Surge in growth stocks lifts investor relations activity

2021 has been a record year for the number of initial public offerings (IPOs), with more than 130 on the ASX so far and dozens more anticipated by the end of December. The heightened IPO activity was fuelled by strong investor demand across a broad range of sectors. Led by resources, healthcare and technology stocks, it’s been the biggest global IPO surge in more than 20 years.

More than $5 billion was raised by first time share sales in Australia this year, according to Bloomberg data. Cumulative proceeds are expected to be around $7 billion, the largest annual tally of proceeds in IPOs since 2014 when almost $16 billion was raised (CommSec insights).

The ASX has delivered ~120 new IPOs each year since 2014. The rush to IPO in 2021 follows a wall of capital being made available for ASX growth stocks in 2020 and 2021, due to the pandemic, and economic and geopolitical uncertainties, which reduced travel and curbed spending. Despite unprecedented challenges, it’s been a cracking year for ASX listings and there’s lots more action to come, including plenty of +$1 billion IPOs.

These include lottery operator SG Lottery ($8 billion), boutique asset management firm GQG Partners ($5.9 billion to $6.5 billion), global human services and healthcare organisation APM ($3 billion), SME-focused bank Judo Bank ($2.3 billion), essential services provider Ventia ($2 billion to $2.5 billion), land transport company ComfortDelGro ($2 billion), metals distribution and processing company Vulcan Steel ($1.1 billion) and hotel commerce platform SiteMinder (+$1 billion).

While recent concerns about inflation, rising interest rates and a property crisis in China are weighing on investor sentiment, investors have amassed huge savings and our economy is now gradually reopening after extended lockdowns. The market is flush with cash and the junior end is very much alive and well.

ASX-listed companies have been busy ensuring their IR strategies are firmly bedded down to capitalise on growth opportunities. In this crowded landscape, board and management teams are seeking to create awareness and understanding of their assets, projects and operations to properly compete for investment and achieve fair value.

So what are some of the investor relations fundamentals that newly listed companies should consider?

1. Advancing ESG. Climate-aware portfolios dominate

ESG continues to impact investor behaviour as policy response to climate change gathers momentum. The race to net zero is intensifying, amid rising energy costs. Today, as sustainable investing surges there are far greater considerations for all companies, large and small. Investors are punishing companies that fail to take their ESG responsibilities seriously and rewarding those that do. The creation of sustainable index investments has increased the acceleration of capital towards companies that are better prepared to address climate risk. Companies that are taking a more balanced approach to the needs of broader stakeholder groups are expected to outperform those that focus on short-term profits. Investors (and regulators) are requiring companies to demonstrate full disclosure of ESG risks and opportunities. APRA’s final Prudential Practice Guide to banks, insurers and superannuation trustees on managing the financial risks of climate change is expected by the end of the year.

2. Delivering clear and concise information effectively

In this particularly challenging and complex business environment, access to consistent, clear and timely information is critical. ASX-listed companies are subjected to escalated scrutiny by investors and analysts. In 2021, we’ve seen a large number of companies rapidly adapt to the pandemic driven disruption by pivoting into exciting new growth areas. Navigating this transition involves active and transparent communication of a company’s purpose. This includes careful and considered key messaging to reinforce management’s ability to execute on its growth strategy. There is rising interest in securing professional IR services to enhance a company’s corporate narrative and effectively communicate new business objectives whilst strengthening trust with stakeholders.

3. Embracing technology and innovation. Where to next?

One of the key trends of the pandemic has been the adoption of innovative technologies to reach investors during lockdown. Virtual platforms challenged the traditional model for engaging with investors. We witnessed soaring demand for online events such as webcasts, video conferences (see our very own IRD Invest conference here), webinars and web conferencing. Skype, Zoom and Teams quickly became integral tools in our daily lives, while more sophisticated technologies such as artificial intelligence (AI) also rapidly gained acceptance. AI is enabling improved automation, acceleration and accuracy. Being able to quickly dissect detailed financial reports, recognise speech, utilise chatbots and undertake mundane tasks such as tracking media coverage or targeting new investors, make AI one of the most disruptive technologies to impact IR.

4. Maintaining close contact with investors and analysts

Over 100 days of isolation has highlighted the need for companies to establish closer contact with investors and analysts. Maintaining effective channels for sharing information and building and sustaining credibility with long-term investors remains a core aspect of the IR function. IR agencies can act as a conduit in the efficient flow of communication within capital markets whilst facilitating valuable introductions and relationship building. Solid connections with leading brokers and banks can greatly assist in raising growth capital, advising on corporate transactions and M&A, coordinating investor roadshows, securing analyst research coverage, preparing timely perception audits and sentiment analysis, gaining market intelligence and other useful insights. Quality conferences are also a great way to keep investors informed of financial performance and operational milestones, especially now that lockdown restrictions have eased. In a post-lockdown environment, we expect to see demand for face-to-face conferencing return.

5. Reinforcing legal obligations to manage reputational risk

After such a major disruption, reinforcing legal responsibilities is sensible. IR is a strategic management responsibility that requires strict compliance with legal regulations. These include abiding by the ASX listing rules on continuous disclosure. While the field of investor relations continues to evolve at pace, advising on securities law will continue to play an increasingly important part of the role. Newly listed companies are often falling short of their legal obligations. As with company secretaries, IR specialists operate with the highest levels of professionalism and ethical conduct. Companies can minimise reputational damage risk by partnering with an IR consultancy that has a strong depth of knowledge of ASX legal requirements as well as financial orientation and communication skills.

6. Exploring the best opportunities to promote

Investors are thoroughly scanning for quality growth stocks and there is no shortage of opportunities to inform and influence them. Integrating traditional investor communications with media campaigns and online / digital strategies is becoming increasingly valuable. This includes gaining access to reputable journalists to achieve exposure in major print and online media outlets, news wires, trade publications, radio, TV, video, podcasts and various other tools and platforms to amplify digital content, including social media. IR consultancies, like IR Department offer advice from former journalists and industry commentators, but companies can also undertake basic steps in advance of PR campaigns to ensure their spokespeople are trained, the corporate website is “investor friendly” and relevant sections, fact sheets, presentations and other IR materials have been updated.

For more information or to discuss investor relations with the IRD team, please get in touch.