International Investors: An Overlooked Opportunity?
By Gene Marbach
Let’s see… Your annual investor relations itinerary typically consists of appearances at a number of brokerage-sponsored conferences and perhaps some sell-side supported road shows to Boston, Chicago, New York and other towns. You might hit other cities such as Minneapolis, Denver and Milwaukee. You might even schedule an analyst day…
What about international markets such as London, Frankfurt, Edinburgh? Are they on your itinerary?
Often, international money centers are overlooked in planning an annual investor relations calendar, most likely due to the time commitment as well as the expense associated with such trips. However, you might be missing out on a great opportunity to generate additional institutional interest and ownership. It should be noted that international ownership of US equities is in the neighborhood of $3 billion.
The US capital markets continue to hold considerable upside potential and should be attractive to international investors given current valuations and the strength of corporate earnings; this despite the challenging global macro environment as a result of the Eurozone’s much publicized problems which some believe might be offset by continued growth in emerging growth markets. In addition, the US economic picture continues to improve, albeit slowly, with GDP and employment inching upward while the housing market appears to be recovering, all of which may serve to underpin the performance of the US capital markets. Finally, while our markets may have suffered a few mishaps of late such as those involving Knight Capital and the Facebook IPO, the US financial markets are highly developed, liquid, and efficient and benefit from strong corporate governance and regulations.
Of course investing in the US capital markets is not without risk. The downside risks are pretty much the same issues that created significant market volatility in 2011—European recession and as well as the slowdown in China. In addition, geopolitical risks continue to be a concern as well as their impact on oil and gas prices.
Some suggestions for undertaking an international road show:
- Talk to your covering analysts. This is a good place to start and many, particularly those at larger firms with a number of international offices, will more than likely be interested in helping arrange an itinerary. They will also be in a position to advise you as to the likelihood of institutional investor interest.
- Consider independent research firms. For example, Edison Investment Research, based in London, with over 2,000 active contacts, can help promote your company to an under-utilized pool of funds through a targeted approach. Edison makes use of proprietary data to target large-scale non-institutional fund managers with significant sums under management and in turn generate fresh demand and improve liquidity on behalf of companies.
- International brokerage-sponsored conferences. Solicit the interest of the sponsors of relevant conferences in having your management team present. Conferences remain one of the most efficient ways of reaching the institutional investment community
One of the chief goals of any investor relations program is to generate additional institutional ownership and while it is easy to hunt in one’s backyard there are considerable opportunities across the pond.