Instinet today entered the corporate access fray as it introduced an electronic service that brings institutions together with corporations looking for investors.
Functioning similarly to an online dating service, Meet the Street, as the corporate access effort is called, matches up corporations of all sizes with interested institutions to arrange non-deal road shows. The two sides register information about one-another on an online network. And when there are commonalities, technology connects the two parties, said Jonathan Kellner, president of Instinet North America.
"This is an online corporate access platform for public companies, designed to completely automate and streamline the non-deal road show process," he said.
Meet the Street debuts at a time when the world of corporate access continues to grow while the coverage of small-and mid-size companies continues to shrink. Wall Street has seen an 84 percent headcount reduction in the sellside analyst ranks over the last decade, said Dan Dykens, co-president of Meet the Street, a subsidiary of Instinet. The culling has led to a severe shortage of coverage of small-and mid-cap companies, he added.
"We’re in a declining commission environment," Dykens said. "And the way [sellside analysts] get paid today is to cover companies that trade much more volume. So, the analysts that are lucky enough to have jobs on Wall Street on the sellside have pretty much dropped coverage in unison on small- and mid-cap companies and migrated over to large-cap companies."
Corporate access is a hot subject right now. Within the past year, many agency brokerages have begun offering the service. Liquidnet started a service last June. Other agency shops are considering starting a corporate access service because it is a relatively inexpensive way to get research chits and offers the potential for large payouts in commissions.
"More are advertising their capabilities; more firms are looking to hire in this area," said an executive at one firm looking at starting a corporate access program. "If you can bring more of those investor relations or CFO contacts, I think you can do fairly well right now."
And Instinet, the agency brokerage subsidiary of Nomura Holdings, Inc., likes its chances to make waves with small- and mid-cap firms. "We think we’ll get a large share of the small- and mid-cap market, because there’s really nothing for them out there," Dykens said. "They’re being ignored, really, by the sellside."
Instinet also said it has a chance to gain a foothold in the saturated space of large-cap coverage. The Meet the Street group spoke to many large-cap firm representatives and learned of an opening for their service, Dykens said. Despite their over coverage, large-cap companies are showing interest in doing at least a portion of their road shows on their own.
In the traditional corporate management access model, sellside research sales groups usually organize investor meetings for senior corporate management members whose companies are covered by the sellside firm’s analysts. But with fewer analysts today, a growing number of companies lack sellside analyst coverage and struggle subsequently to find interested institutional investors.
Meet the Street works by having investors register online by building a profile. It includes a "watch list" that shows Instinet which companies they follow in real time. Companies, meanwhile, register with information about executives who are likely to be traveling to meet investors, as well as whom their competitors are.
The executive group would log into the application and input the city they plan to visit, as well as how long they’d be there. Meet the Street would generate an agenda. The company could then filter which institution they wanted to visit by assets under management or investment style.
"We’ll show them a complete list of investors who fit their preferences within their city of choice who either care about their company, or who care about their competitors, if they so choose to see that view," Kellner said.
Once the company is comfortable with the list, appropriate investors are contacted through Instant Message and emails, Kellner said. The investors and companies can then determine if, when and where to meet with a couple of mouse clicks.
