There has been much speculation in the run-up to MiFID II about the effects of this directive on listed companies. Among other things, fewer free roadshows and conferences (corporate access) and therefore less access to investors were forecast for companies. According to the statement, under MiFID II brokers can no longer offer these corporate access services for listed companies free of charge or can no longer do so to the same extent. Small and medium-sized companies in particular feared that this would restrict access to investors. But what has actually changed since MiFID II came into force? Has there been any major upheaval in the market? Do small & medium-sized companies have no or reduced access to free roadshows & conferences – because brokers can no longer offer these services? How should companies react to such changes?
Market Development Since MiFID II
First interviews show: The capital market has changed since MiFID II came into force. Brokers such as WH Ireland, Cenkos and Arden Partners report dull figures in recent weeks.[1] For example, commission payments to brokers in the UK in the first quarter of 2018 fell by 28% year-on-year. [2] Cenkos even reported a decline in profits of over 90% in September 2018.[3] This cost the CEO of Cenkos the job.[4] Other brokers are thinking of consolidating.[5] First capacities are leaving the market.[6]
Changed (Business) Relationships Between Brokers, Investors & Companies
Not only market structures are changing. It is about all long-term relationships between the sell side (brokers) and the buy side (investors) that are being undermined by MiFID II. And this has direct consequences for listed companies. How does the sell side deal with these changed market structures? What are the consequences for investors & companies? Large sell-side brokers offer buy-side investors services such as participation in conferences, roadshows or reverse roadshows at special conditions. However, this new broker business model requires investors to be willing to pay. However, 51% of the investors stated that they did not want to make any payments for services they had previously obtained free of charge from the brokers.[7] As a result, brokers are turning to listed companies and increasingly offering them paid roadshows & conferences, and as a result of MiFID II, sell-side brokers are increasingly focusing on larger companies.[8] This makes corporate access more difficult for small and medium-sized enterprises. Small and mid-cap companies in particular report on fewer free offers for roadshows and conferences.[9] But even larger companies report that brokers can no longer address all investors through MiFID II and that the company’s own major shareholders cannot be reached by the broker.
Investors’ Expectations of Companies
What expectations do investors have of companies if over 50% of investors are not prepared to pay for roadshows & conferences? Some investors expect more direct targeting of the companies, so that they directly address the investors: “Companies will need to work harder at directly contacting current and potential investors”.[10] Other investors advise using the services of intermediaries such as brokers & other specialized roadshow providers: „What I would like to see is corporates paying intermediaries to arrange investor meetings. This is the cleanest way to do it.”[11]
How Can Companies React To The Changes?
Which solutions do companies pursue in order to adapt to the changes? On the one hand, of course, not all investors expect companies to bear the burden of the changed corporate access conditions alone. There are investors who have a certain willingness to pay for roadshows or who turn directly to the companies. Brokers also sometimes find opportunities to offer roadshows and conferences free of charge. Nevertheless, (some) companies must also react to the changes. As far as companies are affected by changes, they see the IR in the obligation, which an increased investor targeting should make. A suitable IR programme includes self-organised roadshows, conferences, capital market days and reversed roadshows.[12]
[1] Hannah Murphy in Financial Times, 18. August 2018: https://www.ft.com/content/e0fde656-9c76-11e8-9702-5946bae86e6d, Artikel abgerufen am 10. Otktober 2018
[2] Daten laut ITG. Vgl. Hannah Murphy in Financial Times, 18. August 2018: https://www.ft.com/content/e0fde656-9c76-11e8-9702-5946bae86e6d, Artikel abgerufen am 10. Otktober 2018
[3] Hannah Murphy: Investors take fright over 90% drop in profits at Cenkos, Finciial Times vom 18. September 2018: https://www.ft.com/content/7db5fa38-bb12-11e8-8274-55b72926558f, Abgerufen am 10. Oktober 2018.
[4] Vgl. Hanna Murhpy in Financial Times, 09. Oktober 2018: Cenkos CEO steps down after 90% drop in profits: https://www.ft.com/content/1eba1392-cb8f-11e8-b276-b9069bde0956, Abgerufen am 10. Oktober 2018.
[5] Vgl. Hanna Murhpy in Financial Times, 09. Oktober 2018: Cenkos CEO steps down after 90% drop in profits: https://www.ft.com/content/1eba1392-cb8f-11e8-b276-b9069bde0956, Abgerufen am 10. Oktober 2018.
[6] Gerard Walsh, Head of Business Development bei Northern Trust Capital in: Hannah Murphy in Financial Times, 18. August 2018: https://www.ft.com/content/e0fde656-9c76-11e8-9702-5946bae86e6d, Artikel abgerufen am 10. Otktober 2018
[7] Vgl. ir society: By-side expectations for corporate access under MiFID II: http://irsociety.org.uk/resources/news/item/buy-side-expectations-for-corporate-access-under-mifid-ii
[8] Vgl. Hoffmann, Joerg, Wacker Chemie AG, inL Going Public: Erste Beobachtungen nach MiFID II: https://www.goingpublic.de/erste-beobachtungen-nach-mifid-ii, Abrufdatum: 10. Oktober 2018
[9] Vgl. Hoffmann, Joerg, Wacker Chemie AG, inL Going Public: Erste Beobachtungen nach MiFID II: https://www.goingpublic.de/erste-beobachtungen-nach-mifid-ii, Abrufdatum: 10. Oktober 2018
[10] Vgl. ir society: By-side expectations for corporate access under MiFID II: http://irsociety.org.uk/resources/news/item/buy-side-expectations-for-corporate-access-under-mifid-ii
[11] Vgl. ir society: By-side expectations for corporate access under MiFID II: http://irsociety.org.uk/resources/news/item/buy-side-expectations-for-corporate-access-under-mifid-ii
[12] Vgl. WACKER Corporate Access Program: https://www.dirk.org/static/uploads/2-1-Corporate-Access-The-Issuers-Perspective.pdf, S. 8