The amount already written about MiFID II could fill libraries. It certainly looks set to have enormous ramifications for my old profession, that of a sell-side analyst. While we have had plenty of prophecies on how brokers and investors will respond, this is also a new world for listed companies. Having observed how companies engage with the market for over 25 years, I can see MiFID will provide the catalyst for a revolution in how they communicate.
One necessity that stems from its implementation is that it demands a more integrated approach to communications. To ignore this would mean companies being left behind in the competition for capital and column inches.
There has been some commentary on how Investor Relations departments will cope with the likelihood of less research coverage. It is certainly true that the workload and cost of IR looks set to rise: with less broker research, there becomes a need to expand content on your website to present your story.
Companies will need to host more capital market events and even consider the “paid for research” option. As for corporate access, a variety of solutions will need to be evaluated and companies will have to take more ownership of shareholder targeting and the roadshow process. There will certainly need to be more time allocated for investor meetings too.
But there are much wider ramifications from these regulatory changes, and the C-suite, board of directors and communications chiefs need to be fully aware of these.
Companies will be competing to gain the attention of investors for their capital, as well as competing for column inches in the media. MiFID ll will shift the responsibility and cost of facilitating communication away from third parties, such as brokers, to the companies themselves. For mid-caps in particular, this raises the issue of how visible they will be in future with their stakeholders.
Companies should start with a review of communication objectives. Are the strategy, business aims and KPIs of the company fully articulated? Are the internal and external resourcing in IR and PR sufficient? Should there be further investment in channels like video and social media to promote the corporate message?
Above all, should there be a closer alignment within the company between Investor Relations and other communications functions? This is a crucial question.
Historically (and from my own painful experience), in many companies these roles have been managed separately with different reporting lines (IR usually to the CFO, communications often to the CEO). This leads to inefficiencies and inconsistencies.
The all-round visibility, which comes from a joined-up approach, would help tell a better story to stakeholders. There will also be a need to leverage larger Investor Relations costs (from greater website presence, more capital market events etc) by using this content with other stakeholders, such as the media.
And do not forget, MiFID ll is likely to have a direct impact on “corporate comms”. As research is less available, who is going to ensure that the media is well informed around results reporting or an acquisition announcement?
As a former sell-side analyst, it is clear to me that a key takeaway for companies is the need to adopt a holistic view of the impact of MiFID ll on their communications.
There could be great rewards for listed companies who seize the opportunities MiFID II brings for communicating differently, more efficiently and more directly.
The price for not doing so could be less capital from investors as well as fewer column inches.