Regulation and matters related – here and abroad

At the start of the year most companies are absorbed in reporting and roadshows, but we will try to turn the spotlight on what is said and done in relation to various regulation of importance and the impact for investor relations the coming year from various sources like our IR counterparts and the media.

MiFID II and Shareholder Rights Directive
Various studies have shown repeatedly that non-deal roadshows are the prized means by which institutional investors the world over gain insight into companies’ investment appeal. Nowhere has this been truer than among money managers domiciled in Europe. Many more NDR days are conducted by European companies than is the case for IROs who work for corporations in North America.

From a company perspective in the UK the immediate effects have included more direct contact from the buy-side to corporates, a decline in attendance at investor conferences and gaps in broker-led roadshows. Other concerns include the quality of investor feedback, quality and quantity of research coverage, liquidity, valuation and consensus guidance. There are, however, big differences between large and small cap companies. Among large caps there is less concern, although internal resourcing is an issue with more buy side direct contact. At the other end, mid- to small-cap companies are more concerned with the lack of sell-side coverage and reduced investor access, as well as more internal cost and resource.

The message to the American IROs is also; “Bottomline is that you have to pay for research with hard dollars. If you are the IRO of a decent-size public company that has analysts covering your stock, there is a lot more to MiFID II than just research. If you don’t dive into the world of MiFID, you are not doing your job – only three percent of analyst reports are actually read”.

Though it is not so much in the news, attention is also put on the implementation of the Shareholder Rights Directive and its consequences throughout the EU. Especially the newsletters from Germany focus on it. The key areas included in the directive are better facilitation of shareholder rights, management remuneration, transactions with near relatives, institutional investors and asset managers and finally proxy advisors. In Denmark the bill has passed its first reading in parliament and will become effective from 10 June 2019.

In the media much attention is generally focused on ESG and various sustainability issues, but how much is seeping through the corporate layers and implemented in new strategies, policies and business cases? Still, this is a hot topic among investor relations practitioners how ESG is being integrated into day-to-day IR activities and communications. It should be clear how important it is to treat ESG as an integral part of IR. In the UK, recommendations include to take control of the information flow internally, get to know your ESG analysts at the research houses, find out which bodies your shareholders use and always include these in discussions with top shareholders. Key to all ESG efforts is to ensure that they follow the company purpose and are properly part of the business not just a tick-box exercise. Business is no longer business as usual – and this has become evident to many creditors, investors and insurers. It is necessary to have an updated risk assessment and a clear idea of exposure as climate nonchalance is becoming a no go. Only in the absence of reporting requirements ‘cold accounting logic undermines the economic rationale’, and according to a survey by Dansk Erhverv/Økonomisk Ugebrev, three out of four Danish companies have neither CSR nor the UN Sustainable Development Goals incorporated in their innovation and business strategy.

The role of Investor Relations
According to Nasdaq President & CEO Adena Friedman good investor relations will add 10-20 percent to the value of a stock. In the US there are 40 percent fewer publicly traded companies now compared to its peak in 1997 at 8,800. The private equity markets have expanded, but the public markets have shrunk which make Investor Relations more important. The need for smart storytelling is important today which hone an integrated company narrative that combines corporate strategy and financial results.

An American buyside view shared by Perry Boyle of Point 72 Asset Management says that the low pace of IPOs per year along with MiFID are factors in the secular decline of the sell-side and make developing relationships with the buyside ever more important for IROs: “Being public may not even assure a premium evaluation given the deep pockets of private equity and venture capital investors. So IROs need to know the numbers and buyside and sell-side sentiment surrounding those numbers”.

In Germany the phrase causing most distress in the financial world the past months is ‘Make America Great Again’ – due to the negative consequences the derived policies such as market uncertainty and volatility. Furthermore, much attention is put on digitization in general, but also specifically as company announcements are now partly analyzed and valued using artificial intelligence. This requires IR-texts also to be optimized for this purpose. The argument goes further that the present structures of the capital markets are not up-to-date and do not match the present requirements. In the UK, the talk of the town is the future of investor relations and ‘the silent disrupter’. This refers to the recent changes to the financial markets which are having a knock-on effect for investor relations. The talent pool is changing as MiFID II has put pressure on sell side analysts to look for a new career – and in many cases this is IR. Brain-drain is also a concern as highly-experienced IROs will begin to move away.


  • NIRI, IR Update, Nov./Dec. 2018
  • IR Society, Informed, Winter 2018-19
  • The Economist, February 23rd-March 1 2019
  • DIRK-Newsletter/Das Investor Relations-Update, February 2019
  • Økonomisk Ugebrev Samfundsansvar – 4. Årgang 2 – 22. februar 2019

Regulation and matters related – here and abroad_DIRFnyt No 2, 2019