Shareholder Engagement In The Post COVID-19 Era
A Conversation Between Christopher P. Skroupa, Skytop Editor-in-Chief and the Executive Team at Cmi2i / September 7th, 2021
Part One of a Three Part Series
Mark Simms is the founder and Chief Executive Officer of CMi2i. For 25 years Mark has specialised in the provision of Capital Markets Intelligence Services, with a focus on unique shareholder and debtholder insights. In addition to founding CMi2i, he founded its predecessor Capital Precision. He was previously CEO of Ilios Europe and has held senior positions within the Investor Relations industry, including at Thomson Financial and ICV Ltd. Mark is a regular speaker at International IR and Banking conferences. He has also been involved in Disclosure Policy, Market Transparency, and Law reviews.
Christopher Skroupa: From your perspective, how bad of a ditch are companies in? Could we first get a COVID-19 perspective? How are companies going to face issues they’ve never needed to address in the past?
Mark Simms: At the beginning of COVID-19, it was mostly about companies keeping the lights on and debt guys getting enough capital to keep these companies afloat. Most have made it through but are working while looking over their shoulder at the debt they’ve accumulated during the crisis. Our position looks at who actually owns that debt, and further into M&A activity. If a hostile takeover is in the works, shareholder and debt holder relations all go into calculating the risk for these overleveraged companies.
Christopher: How do you think this compares to the ditch that companies were in back in 2008?
Mark: We saw this in 2008 with the financial crisis. Companies were vulnerable, same with how companies are recovering from this past year. The banks see this too, with heavy borrowing. We’ll see soon in what sectors are the easy pickings when it comes to companies that could be bought out.
Christopher: Have you noticed extensive borrowing to be the biggest source of risk that companies are making themselves?
Mark: Your Achilles heel may as well be your debt. It’s the biggest way a company can be blindsided and run into a hostile takeover while coming out of this.
Christopher: How has that affected your work during this period? Have you been forced to take a more involved approach?
Mark: Our role in the industry is very much as an observer, to see how this all affects companies and how it affects investors and shareholders. It’s really helping companies and their advisors understand their company’s vulnerability. How strong is the debtholder or shareholder base? And how strong is their relationship with management? How to quantify that, and how we can look inward to understand risk levels with M&A.
Christopher: What’s important for companies to understand during this period when facing upset investors?
Mark: In most of these extreme cases with angry investors, the issue will never make it into public domain since they will meet with the investor and sort things out before making it a public endeavor that needs more attention. The biggest step to this is actually listening to what the activist has to say and looking at their criticism as constructive and trying to further get value out of the company. If they do this, real resolution may be made if the points brought up by the activist are sound. So, don’t initially treat them as hostile, even if they are. You should also consider why that investor is there in the first place. Have they been in contact with other investors? If they have a support system of shareholders is when they can push it out into the media and win over mass shareholders. Address these issues gently. The more chest beating means that less progress is made.
Christopher: Mark, thank you for your insights. I’m sure it will be interesting to watch the corporate landscape as it unfolds. There will certainly be winners and losers in the COVID recovery bounce back.
Mark: Thank you Chris. The pleasure was mine.