There are two IRO camps. The first camp rarely relies on the sell-side to assist in buy-side engagement, travel logistics, or the like. They may be well known, have no problem getting quality meetings or little use for proactive targeting. In their head, they may bifurcate sell-side estimates from the corporate access service that banks provide. Perhaps they have an abundance of covering banks, so losing a few may not really matter. In fact, it may actually be a blessing.
The second camp has a different job to do. They leverage the banks to find quality investors. They allow them to set-up trips, manage logistics, and provide market insights. They have to hustle to get mindshare. These IROs may believe that the research and corporate access side is inexplicably connected. They may pay a bit more respect to the economics of the sell-side business model, and work to ensure they are successful too. They may have once had ten covering analysts, but now only have six.
Our world is changing. We’ve been talking about it for more than a decade, but it’s a reality now. I was recently speaking with a client about our IR Success Platform who shared a story about a bank declining to host her NDR. It sounds crazy, but is actually a reality. In the past, banks would have been knocking down doors to host a trip. So what was the reasoning? “We can’t make money off that trip with you any longer,” they said.
The changing IR landscape
What do we do now that the world is changing? We’re resourceful and resilient. Innovative and passionate. We take responsibility for the corporate access requirements ourselves (of course). The bright side is that you’re not alone. There are very useful tools and services, new methods and processes that we can all deploy.
You’re not convinced, I can see it on your face. Think about this:
You respond to that email from BigBank & Co requesting your participation at their annual conference. You accept, provide contact info, speaker title, and availability for one-on-ones. Three weeks before the event, you get a “sample schedule.” It’s like Christmas morning. You’re eager to see what amazing meetings the sales and events teams have gathered for you. Only you quickly learn that you recognize very few of the names or firms. Perhaps you recognize all of the names and firms, which could be a problem as well. You move a few of the names around, ask if there are any others that didn’t make the list, and eventually agree, defeated.
This is the process that we’ve all employed for decades. But let me illustrate how silly this process is (albeit with a sense of humor):
You decide to go to a restaurant next week for dinner. You make a reservation. Get dressed-up, drive, park, and are seated. The server comes and gives you a few options to order, but never a menu. However, you see other customers eating dishes that they never mentioned to you. You think you might like some of those items, but they’re not available to you. Why is the restaurant selecting a small subset of menu items for you? Are you not qualified to make a decision on your own?
When you go to a conference with a thousand buy-side attendees, but see a small list of thirty who expressed interest, you’re only getting a partial view of the possible options available. This shouldn’t happen. You should be able to proactively reach out to any of those thousand attendees and invite them to meet with you. Maybe they forgot who you were. Maybe they missed your company name on the list of presenting firms. Who knows? But this much I know: part of your job is to generate demand for your stock, so why wouldn’t you match the attendee list against a targeting list?
The point I’m making is that the role of generating demand and spurring engagement with current or potential investors will increasingly shift to you. We’ve passed the point of equilibrium, and it will become more visible now. You may be declined for the NDR now. That’s fine. We can be just as successful on our own. MiFID II has tipped the balance, and we have to react. I suggest developing a proactive engagement plan that leverages any and all assistance out there. Establish a thoughtful targeting list as you enter the year, as well each and every quarter. Lean on your partners to provide insight, materials, and even logistical support. You’re not alone. Together we are stronger than you can imagine.
Matt Tractenberg is IR Partner at Q4. He has a passion for combining IR with corporate strategy, to help customers identify opportunities and evolve their IR programs.