Competition for capital is increasingly intense despite the large amount of liquidity in the markets. The restrictions on mobility caused by Covid-19 have given rise to a model of virtual meetings, supported by the improvement of technological support. In the future, we will have a hybrid model of face-to-face and virtual meetings that will gain due to their greater efficiency in terms of time and cost savings compared to traditional ones Roadshows.
Digital media and social networks are the new communication channels for companies and their managers. Every day, more and more CEOs of listed companies are actively participating in these networks.
Minority shareholders, often forgotten in recent years, have found social media as a powerful channel of communication and influence. The progressive blurring of the role of brokers has led to direct contact between investors and companies, where the latter must be proactive in finding clients, investors, who tend to reduce the number of companies in their portfolios and rotate them more frequently.
The strong stock market weight of new sectors has been supported by the markets. It is the so-called capital-free capitalism, with little fixed assets, limited or no cash generation in the short term, but strong growth in sales. Companies in the new digital reality (TikTok, Zoom, Google, Amazon) are reaching stratospheric capitalizations that have changed the composition of the indices. Tesla, whose contribution to global automobile production does not reach 1%, has a capitalization, higher than the rest of the manufacturers combined.
In the case of small companies, the introduction of MiFID II has meant that they have lost analysis coverage by brokers who need to adjust their costs to lower revenues. Nor do they receive invitations to perform Roadshows if they don't have the free float and the necessary liquidity to generate commissions that offset the expense of organizing meetings or writing a report.
Sustainability and Investor Relations form an indivisible core. Policies on climate change, diversity, remuneration, and corporate governance issues are already an essential part of Equity Story Of the companies
Investor Relations departments need greater proactivity to search directly for their potential investors. Those responsible must incorporate new skills for the development of their work. Along with knowledge of valuation and analysis of companies, they need to improve their communication and synthesis capabilities. Today, no one reads a 600-page memory, such as those of some of our Ibex 35 companies. Time is the scarce resource, not information.
In the future, the reporting of non-financial information must be integrated into the control departments of companies, subject to the same requirements of veracity, periodicity, accuracy and auditing as accounting information.
The Investor Relations professional must be comfortable handling legal concepts, due to the continuous increase in passively managed funds. When a company seeks the support of its institutional investors for the proposals of its General Shareholder Meeting, it should talk to the areas of compliance (regulatory compliance), given that passive management carried out with machines progressively displaces the traditional portfolio manager. The coordination of the Investor Relations department and the company's legal department is essential.
The irreversible change in business financing to the capital market via bond issuance has added bondholders and agencies of Rating as new interlocutors of the Investor Relations departments together with those of the treasury.
Shares are traded through alternative platforms that can represent 60-65% and not so much on centralized exchanges (BME). This fact and the non-obligation of financial intermediaries to report their daily purchases and sales have made it very difficult to know who the shareholders of the companies are. Companies are blind to who is intermediating their actions.
The growing weight of quantitative funds has triggered algorithmic trading. Decisions are made by machines, not by people (who only decide what criteria are put into the algorithms). This phenomenon has increased price volatility. Their abrupt variation does not have to do with the quality of the results, but rather with how they differ from what is programmed in these logarithms. This rewards short-term management over the generation of long-term value by companies.
In the fight to attract investment, Investor Relations departments are now more important than ever, but the demand is also greater. We must carry out an exercise of continuous adaptation to the needs of the customer (investors).
Not existing in the minds of investors is the worst case scenario a company can have. The efforts of those responsible for Investor Relations should not be focused on the price of the stock but on building trust. It is this trust that will ultimately decide the price of the share, the company's cost of capital and its reputation among the different interest groups, whether or not it can be an alternative.
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Ricardo Jiménez Hernández
Sigma Rocket partner
