The broad-based drive among major U.S. companies to expand sales overseas has been going on for decades, but attracting non-U.S. investors hasn’t had the same urgency. Perhaps that’s about to change, according to some data Clermont Partners’ Intelligence in early 2016.
Roughly 200 public company representatives responded to a recent survey we conducted regarding their IR plans for 2016. The sample was heavily weighted toward companies with market capitalizations of $5 billion to $15 billion, with that range accounting for roughly 60% of respondents. Approximately 20% of responses were from smaller market-cap companies, and 20% from those larger than $15 billion.
One surprise from the responses was that more than half of the companies said that international investor targeting is of greater interest in 2016 than it was last year. Another 45% said finding foreign investors is equally as important as in 2015, leaving only a handful of companies – 4% of the sample – who are less interested in overseas investors than they were a year ago.
Based on prior studies, this interest level exceeds that from prior years, and to follow through on attracting foreign investors will require considerable effort by IROs, CFOs and, ultimately, CEOs.
What’s driving the desire of companies to broaden shareholder bases outside their U.S. borders? Well, quite clearly many U.S. companies already get a large percentage of their sales from overseas; therefore, shouldn’t their investor base reflect the global nature of the business? International fund managers tend to be relatively more patient investors than their U.S. counterparts, and all companies would like to see more long-term holders of their shares.
From our experience, however, it will do no good to target fund managers who invest in your sector, but who do not buy U.S. companies. They’ll happily listen, but with the goal of gleaning competitive information from your management team, not to invest. We’d also recommend planning your own meetings with analysts and fund managers, rather than attending sell-side events, which tend to be inefficient and skewed toward their largest international customers, rather than those most likely to make an investment. Your intelligence efforts should be aimed at investors with a history of buying U.S. stocks and with an interest in both your industry and companies exhibiting similar growth profiles.
Even well planned campaigns, however, might not yield immediate results, and so U.S. company management teams should view an increased overseas focus as a long-term project. There is an inevitable getting-to-know-you period, and your company may need to tweak its communications approach – announcements and calls that occur while Europeans are in bed aren’t great ways to make new friends across the pond. And it’s important to remember that overseas funds may be far more valuation-sensitive than their U.S. counterparts; they may grow to like your company but wait for an entry point to buy your stock. Regardless, foreign investors can provide a critical support segment for and your stock if you’re willing to put in the time and effort necessary to attract them. Based on our recent survey, more U.S. companies are beginning to recognize this investor class and the opportunity that lies ahead.