The evolution of investor relations and how to access untapped capital markets
It can be easy to narrow the investment research and investor relations (IR) space to nothing more than data analysts and press releases, but like all industries, the IR space has dramatically evolved over the past two decades with the advent of the Internet and an increasingly globalized world economy. However, many RI companies have not evolved with it, clinging to outdated approaches or targeting only a small subsection of capital sources and leaving trillions of dollars of untapped resources on the table.
Edison Group is an investor relations firm specializing in transatlantic business for fast-growing listed and private companies, helping European companies tap into US capital and vice versa. The company sees an opportunity for both banks and traditional RI firms that have failed to connect these emerging international markets companies with investors and capital that are ready and willing to cross borders.
We spoke with Rachel Carroll, President and Managing Partner of Edison Group, about how the IR space has changed, where it is now, and how the company aims to connect promising startups with specific types of investors that make sense to them.
Q: How do you view the current RI landscape, how it is changing, and the industry’s ability to help companies connect to capital?
A: Investor relations as a mechanism to influence capital markets has seen huge changes in recent years, echoing broader changes in financial services and fund management. With continued money inflows into passive vehicles, the pool of funds managed by active investors has shrunk proportionately and competition for capital has intensified, especially with more established institutional funds. Over the past twenty years, there has been a migration of intellectual capital from the sell side to the buy side, and a continuing trend to disintermediate the sell side as the connector of capital, exacerbated by legislation like MiFID2 in Europe.
The impact is particularly pronounced for small and medium-sized public companies which often will not have full visibility or influence over all the pools of addressable capital available to them: institutions, private wealth institutions, family offices and retail businesses. They will often be locked into the local market where they went public, as their advisers are unable to access capital in other geographies. It is important that private and public companies take ownership of their capital markets strategy and have a clear understanding of how to attract and develop a deep and diverse shareholder base to maximize valuation and fund the business over a growth cycle. extended life.
Q: Where are the untapped opportunities that the conventional approach does not target?
A: The hardest groups to reach through conventional means are family offices and mass retail investors. In the United States, we estimate that there is approximately $2.5 trillion managed by family offices and $12 trillion managed by the retail investment advisory community. Most banks will focus on the pool of active investors who manage around $3.5 trillion. These are big numbers, but with the number of new issues in recent years and the competition for investment from active managers is actually increasing. Companies that do not employ a strategy to target this “tail” of investment capital in addition to working with banks and advisers to target active institutions risk leaving money on the table.
Q: How have these limitations impacted companies’ capital raising strategies?
A: There is still a huge amount of capital to play in the public and private markets. With monies earned in private markets and reinvested, companies tend to stay private longer. Seed investment rounds have become more important and in 2020 we have seen well-known public market institutions flex their considerable capital and expertise to support Series B rounds already.
We are an independent advisor focused on supporting private and public companies on various capital markets strategies, often cross-border, so they can weigh the pros and cons in parallel. I’m about to hold a series of meetings in Austin, Atlanta, Nashville and the west coast to talk to growing businesses about access to European capital, for example, in some cases in the first place Europe and using that as a stepping stone to an American exchange. The strategies we engage may be diverse, but are always underpinned by advising businesses to be at the forefront of all available pools of capital under a well thought out and executed plan.
Q: What is the Edison Group’s philosophy towards investment research and the current RI space, and how does it differ from other companies?
A: Edison’s IR business was built alongside one of the world’s largest independent equity research firms, with 60 research analysts writing thematic and equity-specific research across all sectors. and over one million research reports downloaded each year. This gives us an inherent advantage in communicating complex science and technology, as well as understanding the unique characteristics that investors are looking for in different industries.
Investment research is an important tool for sophisticated investors to exercise due diligence and support a fair valuation of company shares. Businesses need to be more proactive in today’s market to create ongoing mindshare and touchpoints to engage their audience. We now employ over fifteen different types of investment and educational content, including in-depth topic reports, technology spotlights, expert panels, virtual conferences, CEO interviews and podcasts. It’s still interesting! The content is then distributed to various stakeholder audiences through all major financial portals and digital amplification campaigns.
Q: What are the unique value propositions of this model, especially for international investments?
A: We specialize in transatlantic service and often bring foreign companies to the United States for the first time. It is the largest and most extensive capital market in the world, we estimate that there is over $9 trillion allocated to non-US stocks alone. An amazing opportunity, but companies often don’t know where to start or work with local advisors who can’t navigate to the US markets. For the US companies we work with, we find that they are often only reaching the tip of the iceberg in terms of addressable capital.
Having a platform capable of creating a huge range of engaging content with 1.5 million engaged users is a massive head start, we then layer digital amplification strategies to target audiences based on predictive analytics and the traditional elements of RI: CXO speaking and thought leadership opportunities, access to investment banking conferences, inconclusive roadshows, media relations and marketing strategies. ‘affecting. For RI practitioners looking to create influence in today’s markets, it’s certainly more complex, but I personally like how it fosters more innovation and creative thinking in what some may consider it a fairly stuffy industry.