Old Rivalries Take Center Stage in the Quest for Investor’s Hearts (and Wallets)
After Softbank Group’s decision to list British microchip designer Arm Ltd. in New York instead of London, the move prompted some introspection about the state of the British financial capital. While New York and London have tussled for decades in their quest to be the financial capital of the world, the US markets seem to be winning. With its large, vibrant investor base and deep pools of capital, more and more companies are choosing to list or cross-list in the US. Home bias aside, the US equity markets are the largest in the world and continue to be among the most liquid, stable and efficient despite recent volatility.
US listed companies have always traded at a premium to European companies, because of the greater transparency and liquidity of the US market. US investors are not so-called dumb money but, simply view investing in the US as less risky than outside the country. All things being equal, US investors will pay a higher multiple to reflect the lower risk.
Investors in the US, though, are not like investors in your home market. They demand greater clarity, transparency, and communication. Along with higher expectations, investors need relevant data and information in order to make informed decisions about historical and future operating performance. Feedback mechanisms are essential to foster this 2-way communication between investors and management.
To avoid what we call the ‘Valley of Disappointment’ (credit for this term goes to James Clear), cross-listed companies need to build a robust IR program for the US market.
5 key pillars:
1. Strengthening governance structure.
2. Installing quality and timely disclosure—this includes GAAP and non-GAAP information.
3. Establishing an ongoing 1-1 dialogue with investors via conferences, meetings and calls.
4. Creating a compelling investment case and investor presentation.
5. Updating your IR website so that that is well-organized, user-friendly and easy to navigate.
