As winter draws closer, it’s time for us all to be getting our annual flu jab to give us the best chance of making it through the season in good health.
But there’s another virus sweeping through smaller companies on public equity markets. It’s slowing them down and impacting their health. This is a regulatory virus that is prescribed for one thing, but has wider unintended side-effects.
The MIFID II financial regulation came into effect at the start of the year with the intention of increasing transparency across financial markets. However, it’s been having the additional, and unintended, impact of reducing the visibility of smaller quoted companies to investors and potential investors.
This is bad for companies looking to grow, bad for fund managers wanting to find good smaller companies to invest in, and bad for the country as we all need these companies to succeed for the sake of future job creation, tax contributions, and innovation.
But in the same way that we can do things to reduce the risk of getting flu so there are ways that these companies can protect themselves from the worst effects.
Hardman & Co’s MiFID II Monitor suggests a number of actions that companies can take to mitigate the impact and better engage with investors - including commissioning research themselves to be written on them, working with investor relations advisors, investing in public relations, and making retail investors a higher priority.
A number of these actions are also being recommended by the QCA to its member companies - who are typically small & mid-size quoted companies. In particular, we are advising companies that improving the accessibility and content of their corporate websites
is an essential step to take.
Our recent investor survey backs this up, with 74 per cent of small & mid-cap investors stating that they see corporate websites becoming more important as a primary source of information on companies.
Companies need to ensure that investors can quickly and easily find what they are looking for. They need to present their investment case in an accessible and simple manner. This will, at the very least, encourage such investors to seek to learn more about a company, to follow it and potentially invest. After all, companies are seeking investors that want to buy into the long-term sustainable success of their business model.
The MiFID II virus is here to stay all year round. Growth companies need to do what they can to keep themselves in the best of health. More and more they must do all they can for themselves and not rely on others.
Otherwise the virus will become deadly.