UK IR Society - Best Practice Guidelines
A key principle is that there should be a regular and consistent process of engagement, over time, between a company and its key investors, in order to establish, develop and maintain relationships’.
The purpose of Investor Relations is to attract the shareholders you never want to lose.
The creation of a stable and complimentary shareholder base should be a key aim for all Issuers.
The process of creating that shareholder base will vary from Issuer to Issuer and from market to market. However there are some core fundamental building blocks that all Issuers require to be able to develop and execute an effective IR strategy.
First and foremost among these is knowing who their underlying shareholders are. The continuing trend in financial markets is for shares to be held in custody on behalf of a client, leading to a Register that shows either global Custodians or nominee accounts, not the underlying beneficial owner or fund manager with discretionary control. Even if local disclosure requirements provides beneficial ownership data for local investors, this may not reach into international investors, who in the ever increasing interconnected global capital markets, are becoming larger holders as foreign ownership restrictions relax.
Issuers are not able to control the length of this custodial chain and they are connected through a series of bilateral links that are independent of each other. All of this is further complicated by the rise of passive investors, derivatives and exchange traded funds, which has further clouded the previously simple idea of shareholder ownership.
The process for an identification will vary slightly from market to market, but Orient Capital is able to assist in both disclosure markets, such as the UK, Ireland and Australia and SRDII in Europe, as well as non disclosure markets such as Russia or ADR and GDR listings.
An ultimate shareholder identification report should provide a comprehensive breakdown of the identifiable investors, including a geographical breakdown, investment style and turnover analysis. In addition it will provide Institutional identification showing pension, insurance, mutual, hedge and sovereign wealth funds, as well as top buyers and sellers.
The resulting ownership transparency - both identifying shareholders (and debt investors) and tracking their investment behavior - enables listed companies to most effectively monitor capital market transactions, as well as manage and measure the success of their ongoing investor relations activities.
Orient Capital's ownership analytics allow companies to:
Common practice for most Issuers is to carry out this exercise at least once a year, with mid to large caps generally running the process on a quarterly or monthly basis. Closely monitoring shareholder movement ahead of a transaction can also be undertaken by weekly or daily analysis. Regular shareholder identification reporting allow IR teams to build an effective profile of the key drivers for investors to shape communications, track changes in ownership and monitor possible trends such as an activist increasing a position. It also helps IR teams educate the Board on investor composition and help shape targeting exercises and plan effective roadshows to existing and new investors.