HONG KONG: Who needs expensive lunches at glitzy hotels and fancy restaurants to court investors for bond deals or the sale of new shares on the stock exchange?
In a world governed by quarantine and social distancing rules, even lead managers on multi-billion dollar deals have had to curtail travel and drop the personal touch in favor of video conferences and phone calls to woo potential investors.
Warner Music Group is one of more than a dozen companies that launched an initial public offering (IPO) in the aftermath of the COVID-19 pandemic and saw its shares soar on the first day trading. “The wear from a virtual roadshow is much less than the wear and tear on the old normal roadshow. I was pleasantly surprised,” Warner Music Group CEO Stephen Cooper said following this company’s IPO this week.
Some investors were also happy with the switch, because they saved time traveling to meetings with companies and their IPO advisers.
“When you meet face-to-face, you have to get everyone together into the lift, some people need to get their Starbucks … that one hour turns into one-and-a-half hours,” said Khiem Do, head of Greater China investments at Barings in Hong Kong.
All over the world, companies and their advisers have given up on the traditional multi-city investor roadshow — lasting up to two weeks — in favor of virtual sessions that only last a few days.
So far the change has worked. US IPOs excluding those of special purpose acquisition companies have yielded average gains of 35 percent, according to data firm IPOScoop. The S&P 500 Index has risen only around 6.6 percent in that period.
“In New York City you would normally do six or seven one-on-one meetings plus a group event. Boston is about the same. Now you can do at least nine in a day with no travel time,” said Taylor Wright, co-head of US equity capital markets at Barclays.
However, Wright and other bankers questioned whether virtual roadshows will completely replace physical gatherings when the pandemic subsides. They said that many companies behind the IPOs of the last few weeks had warmed up investors in person before the pandemic, and younger companies may not be able to court investors only virtually.
“If roadshows cannot carry on, I feel some investors won’t be willing to invest as happily,” said Zhenro Properties chief financial officer Kenny Chan, speaking in mid-May.