Roadshows: Include fixed income investors to improve roadshow efficiency
The MiFID2 powered regulatory wheel has started spinning faster (click here for Google search numbers). It now looks increasingly likely that ‘broker sponsored roadshows’ might indeed need to be put on the ‘endangered species’ next year. Today, however, we will not go into details here, but rather look into another argument that – independent from regulatory pressures – speaks for broker-independent roadshows.
Broker-sponsored roadshows: either equity OR debt
Almost all investment banks run their equity and debt operations separately, i.e. separate research, trading, sales and therefore ‘corporate access’ operations. This means the equity team organizes non-deal roadshows and all roadshows related to an equity deal (capital increase, placement, IPO), whereas the debt team organizes all fixed-income roadshows. Combined equity & debt roadshows organized by brokers are very rare.
Some investors look at equity AND debt
While it is true that most investors or analysts only deal with equities OR debt there is a substantial number of professionals that have a mandate to cover both. The latter group includes PMs of multi-asset class products, portfolio managers for discretionary mandates at private banks or family offices. There are also certain sectors (like banks, insurances) where a valuation of one asset class is hardly possible without understanding the other. Generally speaking, these individuals care for both equity and debt, probably leaning more to one side rather than the other, depending on the company.
CFO & IR can answer equity AND debt questions
While a roadshow related to the issuance of a bond will mostly be supported by the treasurer most follow up questions are dealt with by the IR team. Or to put it differently most companies and IR teams have company representatives that can answer both equity and debt questions. Or to put it differently, the cross-asset class expertise of company representatives is rarely the bottleneck here.
Independent providers offer equity AND debt events …
On a more practical level ‘integrating debt’ might involve offering 1:1 slots to the key debt players and bigger holders of outstanding bonds, organizing a group meeting that is open for equity & debt investors or invite for a dedicated ‘debt group meeting’. While less relevant for Switzerland, including rating agencies might be an additional option e.g. in London or Frankfurt.
Clearly such hybrid roadshows are only relevant for companies that have a material volume of bonds outstanding, even more relevant if high-yield is involved. Sector-wise combined or hybrid roadshows are especially interesting for banks with all their AT, Tier1, CoCos and the like. To a lesser degree this applies to insurance companies and real estate companies as well.
… increasing target audience and improving efficiency
As mentioned above, there is a small, but material group of investors that cover both equity and debt. The majority, however, still looks at either equity OR debt. With a combined equity & debt roadshow you are covering all of the above investors. This increases the number of potential participants in a roadshow, i.e. increases the target audience. This in turn provides result in a higher quality and more efficient schedule.
For smaller locations or smaller firms including debt in an a roadshow might make a specific location economically viable that was not before, offering an opportunity to broaden the investor base.