Insights: The "new normal" will simply be normal
The first few days of working from home under the cloud of COVID-19 were disorienting, but a newly remote global workforce quickly refocused and began to adapt. Two months later, the majority has successfully adapted to working without physical proximity to others. There have of course been myriad challenges along the way, but ten thousand Zoom calls later, we have arrived at the “new normal.”
Public companies have had the unique challenge of not only making dramatic and often drastic changes to their business plans, but also of communicating their plans to investors amid a rapidly changing backdrop. First quarter 2020 reporting required an unusually heavy lift as significant changes needed to be made to core messaging, and as a result investor presentation needed to be rebuilt. This will undoubtedly be an ongoing process given the fluidity of the business environment.
Institutional Investors have likewise had to adapt to working from home as well. In treacherous market conditions they have had to re-evaluate their investments while continuing to search for new opportunities. They are doing so without the full benefit of management access. For the investors, this crucial element of the investment process has been disrupted.
We are all asking the question when will we return to business as usual? For face-to-face investor engagement, the answer is no time soon. For the foreseeable future, until the risk of infection is mitigated by vaccination, herd immunity or an effective treatment, the “new normal” will simply be normal.
The major global money centers have been the hardest hit by the virus, and none has been hit harder than New York City. While New York State’s criteria for re-opening are trending in the right direction, financial services companies are advising their employees that a staged re-opening of offices likely will not begin until after the end of the summer. Some firms have advised employees that their offices will be closed for the rest of the year. Even if some companies fast track reopening, it’s safe to assume that employees will be hesitant to leave their protected bubbles and put themselves and their families at risk. When offices do reopen, it will not be business as usual. Social distancing rules will remain in effect, visitors will not be permitted and permission to travel will face an extremely high threshold for approval. Any resurgence of the virus will likely result in a quick shift back to the home office.
Public companies do not have the option of waiting for conditions to improve before resuming investor marketing. Maintaining a dialogue with investors is a priority for both parties regardless of conditions, but it is even more crucial today given the dramatic shifts in strategies that most companies have undertaken. These changes cannot be left unexplained to both existing and prospective shareholders. Rose & Company is pleased to have helped our clients fulfill this mandate during this initial period of dislocation. While most public companies remain dependent on bank sponsored corporate access; our clients retained us pre-pandemic because we offer a superior solution to relying upon the diminishing effectiveness of bank sponsored investor meetings. Introductions to decision makers at high quality, long only institutions have become increasingly scarce as banks prioritized management meetings with high commission paying hedge funds. For better or worse, 90% all investor 1×1’s conducted in the 12 months prior to the pandemic were arranged through this sub-optimal channel.
Rose & Company developed our unique investor access program in response to this erosion of the quality of meetings being offered to corporate clients by the banks. The blend of meetings that management teams were offered was heavily weighted to hedge funds and the seniority of the investors at meetings was highly variable. After the adoption of MiFID II, long only investors significantly reduced their payments to banks for both research and corporate access and are reluctant to accept bank sponsored meetings that they need to pay for.
Through our recently announced partnership with Q4, Inc we have created the only end-to-end solution for companies to execute comprehensive investor targeting and outreach programs. Rose & Company’s experienced team of institutional salespeople have decades of experience at major global banks and relationships with senior decision makers at over 800 global institutional investment houses. We employ a thorough and consistent process that optimizes a company’s marketing time by introducing management teams to decision makers at methodically targeted long-only institutional investors. We provide detailed feedback to our clients after all investor meetings, prioritizing further company interaction, and maintain engagement with targeted investors on an ongoing basis. We work exclusively on behalf of corporate clients and accept no payment from investors to arrange corporate access. As a result, we are not regulated by MiFID II, and investors who are allowed to accept our no-cost meeting invitations are far more willing to engage with our team than with investment banks.
Despite the disruptions to normal workflows and limitations on everyone’s ability to interact on more personal levels in the current environment, we are pleased to see practices adapt as we work to ensure that our clients’ bridge to the investment community remains strong. In fact, if there is a silver lining to be had, it’s that necessity has catalyzed the adoption of video or audio conferences with screen sharing in lieu of in person meetings. This has driven a boom in efficiency for our clients, resulting in more high-quality meetings without the demands of travel. A day of investor meetings is no longer a 2 ½ day time commitment. Also, our investor outreach effort is no longer subject to geographical limitations. Instead of arranging a New York day, we can instead focus on arranging the best meetings possible that might traverse London, New York and the West Coast over the course of two days. There is no substitute for face-to-face relationship building, but the efficiency gains have been tremendous.
Companies are experiencing ongoing changes as the business landscape shifts. Effective communication with investors has never been as important in the competition for investor capital. An effective outreach effort offers a competitive advantage in the fight for investor capital and we are here to help.