The latest in our investor relations series looks at the extraordinary trading volumes since lockdown, and ‘going virtual’ in the middle of a reporting and AGM season.
In times of crisis it can be tempting to batten down the hatches. For public companies, however, there is nothing more important than continuing to communicate with investors and other key stakeholders during these uncertain times. There is now a heightened need for integrated investor relations strategies incorporating many aspects of communications, finance and PR into a combined information stream for the entire stakeholder audience.
Over the years and through numerous economic cycles, the investor relations team at Tavistock has worked with our clients to help them navigate a broad range of difficult situations. Here we outline some of the accumulated lessons we’ve learned, some of them harder learned than others!
Recent trading volumes make history
In the wake of a crisis such as the COVID-19 pandemic, we have seen new levels of investor behaviour. During the first two weeks of lock down, the London Stock Exchange witnessed four of its five highest trading volumes in its long history. Normal daily transaction volumes of £3-4 billion rose to £12 billion, highlighting the differing strategies being deployed following the equity sell off. We have seen the retail broking houses disclose that new account levels have been 3x higher over this period as new retail investors seek value opportunities, while institutional investors prepare for a period of required recapitalisation from their portfolio companies.
Investors are shifting their focus to the short to mid-term, straying from their longer-term investment goals as they become more preoccupied with immediate and fundamental questions about the viability of their investments, such as:
- How much cash does the company have and what is its cash burn?
- What short term options are available to the company in terms of cash and liquidity?
- What can management do to manage the cost base in the short term?
- In what other ways is management ensuring the viability of the company?
- How is management mitigating risk and protecting the company’s assets and growth drivers?
- What plans exist to cope with the medium-term economic scenarios created by the pandemic?
While some of these questions seem like common sense, other key issues to bear in mind when talking to your investors include:
- Make sure your timing is right – does the news need to be published now? Are you communicating something fundamental? Businesses often feel pressurised into copying their peers but try to avoid herd communications – wait until you have something specific and accurate to say that is relevant to your investors and the viability of your business.
- Avoid selective disclosure – don’t change your KPIs or traditional reporting statistics unnecessarily. Stick to your fundamental investor communications strategy and build upon the information already in the public domain. Investors understand that assessing situations carefully takes time; don’t be afraid to issue a holding statement to avoid rushing inaccurate information into the market.
- Don’t forget about the longer-term IR agenda – while it may not be high up the to-do list, other areas of your Investor Relations strategy should continue where possible. For example, environment, social and governance (ESG) remains a focus for investors throughout the COVID-19 crisis and those companies who invest effort in ESG during this time will reap the rewards later.
- Going Virtual – there clearly is no substitute for face-to-face meetings but during this period technology has shown video meetings to be more than capable alternatives. Investors and employees alike are hungry for news and these platforms are good tools for management to deliver their messages.
For AGMs, boards are rightly looking to safeguard the health of everyone involved and reverting to virtual AGM formats is advisable given social distancing measures. Some companies are getting bogged down with the legal ramifications in terms of their business’ articles of association to ascertain whether a virtual AGM is possible. It is important to remember that for many investors, the AGM is the only opportunity they get to engage with the board. Not surprisingly, we are seeing investors call for boards to make available Q&A sessions beyond the minimal required proxy voting. One such option is an investor call immediately before the formal meeting. Investors are interested in how businesses are coping through Covid-19 and therefore it is essential to facilitate open channels of communication. We are seeing a growing number of shareholder groups call for boards to make themselves available for the valuable discussions that come with an AGM. Generating goodwill now, will pay dividends later.
In the last few weeks, we have seen markets in free fall followed by spectacular gains. The FTSE suffered its worst quarter’s fall since 1987 but with strategic thinking, transparency and open communication, we can all move forward together. Every publicly listed business in the UK is working to overcome the same obstacles. There’s some comfort in that.