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. Last Updated: 07/27/2016

Road Shows: A Dead End With Buyers?

LONDON -- The use of road shows to attract investors is becoming increasingly obsolete in today's electronic information age, according to bankers and borrowers.


"Road shows every five minutes are a pain in the neck and investor fatigue is a problem," a syndicate manager at a German bank said. "If there are seven road shows in London in one week key investors are not going to turn up for every meeting."


Bankers say road shows are an extremely time-consuming marketing tool and one which often leads to inflated expectations while borrowers speak of "embarrassingly" low attendance levels at what is often a costly exercise.


The issue was discussed at a recent conference in London where global borrowers heard how investors could be suffering from "road show fatigue" -- an overdose of investor presentations by borrowers eager to sell their bonds.


The debate was triggered by the heavy load of road shows for a number of debut bonds for emerging-market borrowers as well as for borrowers ahead of the planned European economic and monetary union.


Low attendance levels at investor presentations in key centers such as New York have also sparked debate.


"You can take a good corporate name around Europe and expect a turnout of 50, and only 10 appear, which is very embarrassing," a banker said.


There are, however, stalwart supporters of the traditional type of investor presentations but even they prefer the more intimate one-on-one meetings.


"Road shows have become a fashion promoted by investment banks," Creditanstalt's Christian Murach said. "We prefer one-on-one meetings with investors because with extensive road shows, by the time it comes to launching the bond, the market conditions have often changed." Added to this, some investors say road shows create unnecessary hype which is times misleading or leads to unwarranted tighter launch spreads which then widen again immediately after launch.


Borrowers visit as many as 12 cities, typically for a new issue for an emerging market credit such as Russia did for its debut international bond last November.


But the more familiar borrowers and usually triple-A rated borrowers to the market do not bother with an investor jamboree, assuming buyers to be clued up to their story.


There are still those who see the benefits of the road show tradition. African Development Bank's treasurer Thierry de Logumar said there was still a need to enlighten certain continents to others such as Africa to Asia.


China's deputy director general of the state debt management department, Li Dachun, said China still placed a lot of importance on road shows.


"They [road shows] undoubtedly have a purpose," a syndicate manager said. "You can read a hundred financial statements but never know whether a borrower can be trusted or not."


Investment banks might, however, rethink their strategy. Some bankers speak of "rival banks rocking up at road shows to try to win future mandates from the borrower."


Some suggest the use of the Internet instead of road shows.


But even more intimate is the use of "television conferencing" where investors can remain in their office while watching a live transmission of the borrowers' message, some bankers said.


"This technique could well save time." a syndicate manager said. "Road shows ought to be used in a more discriminating way."