Investor and Issuer Engagement in Uncertain Times - Part 3
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."
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.
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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.