New York – Instinet Incorporated announced today the launch of a new corporate access service named Meet the StreetTM. Instinet joins Liquidnet, BNY Convergex and Capital Institutional Services (CAPIS) in recent launches of corporate access products.
Instinet’s Corporate Access Platform
Instinet intends the Meet the Street platform to be fully automated. PMs and analysts indicate which companies they are interested in seeing. They can do so through IM’s, email or any other avenue which is convenient for them, and do not have to log onto a specific website to do so. The platform is set up to make it easy for Investor Relations Officers (IROs) at publicly traded companies to organize their non-deal road shows. IRO’s can send meeting invitations to investors which hold their stock. The service includes GPS capabilities, so IRO’s can set up efficient itineraries, as well as adding calendar entries to both parties when meetings are scheduled.
Meet the Street, LLC is set up as a subsidiary of Instinet, and is headed by Mike Dolan, who also heads Instinet’s research sales team, and Dan Dykens, who was co-founder and CEO of Norbury Financial, a research management systems provider.
The service will initially be targeted to small cap and mid cap firms which are under-followed by brokerage analysts. Presumably portfolio managers and analysts invested in under-followed stocks will see the value in a new service also. Instinet believes that because the process is fully automated, it will also appeal to large cap firms which are already serviced by brokerage firms, but wish to bring the process in-house.
The business model is to be paid by the buy side. Instinet has not set a specific fee for the service, but plans to determine both the fees and the payment process on a client-by-client basis based on level of usage and value received. Clients who wish to pay on a bundled basis can trade through Instinet’s trading desk, whereas clients who want separate invoicing can receive that.
Meet the Street will draw primarily on the research sales team that Mike Dolan previously headed and will have a couple of dedicated salespeople in addition.
Increasing Competition
Corporate access is receiving more competition because it is a large and lucrative component of the research services purchased by investors. Access to management is consistently rated as one of the most highly valued services received by investors. Brokerage firms have traditionally dominated corporate access, in part because of their investment banking relationships with issuers helps to facilitate non-deal road shows.
Hanley and Associates was one of the first independents to develop a stand-alone corporate access service when founder Rick Hanley left Deutsche Banks’ North American Corporate Marketing Group to set up his own shop in 2006. Corporate access is the only research product offered by Hanley.
Liquidnet announced its entry, Liquidnet Insight, in June of last year. Liquidnet developed a desktop application, called InfraRed, which provides institutional demand, news sentiment, and block trading data to IROs, helping to engage them in the corporate access process. Liquidnet then works with IROs to set up meetings with interested investors. The service, headed by John Adam, has already organized a couple of conferences in Boston and NY and a variety of non-deal road shows.
BNY Convergex launched its corporate access product this past January. To run its Management Access service, BNY hired John Fitzgerald, who had set up Primary Insight, Bear Stearns’ expert network. BNY Convergex’s service is a more traditional type of corporate access program, similar to the process brokerage firms follow.
Also in January, CAPIS hired Anne Barlow, a former sell-side analyst, to head its Summit corporate access program.
Our Take
Taking share away from brokerage firms will not be a straightforward exercise. Brokerage corporate access programs are well-staffed, efficient and experienced. They already successfully organize non-deal road shows, one on one conferences (where company management meets privately with investors during sessions scheduled throughout the day), and reverse road shows (where investors travel to see companies.)
One hurdle for newcomers is that investors tend to follow the path of least resistance. The whole notion of corporate access speaks to this. There is nothing to prevent investors, especially the larger firms, from organizing their own corporate access. Nevertheless, it is convenient to have others arrange it for you, and PMs and analysts are used to having this service. To be successful, new entries have to make things easy for investors.
Another hurdle is pricing. Yes, investors find corporate access valuable, but for the most part it is paid for as part of the broader set of research services received from brokers. In other words, it is typically not unbundled. This is both a challenge and an opportunity. In the vote process, corporate access is usually an important component in obtaining votes. Agency brokerages and independents can obtain a share of the broker vote, and resulting commissions, through dedicated corporate access programs.
We doubt Instinet will be last firm to launch a corporate access service. We’ve heard rumors about other agency brokerage and research firms that are developing similar services, drawn by the size of the potential opportunity. We estimate that global research spending on brokerage research was nearly $10 billion in 2009. If you assume that some meaningful percentage of that typically bundled service, say 15-20%, is attributable to corporate access, you are looking at a large potential market. No wonder competition is heating up.
Instinet’s press release below:
Instinet Launches “Meet the Street” Corporate Access Platform
Meet the Street helps companies under-serviced by sellside analyst coverage connect with highly-targeted investors while removing conflict from traditional corporate access model.
NEW YORK – March 29, 2010 – Instinet Incorporated, a global leader in electronic trading and agency-only brokerage services, today announced the formation of Meet the Street™, LLC, a new corporate access offering that seeks to match corporate management teams of companies of all sizes with targeted investors through a unique, web-based service.
Unlike the traditional management access model, where sellside firms manually coordinate investor meetings for corporate management teams, Meet the Street puts the power in the hands of investor relations officers (IROs). IROs are able to use the electronic platform to schedule a full, non-deal roadshow with targeted investors who have previously expressed interest their company.
“There are few technology-driven alternatives to the traditional management access model, which contains inefficiencies and is skewed to favor large-cap companies,” said Jonathan Kellner, President, North America, at Instinet, of which Meet the Street is a subsidiary. “Meet the Street is a natural extension of Instinet’s 40-year history of providing innovative technology platforms to help solve legacy-driven inefficiencies. It also provides an excellent strategic complement to Instinet’s other conflict-free offerings in global agency trading, commission management and third-party independent research sales.”
Meet the Street will be run by co-Presidents Michael S. Dolan and Dan Dykens. Mr. Dolan has spent the last 10 years at Instinet in multiple senior roles, most recently running the firm’s U.S. Research Sales Group. Mr. Dykens joins Meet the Street after having co-founded and run Norbury Financial, and prior to that, serving as a Portfolio Manager at Clipper Capital Management, LLC.
“We’ve been developing the Meet the Street platform for the past 15 months, and the concept has been met with great enthusiasm by both investors and corporates. We are actively building the investor side of the network, and as we reach a critical mass of liquidity in various cities we will open those markets to interested IRO participants,” said Dolan and Dykens in a joint statement.
About Meet the Street™, LLC
A subsidiary of agency-only brokerage Instinet, Meet the Street is an innovative new corporate access platform that seeks to match corporate management teams of companies of all sizes with relevant investors through a conflict free, technology-enabled matching service. With Meet the Street, portfolio managers are introduced only to senior management teams that they have pre-selected, while corporates are able to schedule non-deal roadshow meetings with highly-targeted potential investors. Meet the Street is actively building the investor side of the network; as it reaches a critical mass of liquidity in various cities, it will be opened to interested IRO participants in those markets. Interested participants are encouraged to enroll at www.XYZ.com or by calling 877-425-2402.