More than one third of investor targets globally are directly identified by the investor relations team, according to recent research from IR Magazine. There’s no question that this number has increased due to the effects of Mifid II and the changes to corporate access it has initiated.
The same research shows IR teams are more likely to have decreased, rather than increased, their use of brokers for investor targeting. In this new era, IR teams are stepping up to the plate and playing a more active role in investor targeting,
At a recent IR Magazine event in Toronto, Adrienne O’Neill, global head of investor relations at Manulife, explained how her targeting efforts in Europe have changed since Mifid II. ‘We were recently marketing in Frankfurt,’ she said. ‘I looked at the list of investors we were meeting with and noticed that our largest investor wasn’t on the schedule. When I asked the bank about this, it said it didn’t have a relationship with [that investor].’
O’Neill added that the brokers she works with are very transparent about whether they have relationships with her current and target investors in the post-Mifid II era – to the extent that they ask her to rank her targets in order of importance so the broker can give her an idea of how many of her ‘platinum’ targets it can arrange meetings with.
Tech platforms come to the foreground
As IR teams bear more of the brunt of investor targeting on their own, they need the support of effective targeting and technology tools to streamline their workflows and highlight prospective investors. Indeed, more than half of the companies surveyed by IR Magazine globally use technology platforms to enhance their investor targeting efforts.
When using these tools – such as the EQS Cockpit – IR teams can analyze their existing shareholder base, compare it with the bases of their peer companies and evaluate the quality of current and prospective investors. This can be crucial for IR teams being asked to do more in a Mifid II era, but with the same budgets and team sizes they had pre-Mifid II.
IR Magazine’s research shows that investment style is the most important factor IROs look at when determining targets, followed closely by peer ownership. Among small caps, peer ownership and sector focus are the most important areas of focus.
Speaking to IR Magazine in 2018, Jeannie Ong, then responsible for investor relations at StarHub and now a director at the Investor Relations Professionals Association (Singapore), explained how she used technology tools for peer analysis. ‘Using our regular share registry analysis to compare ourselves against our peers in the FTSE ST Telecommunications Index, we have a good idea of which funds have invested in our peers, but not in us. We can then specifically contact them for a meeting when we know we are going to be in their home country.’
IR teams have to be patient
One of the by-products of IR teams playing a more active role in investor targeting is that it can be harder to get a sense of whether a target investor is going to take a position following a meeting. Traditionally a broker would provide feedback to the issuer following a meeting, and would have a much better sense of how many meetings it takes investors to initiate a position.
According to IR Magazine’s research, it takes an average of between four and five meetings with targets before an investor takes a position. Globally, 22 percent of new investment targets will end up taking a position in the company.
For Marisa Jacobs, global head of investor relations at Crocs, it’s extremely important to keep track of every interaction she’s had with investors in order to determine who to meet with in the future. ‘If I’ve spoken to people four or more times and they have never taken a position, I do start questioning why we’re having those conversations and whether they are using a conversation with me as a way to get data about the industry and other companies in the industry,’ she told IR Magazine earlier this year.
In this new era, where IR teams are to do more both operationally and strategically when it comes to targeting, it’s important they have effective tools to help them along the way. Streamlining workflows saves time and helps IR teams hone in on precise and actionable information they can use to inform their targeting efforts.