At IRM, we’re privileged to complement the work of some of the best investor and public relations practitioners in the business.
Today's post, Chasing the greenback: how to attract US investors was written by Kyahn Williamson, who Heads Investor Communication at Buchan Consulting, a consultancy that IRM works with often.
Here Kyahn explores the thoughts and opinions of several respected US investors and highlights the paths that a number of our ASX listed companies have ventured down when attracting interest from US investors.
“Chasing the greenback: How to attract US investors” first appeared in the Winter edition of Listed@ASX. You can download the full edition here.
Wednesday, May 27, 2015: The US supports one of the world’s deepest pools of capital, and interest in Australian companies is at a peak. In 2013, US investors poured more than US$35 billion into Australia including ASX listed companies, and not just in the traditional stronghold of mining and resources, but across retail, manufacturing and healthcare.
There are many reasons US investors consider ASX listed companies. For some, it is diversification, for others it is the ability to take a meaningful stake in new technologies or IP. And with the falling Australian dollar and the collapse in commodities, the potential to deliver upside is driving strong investor interest.
John Chiplin, the founder of US based investor, Newstar Ventures, and non-executive Director of ASX listed Benitec, says, “It’s good right now because there is an appetite for risk capital and value arbitrage between Australian and US companies is as high as it’s ever been.”
“Most Australian companies are undervalued at the moment,” said Trevor Brucato, Director of RB Milestone Group LLC, a New York based equity research and market intelligence firm. “Valuations are not reflecting true value and many companies, especially in natural resources, are trading at less than liquidation. These conditions scream for management buyouts and other various takeover opportunities. This, along with currency arbitrage, is heightening interest from US funds.”
AN ABUNDANCE OF SPECIALISTS
Although the arbitrage theme is strong in the current climate, the US, with its abundance of specialist investors ranging from venture capitalists to institutional funds, is a source of patient capital.
“The key to making those investors sticky is to take the time to have a presence in the US: make the effort to engage, and go meet with them on a regular basis,” said Daniel Sharp, a corporate advisor with Canaccord Genuity.
Companies such as ImpediMed (IPD) and Nanosonics (NAN) have both have recently completed major capital raises, attracting international, institutional investors. They are also amongst the best performing stocks on the ASX currently, and recent entrants into the ASX300.
Like their peer, Osprey Medical (OSP), these companies have growing sales and awareness in the US, and in the case of ImpediMed a US Category One reimbursement status. Their relevance and strong presence in the market, demonstrates that timing is all important when pitching to the US market. Many agree that some companies simply jump the gun, in terms of the story being too premature or not understanding who the relevant investors are.
The experience of these companies also supports the view that the ASX is an excellent stepping stone for smaller or early stage companies. There has been a run of US based companies listing on the ASX, because it is a regarded as a highly efficient and well regulated market, but one where it is much easier to raise small amounts of capital or list at an earlier stage and at a lower valuation.
For companies at the more speculative end however, the US appetite for risk, is a draw card. As Chiplin points out, “In the US, investors are in generally less risk averse and will take on more risk to get rewards.”
A CASE IN POINT: BENITEC
Australian biotech, Benitec (ASX.BLT), which is conducting first in man trials of its gene silencing technology, raised $30 million in April 2014, almost all from the US. Approximately 30% of its register is US based. A company like Benitec, is considered high risk in the Australian market, so attracting quality US investors and capital was transformative in itself. Benitec was effective in tapping into the intense investor interest in the gene therapy space, which was driving up the valuations of its peers, and targeting specialist investors with a deep understanding of their technology.
But when there’s more money to be found in one New York City block, than in the whole of Australia, where does one begin in their quest to find the fund manager of their dreams? Unfortunately, there is no silver bullet. It takes a great deal of time, effort and persistence.
Barry Driscoll, of Kennedy Needham, who has spent much of his career advising Australian companies on American Depositary Receipts (ADR) programs says: “The companies that do it well understand what the market is. You can’t go in with a scatter gun approach. You need to have the right people guiding you, and you need to get in front of the broking houses that are trading the foreign stocks – and that isn’t necessarily the household names.”
Once you find the right target, getting the story right is paramount. Often, we are told that the Australian style of presentation needs to be honed for the US market. This means not only finding your angle for the US or the individual investor – but ensuring the key points of the story are delivered succinctly and up front. US investors, like their Australian counterparts, want to see quality management, addressable markets, and the ability to execute. Sharp says investors will delve more deeply, and will often have a more detailed understanding of a technology and how it is applied in the market.
But perhaps save the technical details for the specialist analyst or the second meeting. As Brucato succinctly puts it: “In New York, investors want the facts and they want them fast.”
Special thanks to Kyahn and to Buchan for allowing us to reproduce the article here. For more detail on Buchan Consulting, please visit www.buchanwe.com.au.