Marius Strydom, CEO at Austin Lawrence Gidon, talks targeting, corporate access and research in a world of weak economies, Mifid II and – of course – Covid-19
A new partnership announced this week sees Austin Lawrence Gidon (ALG), one of South Africa’s leading equity research companies, join forces with UK-headquartered Edison Group with a professed mission to ‘transform South African corporates’ access to international capital markets’, before doing the same in neighboring markets.
Marius Strydom, CEO at ALG, talks to IR Magazine about the challenges South African IROs are facing, where they should be looking for capital in a post-coronavirus world and how South Africa is ‘famously quick’ to adopt European and UK rules.
How would you describe the corporate access/research scene in South Africa?
The research and corporate access scene in South Africa is in flux. Historically, it has been one of the most over-brokered markets in the world, with almost every global bank setting up operations or partnering with local outfits over the past 25 years. In recent years, though, stockbrokers have faced increased top-line pressure, driven by a weak economy, country downgrades by ratings agencies, weak portfolio flows and the unbundling of equity research.
Many companies have scaled down their operations or shut up shop altogether. Others have increased their focus on large-cap stocks and companies with secondary revenue potential, often at the expense of smaller companies or companies with low offshore shareholding. Analyst coverage has reduced and corporate access looks to be heading the same way, which does not bode well for companies wanting to attract new investors.
Pre-coronavirus, where were South African companies typically traveling and marketing themselves? How would you like to see this targeting evolve?
You typically found South African companies traveling to where the usual suspects in emerging markets fund management reside. London and New York/Boston always formed the core of any roadshow. Many companies would add Zurich, Paris and Edinburgh to their European schedule, while US trips sometimes extended to Chicago or the West Coast for those who were happy not to travel light.
We see meaningful potential for companies to more effectively tap into new pools of capital and we believe the pandemic is leveling the playing field. Increased exposure to Middle Eastern, Indian and Asian investors is on the cards, adding Dubai, Mumbai, Singapore, Shanghai and many more cities to the list.
What has been the impact of the pandemic on research and corporate access?
It has put corporates on the backfoot, requiring them to respond to outside forces rather than developing their own narratives, facing increased scrutiny from investors and pressure on their ratings. Research has become very immediate and reactive in its focus. On the positive side, the lockdown and travel restrictions have enlightened companies to the benefits of doing business remotely and electronically. They have become more efficient at virtual meetings and appreciate not just the time and money that saves, but also the increased reach those meetings provide.
Corporate access is starting to change, with companies realizing they can now reach any investor from the comfort of their own office or home office. Stockbrokers’ large travel and conference budgets are suddenly not the competitive advantages they used to be.