“Nobody wants to go back”: Covid hinders IPO and debt roadshows

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After its executives and bankers attracted investors at more than 50 meetings, VTex was valued at $3.5 billion in its public listing last month. Instead of flying thousands of miles and staying in luxury hotels, the marketing blitz of the Brazilian technology group relied on a less flashy solution: video conferencing.

The roadshow used to be a symbol of debt and equity financing. It was famous for large lunches and frenzied meeting rhythms. It lasted for multiple days and spanned cities around the world, but it has been stopped due to the pandemic.

Debt and stock bankers of large financial companies said that after the coronavirus hit, their days of seeking to raise funds around the world came to an abrupt end. However, bankers, investors and even some corporate executives do not seem to be saddened by the demise of the physical roadshow. They seem to be enthusiastic about this new way of doing things.

It is usually faster and cheaper to complete transactions online and via video calls. This means that corporate executives spend less time on airplanes and in traffic jams, and spend more time with potential investors, as is the case with VTex.

“This is something they could never do before,” said Lise Buyer, who founded Class V Group nearly 15 years ago. After two decades as an investor, banker and corporate executive, she advises companies seeking to go public. . Initial public offering. “It is commendable that they attended more conferences than any company I have worked with.”

The buyer was a member of the Google listing team in 2004, when Sergey Brin and Larry Page rushed to buy a suit the night before the release. In the 1990s, she also rushed to New York with Scott Cook, the co-founder of financial software manufacturer Intuit. Although she didn’t have lunch, she was still late for the meeting.

“We lost him in Midtown Manhattan because he ran to the street to get a hot dog from a trolley,” she said. But there is a serious problem: “People who try to visit multiple cities in a few days are all part of time, cost, and efficiency.”

The typical IPO roadshow starts on Monday morning. A company’s senior executives might fly to New York to gather sales staff from their bank in the company’s office to arrange fundraising activities and introduce them to investors. Then they will go out and start contacting investors.

The next morning will start with breakfast, then three one-on-one meetings with large asset management companies, then lunch, more one-on-one meetings, and then dinner. The meeting may be held in the investor’s office, and then the bank will host a grand lunch in an upscale hotel.Two years ago, Uber chose New York’s Mandarin Oriental Hotel Held an IPO luncheon, and rival Lyft chose Regis.

New York is followed closely by Boston, and then the West Coast. Maybe stop in Denver to see Janus Capital, or stop in Kansas to see American Century.

“Should you go there or stay in New York for another day?” said David Getzler, head of US equity capital markets at Société Générale. “These are your considerations.”

Google co-founders Larry Page (center) and Sergey Brin rush to buy suits during the technology group’s 2004 IPO roadshow © NASDAQ via Getty

The international roadshow may have started in London last Friday. But to some extent, each one must be adjusted according to the timetable and goals of the company’s listing. Therefore, even in smaller domestic roadshows, planning is often ultimately completed by a professional event management team.

“You travel side by side with the management team,” said Chris Israelski of Imagination, a self-proclaimed experience design agency that has participated in more than 800 IPOs. “Then the logistics manager and production manager will walk in front of the team to make sure there are no problems with things like hotels or cars.”

Israelsky said that when Facebook went public in 2012, things changed. “This is the first time that there has been a properly produced on-line performance to complement the actual work done.”

Since then, many companies have invested in online presentations, but for companies like China, the large-scale output value Tencent Music Entertainment unveiled in 2018 ——Face-to-face executive speeches in four cities around the world-was completely suspended until March 2020.

“It has changed dramatically. It was changing before the pandemic, but it has accelerated,” Israelski said. Her role has shifted from global logistics to managing the online production of videos and recommendations, bringing in a series of employees and customers from companies that have never participated in roadshows in history. “Sometimes it is a day of shooting, but it can also be 18 days of shooting,” she said.

The billion-dollar bar chart shows that bank charges from debt and equity financing reach new heights

For banks, virtual roadshows mean a lot of cost savings, and companies bear more online production costs. “It’s expensive,” said Pierre Lapomme, head of US equity capital markets at BNP Paribas in New York, of the live event.

According to bankers, even a simple roadshow can easily reach hundreds of thousands of dollars, which is paid by the relevant banking group. “A single global aircraft bill may be close to one million [dollars],” Israelski said, implying the cost of finer marketing efforts.

The increased use of virtual roadshows has also reduced the time to obtain equity and debt financing. According to data from Standard & Poor’s Global Market Intelligence Corporation, it took an average of 11.8 days from the announcement of a loan transaction for leveraged buyout financing to the distribution of debt to investors this year. This is the shortest time period for data recording since 2010, when the average time was close to 21 days.

For high-profile debt financing, like many private equity-backed acquisitions, senior executives once went on a 10-day tour in large cities before returning to the office to finalize the deal. In 2016, when Argentina Debut In the debt market after defaulting more than a decade ago, it sent two teams of decision-makers to five cities within five days.

Considering that the then Minister of Finance, Louis Caputo, traveled to New York, Los Angeles and Washington as part of the main delegation, some investors regretted that the delegations sent to Boston and London represented “Team B”. According to the British “Financial Times” The interview and roadshow newsletter show.

Former Tencent Music Entertainment chairman Sang Tao observed the trading activities of the group’s stock when he made his debut on the New York Stock Exchange. ©Mark Lennihan/Associated Press

A shorter turnaround time has helped to complete more transactions, and both bond and stock issuances set records in 2020. Capital market bankers are expected to set new records again this year.

The faster pace will also help limit the possibility of turbulent markets disrupting fundraising efforts. Lapomme said: “You have more knowledge about when the work is done, so you are less risky to the market.”

However, despite its high efficiency, it still hopes to reignite some face-to-face meetings. “It’s still not perfect,” Lapomme said. “What you lack in digital roadshows is body language.”

Debt bankers and investors point out that to provide loans to particularly difficult companies, if you want to provide them with large amounts of cash, you want to know the management team in person.

The billion-dollar bar chart shows that, despite the blockade stopping the roadshow, stock financing has soared to record levels

In the stock market, emotional factors also need to be considered. In addition to roadshows, the sound of the opening bell on the New York Stock Exchange and celebrating a milestone with colleagues and supporters may continue to exist.

Israelski said that some executives plan to return to the live roadshow, but many industry participants expect the roadshow to be smaller and more targeted to increase digital media output. “There will always be people who think they are more attractive, and that their company or product is more suitable for face-to-face display,” she said.

For investors, you can also collect more gossip and details from face-to-face activities, including how many big-name investors appeared on the scene to listen to the promotion. But is it worth the time and expense to fully restore it?

“I don’t think we will go back,” Getzler said. “No one wants to go back. We all accepted a new system.”

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