Study: Board concerns over investor sentiment and shareholder activism rising

A Clermont Partners study found frustration among investor relations officers at inexplicable and sudden movements in stock prices as well as greater engagement from boards.

CHICAGO: Board concerns over investor sentiment and shareholder activism are mounting, say investor relations officers in a Clermont Partners survey.

Fieldwork was carried out in December 2016, including about 100 IROs across sectors and market caps. Out of those surveyed, 52% noted increased board interest in the areas of investor sentiment and shareholder activism.

Clermont conducted a similar survey 18 months ago when the firm first launched, according to founding partner Victoria Sivrais.

The survey follows a series of high-profile shareholder activist stories, such as William Ackman’s Chipotle takeover. And PETA, which stands for People for the Ethical Treatment of Animals, continuing its streak of shareholder activism, recently set its sights on Louis Vuitton’s parent company.

As activism rises, boards engage more with how the company communicates its story because they want to understand how investors are "looking at their stock," explained Sivrais.

"It’s a very good thing," Sivrais said. "Greater board engagement drives more discussions between IROs and broader comms pros around how they are positioning their company and stories with a broader set of stakeholders. Enhanced engagement creates better dialogue and more shareholder value."

For Sivrais, the biggest takeaway from the survey is the 80% of respondents who said they are frustrated that they can’t explain sudden movements in stock prices. Also, there is a split among respondents on whether they want to increase shareholder surveillance efforts: 20% said they would, compared to 25% who said it was "futile."

Sivrais explained that stock surveillance gives users a "viewpoint as to what’s happening over a period of time. It doesn’t tell what moves the stock at that moment."

She added that companies are looking more into predictive analytics in stock surveillance.

"You’re able to look forward rather than historically to understand what’s happening in your stock and what may or may not be priced in," Sivrais said. "That’s on the quantitative side."

She noted that the qualitative side – which means reaching out to investors and understanding sentiment to layer in predictive analytics – is critically important.

While fieldwork was conducted following Donald Trump’s upset, Sivrais maintains that the pro-business and boisterous president-elect likely didn’t have an effect on the findings.

"If you take a step back and look at capital markets, it’s evolved so much in terms of algorithmic trading and high-frequency trading," Sivrais said. "It’s just not the same environment IR and comms pros operated in historically. It’s definitely more market-driven."

Other key findings include the fact that 80% see analysts as the most effective way to understand the investment community. Also, 30% of IROs say buy-side meetings at sell-side conferences have "deteriorated," and a quarter reported an increase in buy-side participation in earnings conference calls.

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