some oth­ers (seem to) have an inter­nal pol­i­cy to only trav­el with bro­kers who have at least a “hold” rating.

Ste­fan Frischknecht CFA, Fund Man­ag­er Schroder Invest­ment Management

How does the upcom­ing com­mis­sions’ reg­u­la­tion impact / change your rela­tion­ship with brokers?

Gen­er­al­ly speak­ing we are “MiFID II-ready”, as we already run a research bud­get, which is fixed at the begin­ning of the year. In the­o­ry, our rela­tion­ship with bro­kers should remain the same, but in prac­tise, some bro­kers have not yet thought about the immi­nent changes, and they might con­tact us and ask for a change in the way we pay for research. We expect that it will become increas­ing­ly dif­fi­cult for small­er play­ers to cov­er their costs only by research com­mis­sions and we expect that larg­er play­ers will take a greater share of exe­cu­tion com­mis­sions. This might lead to struc­tur­al changes in the bro­ker­age indus­try. In Switzer­land, we have already seen a pre­sumed first vic­tim: Bank am Belle­vue has announced in Feb­ru­ary 2017 to cease its bro­ker­age and cor­po­rate finance activity.

An IR head of a SMI company…

… mea­sures the suc­cess of a road­show:
– inter­est in meet­ings
– ques­tions and knowl­edge of peo­ple met
– who we met
– fol­low-up ques­tions or meet­ings
– share price per­for­mance dur­ing road­show
– invest­ments done after road­show

…sees the fol­low­ing changes for road­shows re the upcom­ing com­mis­sions’ reg­u­la­tion:
– more admin­is­tra­tive work and logis­tics by the com­pa­ny
– poten­tial­ly less meet­ings as a con­se­quence of the upcom­ing com­mis­sions’ regulation