Going on the road isn’t what it used to be for investment bankers hawking shares in companies seeking a stock market listing.
Gone are the days of the private jet and the two-week carousel of five-star hotels in Europe and the United States. Instead, it is more likely to be a scramble from Hong Kong to New York, often flying on commercial airlines, to capture the ear of potential investors.
Companies looking to woo prospective shareholders are in a rush to get their stock listed while market sentiment is still positive, conscious that rising tensions in Ukraine and the Middle East could weaken investor appetite.
Anxious to reach market before their competitors, company executives and their bankers are embarking on whistle-stop tours of financial hubs such as London, New York, Boston and Singapore, each costing €250,000 ($364,500) to €350,000 or more.
“You’re getting to the market much quicker before a window might close,” said roadshow project director Fallon Painter, citing the example of Russian hypermarket chain Lenta, which squeaked through its initial public offering (IPO) the same week that Russia entered Crimea.
Ms. Painter is the investment banking world’s equivalent of a rock band’s roadie. The company for which she works, Media Tree, is hired to organize and run the investor roadshows at which companies pitch their stock.
Bankers are expecting a busy second half after strong equity markets helped European IPO issuance levels to more than triple in the first half of 2014 against the same period last year, with 130 companies selling $41.2-billion (U.S.) of new shares – the highest since 2007, Thomson Reuters data show.
The wave of issuances helped to compensate investment banks for weak trading revenues, with Goldman Sachs, JPMorgan and Deutsche Bank taking the top three positions for European IPOs by deal value.
With such a large number of IPOs, companies are battling for investors’ time, and bankers sometimes try to steal appointments. To avoid such shenanigans, which can cause problems with rivals, roadshow companies are hired to deal with scheduling problems.
The IPO process has also become more tricky post-recession because of increased regulatory scrutiny, lower fees and larger numbers of banks running deals, a former IPO banker said.
“The amount of time and effort has increased,” the banker said. “[But] face to face meetings are still really important.”
The emergence of large institutional investors and growing pools of private wealth in Asia and the Middle East has also expanded the number of cities that need to be visited, meaning that management teams sometimes split up to cover more ground.
While some bankers privately grumble at the monotony of seeing the same presentation and often hearing the same questions in multiple locations, there is general agreement that the roadshow is a crucial part of the IPO process. A company’s management needs to be able to present well and answer questions competently to win over investors.
For Marcus Bray, managing director of roadshow and creative agency Imagination, there are parallels between his current job and his previous life as a theatre producer.
“Issuers and the banks really want to find a way of differentiating themselves and telling their story,” he said.
The tight time frames and pressure to see as many investors as possible leaves little leisure time on tour for companies and their advisers. “They can be doing 20-hour days. The only time they’re catching any sleep is on the flight,” Mr. Bray said.
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