Investor Relations in the Time of Corona
The initiation of “social distancing” following the spread of the coronavirus epidemic is having a significant impact on how investors and companies are interacting. Investors are rapidly making portfolio decisions, adding to existing positions, initiating new positions, or selling portfolio stocks. Management team interaction is key to remaining in the first two categories!
We polled the 25 largest global institutional investors to find out more about their internal policies around travel, company management team visits, conference attendance, and sell side analyst visits. ALL of the institutions we spoke with have implemented a ban on non-essential travel and many are encouraging teams to work from home. Non-essential travel includes attendance at conferences, and as a result, there has been a precipitous decline in attendance at the few conferences that have not been cancelled.
Half of the institutional investors we spoke with were still able to host management teams, provided they were able to attest that they had not visited “hotspot” Level II or Level III countries, as defined by the U.S. State Department, in the past 14 days. The other half were not accepting outside visitors at all, including management teams and sell side analysts. Over 80% of have banned conference attendance. It is very clear that institutional investors are adopting a more conservative approach.
Public companies are taking a mixed approach with some willing to travel and others not. We spoke with the Head of Corporate Access at a $500B AUM investor who told us that 60 companies cancelled meetings with their portfolio managers last week. Investment banks are reacting in similar ways, banning non-essential travel, encouraging work from home, canceling conferences, and eliminating analyst visits to investors.
While traditional communication channels with investors are seemingly disabled, there are actually very effective solutions available. Investors are increasingly welcoming video conferences and audio calls. Every institution we spoke with is willing to substitute in-person meetings with video/audio conference calls, In fact, the head of a large institution in Boston said that video conferences have become the preferred method of corporate interaction for them over the past week. Meeting by video is a very effective (not to mention efficient) way for investors and companies to communicate, and our senior sales team is positioned to help you manage this process. Just last week, one of our clients, a $115B market cap company with global operations, canceled a series of investor meetings in New York. Fortunately, we were able to quickly convert these meetings to videoconferences and continue to provide the same valuable feedback that we do during in-person meetings.
There has been an historic reluctance by both investors and management teams to use video conference in lieu of in-person meetings. A major factor has been related to interoperability issues between various conferencing systems. Rose & Company has been dedicating resources over the past several weeks to thoroughly evaluate the available options in order to ensure our clients can continue to communicate with current and prospective investors without having to overcome technology hurdles or requisition elaborate conference room system. The solution we are deploying is simple and browser-based and allows for easy communication and simultaneous viewing of presentation materials.
What is abundantly clear in discussions with PM’s, is that they are not hiding under their desks, but rather they are actively looking for investment ideas, developing strategies to position their portfolios and shopping for distortions in value created by volatility. It is market disruptions like this that offer investors the opportunity to bolster their portfolios with unjustly punished stock valuations. Our clients continue to actively engage with their current shareholders as well as new, incremental shareholders. Massive global market volatility is not new to our team. We draw upon our experience from the past, including September 11th, the financial crisis in 2008, SARS, MERS, and now the coronavirus.
The length of this period of disruption to the normal course of business is open ended and will depend on the proliferation and containment of the epidemic. This will pass, but we are now in a “new normal,” and it is essential to have a strategy and tactics in place to adapt. Your business will go on, and being in a position to manage and communicate with existing and new investors must remain a priority. Current visibility as to business impact ranges from none to significant and communications must be nuanced for each scenario, but there must be communication.
There are many unknowns surrounding the impact on business and these questions need to be artfully articulated. Rose & Co’s communications and sales teams are preparing our clients to adapt their messaging and investor outreach through this process.