Direct contact between investors and companies is increasing this year – partly replacing investment banks’ role as a source of research and corporate access – as companies’ dissatisfaction with sell-side research grows, according to a survey of European IROs conducted by Citigate Dewe Rogerson.
The percentage of companies saying they are satisfied with the quantity of sell-side research on them has fallen for a third straight year, declining to 58 percent in 2014 from 61 percent last year and 73 percent in 2012, according to the survey of 190 IROs from 18 countries.
Satisfaction with the quality of research remains relatively high, but 37 percent of respondents still say research has become worse over the past 12 months, the firm says. That is down from a record 41 percent that said the same last year but is still significantly above the 21 percent witnessed in the 2011 survey.
The survey also finds that institutional investors are increasingly producing their own research, with 42 percent of respondents saying they have noticed a rise in buy-side research over the past 12 months, up from 27 percent last year.
‘In line with multiple reports of investors bypassing the sell side and engaging with companies directly, greater levels of buy-side research coverage have been reported across the board,’ Citigate Dewe Rogerson says. ‘Even among small caps, 31 percent have noticed this trend.’
More than three quarters (82 percent) of all investor roadshows are organized by brokers, although IR teams plan to set their own roadshow targets this year, the survey finds. Forty-four percent of IROs in Europe say primary responsibility for planning roadshow targets lies with the IR teams while 40 percent say the IR team will review broker suggestions.
Another 43 percent of respondents say they will also spend more time conducting roadshows over the coming year, up from 39 percent in 2013. The number planning Asian visits has more than tripled, to 18 percent this year from 5 percent last year.
‘The most noticeable change compared with 2013 is the rise in the popularity of Asian roadshows,’ says Citigate Dewe Rogerson. ‘Those who offer more specific comments mention Hong Kong, mainland China, Kuala Lumpur, Seoul and Singapore.’
When it comes to consensus estimates, 92 percent of respondents ‘proactively collect/manage consensus estimates’, with 75 percent doing so directly and 17 percent using a third party. Only 23 percent share the estimates via a website, however, and 25 percent don’t share at all. At the same time, the number of companies that share the information verbally has fallen from 44 percent last year but remains ‘uncomfortably high’ at 39 percent, led by French companies, Citigate Dewe Rogerson says.
