The proposed ban on payment for corporate access with client commissions by the UK’s Financial Conduct Authority (FCA) promises to be a boon to firms hoping to benefit from the regulatory change. Ingage is a brand new platform to facilitate non-deal roadshows. At the same time, video conferencing platform OpenExchange has partnered with Ipreo to offer virtual roadshows and conferences to Ipreo’s customer base.
Ingage is a cloud-hosted platform designed to intermediate corporate investor relations with institutional investors. The system allows investors to view the company roadshows and one-on-one meetings available while companies can select the investors they most want to meet. Companies can host webcasts directly on the platform to reach a wider audience.
Ingage was founded in January 2014 by Michael Hufton, a former Cazenove partner and fund manager at Polar Capital. The firm says its platform is in trial with key players including Fidelity International, Nestlé, Tullow Oil, and National Grid, the operator of the UK’s electricity system.
The business model is a user-based subscription model charged to participants, whether they be publicly traded companies or investors. Companies will pay £6,000 (US$10,000) a year, discounted to £3,000 at first. Companies will also be asked to cover the cost of hiring rooms and providing refreshments. Asset managers will pay between £6,000 and £120,000 (US$200,000) a year, depending on their size.
As we have noted in the past, the fees for corporate access have tended to average between US$7,500 to US$10,000 for each non-deal roadshow, and can range as high as US$20,000 per access for particularly hard-to-get corporate officers, as mooted by the Financial Times.
By these standards, Ingage’s fees are reasonable, but the reality is that investors have been paying corporate access fees with client commissions, not money out of their own wallets. Their appetite for paying for what was previously free to them remains to be seen.
Particularly since investment banks, for whom corporate access is currently a major source of commissions, will not be standing still. Banks are adept at finessing regulation, and we think the FCA’s ban will be no exception. Although facilitating vanilla one-on-one meetings will not eligible to be paid with client commissions under the proposed regulation, conferences are anticipated be eligible since they better meet the “substantive research” standard. Expect to see more conferences, including virtual conferences. Also we will see more analyst involvement in corporate access, moderating meetings and providing perspective, thereby providing grounds for payment with client monies.
OpenExchange is more likely to be a beneficiary of such a trend. OpenExchange is a B2B video collaboration platform targeted to investor communications. In June of last year the firm began collaborating with Ipreo to integrate its video capabilities with Ipreo’s investor relations product. In September, the two firms announced they were adding OpenExchange’s platform to products targeted to the sell-side.
OpenExchange’s collaboration with Ipreo coincided with a $6 million Series B financing led by Ipreo and Barclays.
While it is virtually certain that the FCA will implement the rules proposed in its Consultation Paper 13/17, it would be simplistic to expect the estimated £500 million (US$833 million) UK corporate access market to simply evaporate. Ingage intends to disintermediate investment banks by allowing corporates and investors to interact directly. Larger asset managers inclined to do-it-themselves may find this attractive. However, if Ingage fails to gain a critical mass of corporates and investors, its appeal will be weak.
More likely, investment banks will retrofit corporate access to meet the standards dictated by CP 13/17. Tools such as Ipreo and OpenExchange, which already have traction on the sell-side, are better positioned to succeed in this environment.