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 multibillion-dollar deals have had to curtail travel and drop the personal touch in favour of videoconferences and phone calls to woo potential investors.
Warner Music Group is one of more than a dozen companies that launched initial public offerings (IPOs) after the Covid-19 outbreak and saw their shares soar on the first day of 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 chief executive Stephen Cooper said in an interview following his company’s IPO earlier this month.
Some investors were also happy with the switch, because they saved time travelling 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 1½ hours,” said Mr 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 favour of virtual sessions with investors that last only a few days.
So far, the change has worked. United States IPOs, excluding those of special purpose acquisition companies, have yielded average gains of 35 per cent, according to data firm IPOScoop.
The S&P 500 Index has risen only around 6.6 per cent in the same 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 Mr Taylor Wright, co-head of US equity capital markets at Barclays.
But Mr Wright and other bankers interviewed by Reuters 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.
For example, coffee producer JDE Peet’s raised €2.25 billion (S$3.5 billion) in Amsterdam recently, in Europe’s biggest IPO of the year with a virtual roadshow that lasted just three days.
It managed to do so only because the company and its advisers had already met in person with many potential investors, bankers on the deal said.
JDE Peet’s did not immediately respond to a request for comment outside business hours.
“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 last month as the company raised US$200 million (S$278 million) via online roadshows in Asia’s first junk-rated bond for almost two months.
Many bankers and executives said they missed the social interaction, as well as the ability to ask questions quietly after in-person meetings.
Moreover, many of the IPOs that were successful in the last few weeks were those of well-established companies, including business intelligence platform ZoomInfo Technologies and insurance policy comparison website SelectQuote.
Some IPO advisers cautioned that some start-ups and young, less-known companies will struggle to pique investors’ interest without wooing them in person.
“Gathering in a hotel ballroom and listening to a roadshow presentation is just a different dynamic and vibrancy,” said Ms Jocelyn Arel, a partner at law firm Goodwin Procter’s corporate and technology companies group. “I think it’s harder for start-ups, as they’re still trying to network remotely through video.”
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