Future Focus: Depositary Receipts in EMEA

Future Focus: Depositary Receipts in EMEA

May 2020

By Dave Stueber

How has COVID-19 changed the way that you've been able to support your clients?


I'm grateful we have such a good DR team here in EMEA. They are staying very engaged and adapting to the new environment. We're over-communicating and assuring clients that we are here to support their DR program and will continue to operate smoothly, for the issuer, brokers and investors. With the support of our US based colleagues, I would say it is not just BAU, it is BAU+.


We started with an initial intense COVID-19 client outreach, making sure that clients were okay and assuring them that DR processes and cross-border settlement would continue as usual. In fact, of the DR Division’s initial client COVID-19 outreach feedback, 66 percent came from European clients.


Now, the team has settled into more tactical and routine engagement with DR clients around topics such as annual general meetings (AGMs) and dividend changes. AGMs are going virtual. A lot have been rescheduled, so that creates another opportunity for us and our fellow RMs in NY to engage with clients and to plan for a successful solicitation of DR investors in connection with AGMs. We are monitoring dividend changes or postponements closely and helping clients understand the increased cross- border issuance and cancellation activity. And then we're still continuing our IR initiatives. We’ve recently worked with our Depositary Receipts Global Investor Relations Advisory (GIRA) team and one large EMEA client on their non-deal roadshows, which will be virtual going forward.


How has your work setup and working arrangements changed?


I'm a "manager by walking around" type person, so I miss the interpersonal and direct contact with my team and with clients. I've developed common techniques to over-communicate with the DR EMEA Team, such as video conferencing and daily check-in calls for the whole team that allows us to hear each other’s voices and highlight any issues and escalate. Also more frequent, one on one calls with individual team members to discuss business but also to understand how everyone is dealing with WFH. As for WFH arrangements, some things are easier, others more difficult and I am feeling better with more sleep without the commute. And of course, it’s all about WebEx and making sure you are connected!


What kinds of things have your clients been asking about specifically related to the impacts of COVID-19?


Across the board, at least in EMEA, we've seen increased issuance and cancellation activity, so clients are asking whether this greater cross-border activity will continue and the premium or discount program dynamics to the extent we can identify. They're also asking about best practices in terms of virtual conferences and meetings. We're sharing some insight and with the help of our GIRA colleagues, have offered some webinars and calls to help with non-deal roadshow planning and targeting. Clients have questions about rescheduling their AGMs and how to change the original dates. In this climate, they're also asking about postponing (or not) dividends. Other than that, it has been the typical topics of conversation around DR program cross-border dynamics and investor relations, which is encouraging because it further reinforces BAU.


What are some of the biggest impacts on securities markets?


One of the biggest developments in DR trading in EMEA and beyond is cross-border DR issue/cancel volume. If you consider DR issuance and cancellation a subset of overall trading volume, when trading volume is increased and becomes significantly more volatile, the result is an increase in DR cross-border issue/cancel activities. In the medium turn, I don't know whether higher cross-border activity is sustainable or if that volatility will continue, but in this current environment it is certainly evidence that the DR product is of use and a helpful investment mechanism for many institutions. And in the COVID-19 crisis, we are seeing losers and winners in the securities markets, for example in the Fintech and Biotech market, some DR offerings listed in the US are still occurring, yet again showing the value and use of DRs to issuers and their investors.


As the crisis hopefully starts to subside globally what are some potential scenarios you see for how things will change in the new world?


The current volatility in the market is a double-edged sword. There's been an increase in DR issue/cancel activity, but many IPOs and new DR program, especially in emerging markets, have been put on hold. We'll probably see that continue until some sort of normalcy returns and the extent of economic damage is better understood. This unfortunately will take time, so right now guidance is very uncertain for many issuers and industries.


As mentioned above there are some exceptions within the Fintech and Biotech industries, as evidenced by three Israeli follow-on offerings in DRs just this past week. In general, these offerings tend to be smaller. The large offerings have been delayed. Too much uncertainty exists which likely will delay offerings for now.


How have you seen this particular situation affecting IR teams?


Some investors now just want a phone call. They don't even want video. IR teams are facing the logistics of having to deal with investors directly more often, a trend originating with MiFID II and now exacerbated by the crisis. The frequency of meetings and investor requests for calls has increased as investors seek to determine economic impact.


Further, it’s all about guidance. Investors are looking forward, less concerned than normal about current earnings and pressing issuers with questions about what's going to happen, what’s been impacted, and how earnings will change. IR teams are having to face more guidance questions going forward and to carefully consider how to respond to these questions, whether authorized to do it in direct guidance or not.


I would end by saying that over-communication and escalation internally and externally, remain our focus. Clients appreciate BNY Mellon’s support and I expect, as with our personal lives, relationships will be strengthened by the exceptional efforts by all in these difficult and unprecedented times.

Dave Stueber

Head of BNY Mellon’s EMEA Depositary Receipts (DR)

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