THE Benefits of Issuer Sponsored Equity Research
In today’s competitive investment market, smaller and niche listed companies often face significant challenges in informing, attracting and retaining investor interest.
The economics of separating sell-side research from investment banking relationships, general cost cutting of equity research departments, and the impact of the EU’s MiFID II regulations have driven many sell-side firms to reduce their research coverage, resulting in many companies losing all equity research coverage. South Africa has certainly not escaped these challenges, and most listed property companies have little to no analyst coverage.
One effective strategy to overcome these challenges is to utilise independent bespoke research services. The key benefits of leveraging these services to enhance overall investor knowledge of the company includes:
1. Increased Visibility and Awareness
Paid research services can significantly boost a company’s visibility in the investment community. Detailed and professional research reports help small companies gain the attention of potential investors who might otherwise overlook them. This increased visibility can lead to a broader investor base and greater market interest.
2. Enhanced Credibility and Trust
Professional research reports lend credibility to a company’s financial and operational data. Investors are more likely to trust and invest in companies that are transparent and provide well-documented information. Paid research services ensure that the data presented is accurate, comprehensive, and professionally analysed.
3. Improved Investor Relations
Regular and detailed research reports help maintain a steady flow of information to investors. This consistency in communication builds stronger relationships with current and potential investors. It also helps in managing investor expectations and reducing uncertainties about the company’s performance and future prospects.
4. Better Decision-Making
Access to high-quality research allows investors and company management to make more informed decisions. These reports often include market analysis, competitive landscape reviews, and financial projections, which are valuable for strategic planning and operational improvements leading to better company performance benefitting investors in the long run.
5. Attracting Institutional Investors
Institutional investors often rely on detailed research reports to make investment decisions. By utilising paid research services, small companies can attract the attention of these larger investors, who typically bring more significant capital and stability to the shareholder base.
6. Comprehensive Financial Models
Paid research services often include financial models that provide a clear picture of a company’s financial health and future prospects. These models help investors understand the company’s revenue streams, cost structures, and profitability, making it easier for them to evaluate the investment potential.
7. Competitive Advantage
In a crowded market, having professional research reports can set a company apart from its competitors. Providing independent research demonstrates a commitment to transparency and investor communication, which can be a significant differentiator in keeping and attracting investment.
8. Support for Capital Raising Efforts
When small companies seek to raise capital, having professional research reports can be a critical asset. These reports provide potential investors with the necessary information to make informed decisions, thereby facilitating the capital-raising process.
Golden Section Capital’s Paid Research Standards:
It is important to note that if paid research is not managed and undertaken in a highly ethical manner it can result in potential conflicts of interest. Golden Section Capital therefore adheres to strict standards to avoid such conflicts, and to achieve the highest degree of credibility of our research products. Our standards are based on the CFA Institute’s® Centre for Financial Market Integrity Best Practice Guidelines Governing Analyst/Corporate Issuer Relations.
Golden Section Capital’s Paid Research Standards:
- Golden Section only accepts direct compensation for our work and does not accept any compensation contingent on the content or conclusions of the research, or the resulting impact on share price.
- We disclose whether the report has been paid for by clients.
- We disclose the nature and extent of any personal, professional, or financial relationship we personally, the firm, or any other related entities may have with the subject company, its personnel, parent, subsidiaries, or agents.
- We disclose the credentials, including professional designations and experience that qualifies Golden Section staff to produce the report.
- We disclose any matters that could reasonably be expected to impair our objectivity in drafting research.
- We do not allow, nor tolerate any attempt, explicitly or implicitly, to influence our research, recommendations, or behaviour of analysts, or otherwise permit any pressure on analysts to produce research or recommendations favourable to the corporate issuer.
- We do not provide recommendations (such as Buy, Sell, Hold) for any company we cover, but we do provide what is our opinion is a one year forward fair value for the company.
- We certify that the analysis, and or, recommendations contained in the research, if any, represent the true opinions of the author/s.
- We do not engage in, nor receive compensation from, any investment banking or corporate finance-related activities with the issuer.
- We ensure that the analyst/s do not share information about the subject company or the timing of the release of a research report with any person who could have the ability to trade in advance of the release of a report.
- We do not trade in, nor hold any shares of the subject company.
- We abide by all laws, rules, and regulations that apply to registered or regulated analysts.