I started my career in IR in 1996; at that time, corporate IR teams and IR consultancies still relied heavily on sell-side intermediaries to reach buy-side decision-makers. But it was clear even then that the influence of the sell-side would diminish steadily, and issuers would increasingly take fuller ownership of their investor relations.
This shift has played out largely as expected, and with the introduction of MiFID II earlier this year, forecasts of the sell-side’s diminishing influence increasingly read like obituaries. In Corporate access: death of the go-between?
, the FT’s Owen Walker writes:
One area in which corporate brokers had traditionally been able to show their value was by hosting conferences and roadshows, bringing together fund managers and company executives. These events have been one of the first areas to suffer under Mifid II. Mr Thorne of Edison says he has heard of many examples of conferences being cancelled due to lack of interest, or going ahead but being “shockingly attended”.
He also cites the findings of a survey of 302 institutional investors, including half the 20 largest global financial institutions, in which 64% of the respondents said they are more or much more likely to rely on companies contacting them directly. Not surprisingly, the article also points to early-stage attempts by technology vendors to engineer new solutions for the market participants affected by MiFID.
Walker’s conclusions are correct but incomplete, at least for the purposes of in-house IR teams grappling with the operational, compliance, technology and budgetary implications of the shift to direct engagement between issuers and investors. The end of the speed-dating choreography of corporate access doesn’t just mean that IR departments will staff up or that IR firms will grow their client rosters. Nor is this the only or even the main variable affecting the quality of the issuer-investor dialog.
In my view, the introduction of MiFID II simply accentuates the need for a new model of investor relations, in which the disintermediation of the sell-side represents one of the more trivial changes in the issuer-investor relationship. More important changes in the new model include:
- Greater emphasis on the valuation of intangible assets.
- Increased use of advanced data analytics in targeting and sentiment analysis.
- A commitment to counteract the diminishing value of mandated corporate disclosures.
I welcome interest from IROs and senior management teams exploring ways to adapt not only to post-MiFID realities (e.g., accelerating slump in analyst coverage), but also to other disruptive trends (e.g., increasing use of AI technologies).