Five Key Trends for IROs to Monitor in 2022

In our last article , we discussed the top five IR trends that played out in 2021. In this bulletin, we focus on the key trends that are likely to dominate the investor relations space in 2022.

The IR landscape has changed dramatically in the last two years, thanks to the COVID-19 pandemic. As we approach 2022, there are certain IR trends that are likely to materialize in the following year and beyond. 1) Hybrid events will be the future of IR events; 2) Investors’ reliance on digital sources and research platforms will increase; 3) AI will play a key role in IR targeting strategies; 4) ESG will become more relevant for small- and mid-cap firms; and 5) New ways of fund raising (New Capital) will continue gaining popularity. We discuss these trends below.

·????????Hybrid events will be the future of IR events. 2020 saw virtual meetings gaining prominence among IROs, thanks to COVID-induced travel restrictions. Now, with travel restrictions easing around the world (pre-Omicron) and in-person corporate access events making a comeback, investors and analysts are more open to attending physical corporate access events. This allows them to have one-on-one and deeper conversations with IROs, even though some still prefer the safety and convenience of virtual events. As a result, IROs are adopting a hybrid approach for meetings, combining the advantages of physical and virtual forms. Per Citigate Dewe Rogerson’s (CDR) 13th annual IR survey of 250 companies from 49 countries, 69% of IROs have adopted a hybrid working model post-COVID, implying that virtual engagement will remain popular in the longer term. According to Gartner, 60% of organisations that shifted to virtual events would add physical real-time/real-space experiential aspects into their marketing encounters by 2023. Given this backdrop, IR teams also need to adopt a hybrid approach for their corporate access strategy while considering the associated costs, meeting all technology requirements, choosing the best-suited corporate access platforms , keeping both physical and virtual audiences engaged, and taking feedback to measure success.

·????????Investors’ reliance on digital sources and research platforms will increase. The COVID-19 pandemic enabled institutional investors to work remotely, forcing them to rely more on digital sources and platforms to connect and collaborate, according to a 2021 Digital Investor Survey by Brunswick Group. The survey of 537 institutional investors around the world found that 80% of investors used digital sources to make an investment decision in 2020 – up from 73% in 2018 and 2019. It also highlighted that IR websites were the top digital sources with 92% of investors using the IR section of a company’s website to investigate an issue while 72% of investors used the IR website to make an investment decision. Other digital sources such as Google, Zoom, and e-mail newsletters were used by nearly 40% of investors to make an investment choice. In addition to these digital sources, third-party investment research platforms are also gaining popularity among the investment community to publish and access information/research on companies. We believe the trend of investors’ increased dependence on digital sources will continue in the coming year and beyond, since these platforms are emerging as cost-effective and reliable sources of information for due diligence and investment decision making. Therefore, IROs need to ensure that their IR website is frequently updated and they have ample presence on social media and research platforms to gain visibility and traction among the investment community.

·????????AI will play a key role in IR targeting strategies. Over the last decade, AI use across the Street has grown at a quick pace and investors are increasingly depending on it to make investment decisions. AI’s remarkable capabilities have enabled fund managers and institutional investors to produce alpha, improve operational efficiency, manage risk, and understand how and why markets move the way they do. According to a Gartner report , by 2025, tech investors will prefer data science and AI above “gut feel” for investment decisions. At the same time, it is estimated that over 75% of venture capital and early-stage investor executive reviews will be informed using AI and data analytics. Despite its rising popularity in financial markets, AI adoption has yet to acquire momentum among IROs. A 2020 report by the NIRI Think Tank on “Artificial Intelligence in Investor Relations” found that most IROs do not employ AI-powered technologies extensively in their regular operations. We believe this is set to change and that AI will become a fundamental element of the IR function in 2022 and beyond. This is evidenced from Citigate Dewe Rogerson’s 12th Annual IR Survey of 377 IROs across 55 countries, which showed that 36% of IROs are focusing on making greater use of technology in 2020/21. We believe this change will be driven by improved understanding of the benefits and implications of integrating AI into the IR function , especially since its usage can significantly boost targeting efforts.

·????????ESG will become more relevant for small- and micro-cap firms. While ESG has become a focus area for most large caps, investors are increasingly expecting small- and micro-cap firms as well to focus on ESG issues in future, according to a study by UK’s investment holding company MBH Corporation. Per the study, which included 170 professional investors across the UK, U.S., and Germany with a combined $465 billion in AUM, 72% of investors believe that smaller companies are often overlooked by investors with an ESG mandate. Moreover, 67% of investors anticipate a rise in the number of smaller companies issuing ESG reports to increase over the next three years. The research also showed that 83% of investors believe the attention and investment by small and micro caps in ESG will grow over the next three years. According to the investors, the change is being driven by government and consumers’ demand for companies to be more open in their sustainability reporting following COP26. Small- and micro-cap IROs can prepare for this change by boosting the ESG performance and reporting of their company by identifying material ESG issues, making ESG disclosure a prominent part of investor material, and reporting ESG data in a standard and easy-to-consume format.

·????????New ways of fund raising (New Capital) will continue gaining popularity. Private companies seeking to go public are looking for alternative ways to get publicly listed other than the traditional IPO route, which can be both lengthy and expensive. One of the alternatives is SPACs which took the U.S. IPO market by storm in 2020 and 2021. According to SPACInsider, as of December 9, the number of SPAC deals in 2021 stood at 581 with an average IPO size of $268.9 million, compared to 248 deals and an average IPO size of $336.2 million in 2020. The SPAC market cooled off in 1H21 as the SEC's new guidelines around accounting practices drove SPAC issuance into a tailspin. However, SPAC deal activity regained pace in 3Q21 and is likely to make a comeback in 2022. Apart from SPACs, we believe 2022 will also see other capital raising options such as Reg A Offerings and Direct Listings come to the forefront since these are more accessible, quicker, and less expensive ways of raising funds and going public. The IPO market is here to stay and is also likely to grow bigger, driven by growing retail participation and companies like ClearingBid that offer every investor and their broker a fair and transparent access to the most recent IPOs, just like the big institutions. Traditionally, big investment banks only offered IPOs to their largest and best customers. This led to inefficient pricing and limited distribution with most offerings. With democratized access to IPOs, issuers and investors can see real-time pricing and demand levels, allowing companies to raise more money at more accurate valuations.

About Intro-act

Intro-act optimizes corporate access in the post-MiFID II era. Intro-act’s machine learning prediction engine targets the most likely institutional buyers and sellers of a stock in the next 90 days and offers independent research to promote efficiency and transparency throughout the corporate access and investment process.

Intro-act’s services facilitate higher-quality meetings based on superior preparation for both investors and corporate executives because of centralized access to critical materials, including video, models, commissioned research, and agenda materials. The result is converting more investor meetings into shareholders and improving the ROI on corporate access.

Intro-act’s founders have over 50 years of experience (DLJ, Fidelity, First Call, OTR, Thompson Reuters) in capital markets, corporate access, and building investment research businesses. They realized that a regulatory change (MiFID II) would compel corporate investor relations to become increasingly responsible for servicing and growing their investor pool but would need to do so with fewer resources. Intro-act was created to help corporations fill this void. We use machine learning to predict investor behavior, analyze factors influencing investment decisions, and provide independent research services for investors and corporate IR officers.?

For more information:?www.intro-act.com