Road tripping is fun. Everyone knows that, even IROs.
Rob Swystun, Pristine Advisers
When international companies want to do a North American road trip, they go to New York and Boston, shmooze a little and then go back home, knowing they’ve hit the important areas.
Or, at least, that’s the way it used to be. But while New York and Boston still remain must-stop destinations for most IROs when going on the road in North America for their international clients, so-called secondary cities are increasingly becoming popular destinations on these roadshows.
German gas and electricity company RWE now counts Toronto among its regular stops when on a North American roadshow. RWE’s senior manager of IR Gunhild Grieve says the company has put Toronto on its itinerary because it has well-educated long-term investors and substantial assets under management, making it a valuable peripheral city to visit in North America.
“For us, Toronto and Chicago are the two secondary cities that sit on top,” Grieve says. “We go with the management team to both cities at least once a year. Toronto has substantial funds. It’s become more important to speak to people there.”
And Gunhild knows that people in these secondary or peripheral cities are appreciative of the visits.
“There are some big investors in more peripheral places with a long-term focus,” she notes. “They’re not often visited by companies and will take the time for a meeting with you.”
Toronto has seen overseas investment rise and in 2005 it lifted a 30 percent cap on foreign content in registered pension plans. That’s a big deal for IR in a city full of large institutions.
Global bank HSBC also looks outside the main money centers for opportunities for international companies that come to North America hoping to attract investors.
Jonathan Paterson, head of corporate access for HSBC in the Americas, says there are more benefits to traveling to these more peripheral cities because of changes in the buy side.
“Within the investment community, there is some fragmentation,” Paterson says. “For example, for one big buy-side institution headquartered in Boston, we’re starting to see more analysts based outside the city; its consumer retail analyst is actually based in Chicago. So you can no longer just go to Boston and cover all of that company; you’re going to have to travel to some secondary cities.”
Also drawing attention are successful investment firms in the US Midwest.
“The likes of Chicago, Des Moines and Denver have seen a rise in investment remits, mainly due to an increase in assets under management as a result of performance,” Paterson says.
Over the past three years, investors in Chicago have been steadily increasing their investment in international stocks and, according to data from Ipreo, the city’s metro area recorded 13 consecutive quarters of increases up until the end of 2011.
It is common for companies to visit these peripheral cities once they are finished attending conferences in New York and Boston, the US’ two main investment centers. Being the center of the American investment universe, it can be difficult to schedule meetings in those two cities, as they are crawling with brokers, all vying for face time. It’s usually much easier to arrange meetings in the secondary investment cities, where your efforts to reach out to them will be much appreciated.
“New York and Boston have become overbooked and, as a result, many analysts and portfolio managers have become picky about who they see from a company – or, indeed, the company they meet with,” Paterson says.
Often, a client company’s management team will fly into North America for conferences in New York and Boston. And if you have a company’s management team with you for a conference, why not bring them along for the rest of the roadshow when you visit a different city? Wherever investors are based, they will almost certainly want an opportunity to sit down with the CEO or CFO of a company they are thinking of investing in before committing to that investment.
If time is something you’re concerned about, keep your itinerary to one general area. Chicago and Toronto can both be fit quite easily into an East Coast roadshow.
Choosing what area to hit up will be influenced by your company’s sector. Energy and technology companies should consider the West Coast while industrials should check out the US Midwest and Toronto.
“It very much comes down to sector-specific considerations,” equities coordinator at HSBC Kristen Romanillos says. “That’s where a good broker can ensure you go to the right place, using effective corporate access and peer analysis to make sure you get to meet the right investors.”
To build up a relationship in a city, management should initially come on an annual basis, as well as send out invitations to investor days.
It might pay for a company to use a bank with a strictly international focus rather than bank that has to split its attention between international and domestic markets. Companies benefit from this international specialist focus, as IROs know they are dealing with a bank that has the ability to set up valuable meetings with key investors regardless of where those investors are.
HSBC is one such full-service bank with corporate relationships around the world. The bank finds that North American investors like to use a specialist when dealing with companies flying in from overseas.
While New York and Boston remain the main stops of most companies’ North American investor roadshows, the benefits of looking further afield are clear and these peripheral cities should be included in your itinerary.