If you still have doubt on how fast Corporate Access is changing due to MiFID2 implementation, read the following FT article :
MiFID2 impacts on Corporates are “collateral damages”, as this legislation normally doesn’t apply to them. But by having deep impacts on the relations between brokers and their clients (Asset Managers) it will totally disrupt the Investor Relations space.
The “Free Broker – Marketing Assistant of Corporate” is over. IR departments will have to internalize a huge part of their marketing efforts towards investors that was supported before by the brokers.
At MyDCA we offer a unique digital plateform enabling Investors & Corporates to engage directly and efficiently. Don’t hesitate to login – access is free. https://www.mydca.eu
We are please to announce the first roadshow of a Nasdaq company Innovate Biopharmaceuticals in Paris with MyDCA on the 11 and 12 of April.
As the company is taking all the costs of it, Investors can join for free the event. So fell free to login on MyDCA, www.mydca.eu to create an account to join the roadshow.
Innovate Biopharmaceuticals, Inc., a clinical stage biotechnology company, focuses on developing autoimmune and inflammation therapeutics. Its late-stage clinical pipeline focuses on addressing unmet needs in diseases, such as celiac disease, inflammatory bowel disease (IBD), and nonalcoholic steatohepatitis (NASH).
If you have any question feel free to contact us.
It is very interesting to hear that US Small & Mid cap are considering paying for sponsored research to offset the potential threats of shrinking coverage by brokers.
The following article highlights the difficulties that will come in the small & mid cap universe. But more interestingly it shows that we are currently only seeing the early signs of a global reshuffle of Brokers/Corporates/Investors relations.
This impact of MiFID2 in the US should warn us in Europe of this raising issue.
There is no escape, accessing investors and retaining their attention will without no doubt need additional investments from corporates. Unfortunately, one could assume that these costs will be inversely proportional to corporates’ market capitalization.
Fidelity has been one of the few major asset managers in the world to announce at the end of 2017 that it will continue to charge its clients for external research.
It seems that pressure has been to heavy…. Fidelity finally announced that it will absorb these costs
Broker may offer to their clients Corporate Access for free considering that it is a part of research!
Regarding MiFID2 is not allowed anymore and will lead to a global reshuffle of relations between Corporates and Asset Managers.
If you still have doubt that free Corporate Access is an inducement have a look of this very interesting study from PWC :
It is clear that free corporate access is an inducement and should be banned. Off course we agree with this position at MyDCA as we provide MiFID2 compliant service of Corporate Access through our dedicated platform www.mydca.eu.
Don’t hesitate to contact us to have a demo.
QuantiFire Ltd & The Investor Relations Society made a large survey in december 2017. The research sought to establish investors’ views on the impact of MiFID II on their meetings with companies. 302 institutional investors responded.
Key findings :
- 92% of investors view corporate access as important or critical to their investment process
- 90% of investors regularly used sell-side corporate access teams last year, while 52% are now less likely to continue doing so
MiFIDII will deeply disrupt these relations too, with an increased scrutiny on price paid for this highly strategic service for Investor & Corporates
To have access to the full article, please follow the link below :
If you still doubt that corporate access has a real value read the following article from Bloomberg. Meeting with C-Levels executives is by far considered as the most valuable interaction by investors.
MIFID 2 rebates the cards of a triangular process, old as the Stock market: corporate access. Brokers put investors in touch with listed companies by organizing seemingly free, the roadshows. MIFID 2 will impose, from 3rd January 2018, the invoicing of roadshows to investors. Are the roadshows going to disappear? This is unlikely because they are strategic for corporates as for investors.
But the business model must reinvent itself and be funded by investors and/or by listed companies. Our conviction is that the cleavage will be made according to the size of companies: large caps, essential for the managers, will continue to benefit from “free” roadshows financed by investors; the smaller (the term “midcaps” refers to all capitalizations in under $ 5 Billions) will have to finance the marketing effort themselves, probably largely by internalizing the expertise of targeting and thus increasing their own costs.
Corporate access today is not directly remunerated: the remuneration is by brokerage commission on market flows and by selling the research to the funds. From January 3, 2018, this economic model will become impossible with enforcement of MIFID2: in the name of transparency, Articles 12.3, 24.7 and 25.8 stipulate that the services rendered must be invoiced at their price. We are moving fast to a model where all services will be based on the “Pay per use”. The financial industry is passing so, from Canal + to Netflix.
What are the issues? As the Anglo-Saxons say: The free lunch is over.
For brokers, the European Securities and Markets Authority (ESMA) has taken a position, in its publication of April 4: the corporate access is not research, in any case the broker can not continue to propose this service for free to its customers. For investors, corporate access remains one of the main determinants of the investment decision. A study by Peel Hunt and Extel (November 2015) asked the managers to rank from 1 to 4 the main services required to the investment decision. This study conducted with 300 listed companies in Europe, the US and Asia, and investors representing more than 100 trillions of funds under management, designates corporate access as the main service necessary for the investment decision. Far ahead of sell-side research or contacts with analysts who arrive elsewhere in 3rd or 4th position. Managers will henceforth be confronted with the following problem: “for budget reasons, I have to cut my list of brokers because I cannot anymore “Sprinkle” the brokerage commissions, so I’ll have more and more difficult access to companies, unless you approach them directly, which supposes internal recruitment of human resources “.
Investors can be expected to study with a glance more attentive brokers proposals, always strategic but now billable. For listed companies, the pressure will focus on small & mid caps (up to 5 billion euros in market capitalization), of course less courted by the managers than those of the CAC 40. Today, it is through roadshows offered by brokers that listed companies meet with investors, can deliver their message and take the time to detail their strategy or explain their results. According to the study Annual Review (“Global Roadshow Report 2016” IR Magazine, September 2016), 90% of listed companies make roadshows, these companies spend an average of 16 days a year on the road and meet in addition to these roadshows nearly 150 investors in “one-on-one” per year.
A new ecosystem emerges. There are of course platforms like Researchpool or Alphametry that offers on-demand research. Alpha Value built its model on research payment unbundled for execution commissions. MyDCA for corporate access. A broker In January 2017, Macquarie launched its “pay per use” offer for his research with Macquarie Dimension.
In conclusion, it is likely that companies will have to mobilize more resources to access investors: disintermediation will progress.
No doubts! research will definitely be paid by a vast majority through AM P&L. Man Group is the latest large house to have reverse its previous position. They will finally absorb the cost of research within their P&L. How long will it take for Amundi and few others to change of position?
Read the very interesting FT article on the subject