Panic in the boardroom
How investor relations teams manage crises
IN today’s volatile environment of Twitter storms, shortsell research, fake news and increasing public scrutiny, corporates are under pressure to act effectively in moments of crisis or in an unfavourable environment. Faced with the threat of reputational damage, successful investor relations teams know that being quick to respond and being upfront can mean the difference between extinguishing a volatile situation or wiping out billions of dollars in stockmarket value.
It is in this context that Asset Benchmark Research receives submissions from investor relations teams in Asia as part of the annual The Asset Corporate Awards on the challenges they faced and the successful campaigns they ran, showcasing the best practices in the industry.
Fosun International was under media scrutiny earlier in the year when it came under the spotlight for its aggressive M&A activities. When social media accusations arose that the company had lost contact with its chairman, Guo Guangchang, in early July, Fosun saw a combined HK$10 billion (US$1.28 billion) lost from its market capitalization the day after the release of the news. The investor relations team needed to act – and quick – to restore public confidence.
The team launched a crisis strategy that led to the screening of a live-feed to over 50,000 viewers within hours. The rumour was quashed as Guo was featured sitting in his office with the Shanghai skyline behind him. By lunch, the IR team worked together with public relations to reach out to their stakeholders, shareholders, analysts and commentators and held a widely attended conference call through investment bank UBS’ platform. The quick action helped to restore confidence and the share price rebounded and closed just 0.17% below the opening price.
Sometimes, the issue is industry wide. Link REIT, whose holdings include shopping malls and carpark spaces, has been dealing with a challenging retail market amid the rise of online shopping and e-commerce. Over the year, retail sales in Hong Kong have dropped by almost 4% and landlords have been forced to cut rents by 30% to 50% in some cases. However, in this tumultuous environment, the team has been able to restore investor confidence by disclosing tenants’ sales growth on a quarterly basis and hosting analyst tours of its shopping malls. They’ve also revealed the results of internal research and surveys conducted on e-commerce in the city, giving investors confidence through providing information on current macro trends.
Pacific Basin Shipping faced a similar challenge. With the depressed dry bulk shipping market, the Baltic Dry Index fell to an all-time-low early last year. Downward pressure on commodity prices and charter rates also led to major operating losses, fleet value write-downs and financial distress, which was happening across the industry. Yet, in June of 2016, Pacific Basin Shipping concluded a 1-for-1 underwritten rights issue to raise US$151 million in order to strengthen their balance sheet and liquidity position. With a broad shareholder base (98% free-float), the team needed to enable shareholders in many jurisdictions the ability to participate in the rights issue, which included many in the US.
Pacific Basin’s investor relations team used their latest shareholder report to identify qualified institutional buyers (eligible US shareholders) and other accredited investors. Working under a tight timeframe, the team distributed investor representation letters in both email and hard copy, which investors needed to turnaround. Only then could the team send across a private offering circular and relevant subscription forms. All this was achieved in a two-week period which required the team to seek advice from legal advisers and underwriters in order to prepare the documents.
Approximately 95% of the shareholders exercised their rights and Pacific Basin achieved one of the highest valid acceptance rates in Hong Kong in recent years. In March of 2017, their share price reached three times the subscription price of HK$0.60 per share.
PTTEP, the exploration and production arm of PTT, has also weathered the storm of low oil and gas prices. During a temporary suspension of operations in one of their key projects, PTTEP provided information to the investment community to prevent panic. This involved several working teams that needed to give background facts on the expected impact to the company, potential outcome and the solution. The responses were then disclosed through the official Stock Exchange of Thailand portal and they arranged a conference call with analysts to explain any legal complications, showing a commitment to shareholders with regards to transparency and corporate governance.
At times, being clear about a restructuring is necessary to maintain investor confidence. In the case of one of the largest business groups in the Philippines, SM Investments Corporation, its investor relations team swung into action when the parent announced the merger of all of its retail businesses into SM Retail in February 2016. As the merger was not well understood, the company needed to inform investors of the intent and strategy through public filings, targeted roadshows in the US, Europe and Asia, as well as analyst calls and direct discussions with investors and brokers. Since the merger, SM Investment's share price has climbed by over 60%.
To view the awardees of The Asset Corporate Awards 2017 - Best Investor Relations Team, please click here.
10 Nov 2017