IPO backup plan

Why virtual roadshows are here to stay

The Covid-19 pandemic has kept bankers off planes, but even when distancing measures ease, roadshows are likely to remain virtual for many issuers.

Roadshows have gone virtual across Asia-Pacific.

With social distancing measures in place across the region, bankers are no longer able to jump on planes at the drop of a mandate and pitch to investors.

Take three of the region’s biggest recent deals – Republic of Indonesia’s $4.3 billion three-tranche bond in early April, Malaysian oil and gas company Petronas’ $6 billion three-tranche deal in mid-April, and the Australian Office of Financial Management’s (AOFM) record-breaking A$13 billion ($8.3 billion) November 2024s – all printed very successfully and without a physical roadshow.

Bankers have not only acclimatised to the new world order but in many cases actually seem to prefer it.

“For the last one and a half months we have stopped doing roadshows,” said one banker on the Indonesia deal. “What we've focused on for other transactions is an investor call or a set of calls. That’s mostly for issuers who are not regularly in the market. But for regular issuers, you can even get it done without a call.”

It is a similar reaction from the bankers on the AOFM deal. “The current restrictions had minimal impact and resulted in the process being more efficient, mainly due to not having to travel,” said one banker. “The team worked completely remotely and had positive feedback on the whole process”.

There is, of course, the personal upside for the bankers. Every banker that FinanceAsia talked to for this story cited the advantage of being able to see more of their families. “It’s great to see my children,” said one. Investors understand that people are working from home. “They get it if there is a dog barking in the background or if children wander in.”

But it is the efficiency to the execution of the deals themselves that is finding particular favour.

“If you're doing a four or five-day roadshow, that involves probably another two or three days of flying,” said a banker on the Malaysian state oil company’s syndicate. “With Petronas we were able to hit three markets – Asia, the US and Europe – all within a 24-hour time period. We just followed the time zones.”

And as for the reaction from investors, bankers say that with 80% of the buy-side working from home themselves, they have been positive too even if there has been an element of what one banker describes as “needs must”.

The more complex, back-end aspects of the deal have also been managed smoothly. “We spent a lot of time working with our colleagues across divisions, legal, compliance and engineering, to figure out how to conduct due diligence on transactions in a context where people are unable to travel,” said one banker.

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There is, of course, a downside. Every deal that has hit the markets in recent months has come not just from an investment-grade borrower, but from a repeat investment-grade borrower to boot.

The new reality of virtual roadshows could flicker when other issuers, those less well-known or further down the ratings scale, try to tap the markets.

Here, there is scepticism about how it could work. “I don't think a ‘phone call can replace physical roadshows entirely, particularly for investor relationships. There is a value with meeting investors,” said one banker.

The bankers all cite debut borrowers and more complicated borrowers as where it could get complicated. “There have been no debut names yet. When that does happen, it will be a test for the market,” said one Australian banker, though it is worth noting that he, like many, is curious how a roadshow could work with a debut borrower or high-yield name rather than rule it out altogether.

The reason for the openness to change is that there is a strong sense that the writing has been on the wall for long roadshows in the traditional manner for some time.

The driving force here has been the number of environmental, social and corporate governance (ESG) names which have sold bonds over the past couple of years. 

“It gets uncomfortable when you are on a roadshow for an ESG issuer if they ask you how you got there and then you say, ‘We flew’,” said one banker.

What is more surprising is how old-school the technology for the virtual roadshows has been. Forget any thoughts of the latest high-tech devices, bankers are distinctly old fashioned. “There have been some video conferences, but by-and-large, it is all done by telephone,” said one banker who went on to complain that “my ears are hurting from having my earbuds in”.

They admit that permanent telephone calls had not been without their challenges at the beginning, but that “everyone is getting better at it”.

If nothing else, the bankers themselves recognise that even in the post-Covid-19 world something has to change.

“There is going to have to be a little bit more balance between going on the road just for an investor update for a repeat borrower and using the telephone more. Maybe we do just need to use telephones more than we have done in the past,” he concluded.

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