Much has been said about the implications of MiFID II on stock research coverage levels (see our earlier blogpost and analysis) and the economics of sell side brokerage, but the elephant in the room is what this means for access to investors and investor targeting. The days of simply running your business while letting your sell side brokers take care of your marketing and the share price take care of itself are most definitely over. We are increasingly being asked by mid and small caps for assistance with investor targeting and we share our thoughts below on why a new, more proactive and creative approach is now required.
The more mature among us probably remember the good old days when brokers actively competed to take small cap corporates on roadshows, and when filling multiple days with 6 one on ones plus several conferences every year with a wide range of investors was as easy as falling off a log. However, in the post MiFID II world, not only have analyst coverage levels of mid and small caps declined but strict anti-inducement rules mean corporates are facing a restricted universe of investors on broker roadshows. To explain – if you travel with Broker A, you are going to only see Broker A’s clients because investors with whom Broker A doesn’t have a MiFID II contract will not accept roadshow meetings for fear this could be seen as an inducement to deal and as such a breach of the rules. The economics of roadshowing have fundamentally changed and brokerage houses simply cannot make a proper return on roadshows anymore – the bottom line is that it now costs money to travel and meet investors.
Obviously, if you are a mega cap with 30 analysts following you and a multi-billion euro market cap, life remains relatively easy and the bulge bracket brokerage firms are still queuing up to provide these services for free in the hope of corporate business further down the line, but as a mid/ small cap its now considerably harder to make an impact, let alone identify and target new investors. Paid for research to expand your coverage universe will not solve this and is treated with a justifiably healthy dose of scepticism by investors – it is not a magic bullet.
Another complication which is often ignored is the issue of who actually holds your shares? Sure “AssetManagementCo” is listed as a shareholder and corporates assume that brokers know who the relevant fund manager is – but it’s not always so simple. From recent conversations with investors at large structured houses, we hear again that they are being missed out on roadshows because brokers do not know who to ask when it could be any one of up to 5 fund managers. Tracking down and getting in front of the right person takes not just time, but also an understanding of the processes of a large number of structured organisations.
Finally, and most importantly, having your message on point and being clear up-front is key. Again, from recent investor feedback it is clear that most meeting requests for corporate roadshows nowadays are simply a “company x is coming to location y on such a date – are you interested?”. Crafting a strong narrative ahead of your pitch is the only way to secure a meeting with time pressed investors. Getting a good roadshow schedule together isn’t as simple as having a list of potential and existing investors anymore. Impressing upon investors why they need to meet you is vital, and understanding what they need to hear from you in order for that to happen is essential.
Fortunately, we at Clearhart can offer you real solutions. Our decades of experience in investor facing equity brokerage mean we can assist you from crafting your narrative to assisting with the practicalities of roadshow organisation and optimisation. Our active network means we can assist you in investor targeting, getting the most out your roadshow experience, and enhancing what your brokers are offering you. Contact us to get a head start on your 2025 marketing.