We are living through unprecedented times. Everyone agrees that COVID-19 will change the world for ever and in myriad ways.
‘Unprecedented’ is used almost constantly. But can it be said that how companies communicate with their investors specifically, and the financial market in general, has changed in unprecedented ways too?
The answer, thus far, is a resounding ‘no’.
One of the main aspects of life with the virus has been the acceleration of trends that were already in place. The value of the AGM has been diminishing for some time in the eyes of many. How many believe that AGMs will be reinstated in their traditional form once life returns to normal?
Similarly, the use of video conferencing has risen hugely. Does anyone doubt that a far higher percentage of work will be carried out remotely using such technology from now on? The price of videoconferencing stocks like Zoom, listed in New York, which has seen it price surge by 200 per cent in less than one year, compared to a market fall of 17 per cent over the same period, suggest that the market believes WFH (working from home!) is unequivocally here to stay.
Let’s look at how companies have responded in terms of talking with their investors. Companies have always used two main channels to communicate with the financial markets.
In the UK, one was via their brokers – who acted as their ‘eyes and ears’ towards investors whilst writing the research on which investors based their investment decisions.
Post MIFID II, these traditional broking roles, while important, are less powerful. For example, brokers are often barred from attending meetings between companies and investors. Meanwhile, sell-side research now often sits behind a paywall.
The other channel was editorial media content – delivered with the assistance of financial communications firms – typically around a static, fixed moment such as a single 7am RNS announcement. But the reach of traditional ‘offline’ media is reducing all the time. How many people are reading physical newspapers right now in their own homes? And a significant amount of the best, high-quality journalism also sits behind a paywall and cannot be forwarded.
Faced with a revolving news agenda, there has also been a proliferation of new news sources, with many traditional hacks re-defining the role of the broadcast journalist by choosing to break stories on Twitter, rather than in the television studio.
Of course, companies have invested in their own websites with specific sections devoted to investors. But websites rely on an individual searching out and finding the company. They are not transitive.
Meanwhile, large (and increasingly not so large) institutions make full use of digital data in their quest to secure Alpha. It’s free and there’s lots of it so they use every social media platform available to better assess management teams, how a company manages extra financial risk factors (such as Environmental, Social and Governmental) and how to obtain a clearer picture of a company’s performance in real time.
In fact, even before the COVID-19 there existed a huge imbalance between use of digital data by investors and by companies.
In this unprecedented world it’s vital that companies use digital channels
Firstly, to see themselves how investors see them. To see themselves in the mirror, if you like.
Secondly, to communicate all aspects of their business, including the extra financial ones. Ironically, most companies have swathes of information about such aspects of their business but leave most of it, inert, marooned on their website. It’s time for companies to take this information to their actual and potential investors.
Thirdly, it’s essential the companies and IROs grasp the opportunity that digital communications represents to actively promote themselves as an investment opportunity.
The market, and society at large, is already starting to ask which companies will emerge from the crisis in the strongest shape.
The time for companies to communicate in an unprecedented fashion using digital channels was right six months ago, and it is right now. Coronavirus is accelerating the digitisation of investor communications, changing the way we interact with investors forever.