Bankers question lasting success of remote roadshows

‘Much less than the wear and tear on the old normal roadshow’

NEW YORK — 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 multi-billion-dollar deals have had to curtail travel and drop the personal touch in favour of video conferences and phone calls to woo potential investors.

Warner Music Group is one of more than a dozen companies that launched an initial public offering (IPO) in the aftermath of the COVID19 pandemic and saw their shares soar on the first day 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.

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-toface, you have to get everyone together into the lift, some people need to get their Starbucks… that one hour turns into one-and-a-half hours,” said 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 only last a few days.

So far, the change has worked. U.S. 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 about 6.6 per cent in that 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 Taylor Wright, co-head of U.S. equity capital markets at Barclays.

However, 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.