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Investor and Issuer Engagement in Uncertain Times - Part 3

31 March 2020

IHS Markit's Perception Analytics team engages in in-depth discussions with investors and analysts daily. Given recent market volatility and significant economic uncertainty, IHS Markit will be speaking to investors and analysts on a regular basis to assess how the current situation with COVID-19 is impacting their evaluations of and engagement with corporate issuers. Highlights include:

Investors and analysts agree that companies that stretched their balance sheets during the market upcycle will suffer the consequences now that the market has quickly and unexpectedly turned.
"I believe that what is happening in the market today will finally force companies and shareholders to not stretch balance sheets. I think this is finally the inflection point for leverage on corporate balance sheets."

Some suggest that times like these are a good reminder for why it is important to temper expectations when discussing the upside of capital allocation initiatives.
"Ultimately, many companies had made capital allocation decisions assuming that your cost of capital is 2% higher than you tell everyone and that your returns are 2% lower than you tell everyone.

Others emphasize that similar to their expectations for the companies they invest in, their investment horizon is long-term and less impacted by short-term disruptions (such as COVID-19).
"We expect this to be a few months effect and not a long-term issue. It does not change my view of how companies should allocate capital."

Download the full report

IHS Markit's Perception team will continue to gather real-time market feedback as the situation unfolds, so please look out for the next part of this series.

Part 1 available to view here.

Part 2 available to view here.

IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

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