The Aprio Investor Relations team have also put together a few lessons learnt from COVID-19 so far.

An ill-supported communication strategy during the good times will bite hard during a crisis. 

Consistency is the key to entrenching confidence and earning support. Reaching out to stakeholders when you’ve been quiet before will do very little in terms of building trust and credibility. To this end, a well-resourced and carefully thought-through investor communication strategy that is consistently applied in the good times will yield a handsome return in times of crisis. Contact Aprio IR to review and enhance your IR programme.

Accessibility outweighs numerical guidance.

Remain accessible, even if you don’t have all the answers. Accessibility allows dual-pronged communication and will assist in understanding investors’ issues and how they’re navigating the situation from a risk-allocation perspective. Similarly, they may be well-placed to provide insight on global best practice, as they may be privy to markets that have progressed in terms of managing the crisis.

When the situation remains fluid in terms of the impact, consider sensitivities. 

It is natural that given the speed with which the COVID-19 situation is developing there is uncertainty around its ultimate impact. Consequently, shareholders and investors don’t expect precise guidance on the overall impact on financial and operating performance, with many corporates having withdrawn guidance. Consider assisting the market to understand the impact without providing hard guidance. For example, you could communicate the percentage of costs exposed to foreign exchange volatility, export-related earnings, the average cost of sustaining closed operations, or guidance on cash-preservation initiatives – even if the impact of these are difficult to quantify exactly.

Remain transparent. 

Governments the world over are quickly intervening with aid packages and introducing regulation to help implement lockdown measures. The impact of these may require some analysis and understanding. Be transparent if their impact on the business is unclear. At the same time, you might have a better understanding of the impact of developments on your business than the market does. Stay close to market participants in order to identify misperceptions and address them in line with listing requirements.

Do not attempt to manage the share price. 

Market volatility can result in significant absolute share-price declines. It is tempting for management teams to direct their communications to help stave off the decline or recover the share price. Focus on communicating underlying fundamentals and on aspects within the company’s control. As shown in the attached, markets recover. To this end, the smart money will be looking for entry opportunities for well-positioned, fundamentally sound businesses.

It is important to remain alert to changing practices and engagement preferences from investors.

Sustaining engagement – in whatever format – in a time of crisis is crucial. Webcasts and conferencing are being well-received by investors, and their use is expected to persist.

Although technology is a worthy substitute, there is real value in face-to-face engagement.  

The above notwithstanding, face-to-face engagement provides a dynamic that cannot easily be replicated on an online platform. When we return to some form of normality of operation, remember that there is value in body language and facial expressions, which enrich the depth of engagement – especially when the conversation is not disrupted by a technology glitch or one person talking over another.

There is a significant step-change taking place in the importance that investors and society attach to companies’ role in society. Doing the right thing and being seen to do the right thing in terms of ESG (Environmental, Social and Governance) have important implications for your corporate brand.

When compared with other market crashes, this has had a greater and more widespread humanitarian impact. To this end, although ESG was already gaining traction before COVID-19, investors are scrutinising ESG aspects more closely than ever before and placing a heightened focus on actions that support them. The most pronounced of these actions have been care for the health and wellbeing of employees, contributions to humanitarian initiatives, the deferral of dividends (although share prices are responding adversely to these decisions), and the forfeiture of executive salary and board fees.

The various periods have been overlaid over each other on the graphs below and the stock market indices re-indexed to start at 100 around the trigger point of the various crashes. We can then compare the depth and duration of the crashes, as well as the recovery. The time period chosen was two years (104 weeks) following the crash and about two months (10 weeks) prior, to see how the events played out relative to each other.

• The Dow Jones Industrial Index initially dropped 36% after 24 February this year, but has already recovered 30% from the lows. The initial drop was deeper and quicker than any of the other crashes and the bounce-back was also more vigorous.

• The UK’s FTSE 100 index dropped 33%, but has since only recovered 19%. It seems to follow the other crashes more closely than any of the other markets

• The JSE’s initial drop of 34% was somewhere in the middle, but its 32% bounce-back is the strongest of the markets measured here. This may partially be explained by our low covid-19 infections relative to these other markets, but probably more by the sharp weakening of the rand which provides a big boost to export-oriented companies such as the mines.

• Asian equity markets have fallen much less relative to western markets, with Hong Kong’s Hang Seng index falling 22% since 24 February, but it also only bounced a relatively mute 13% from the bottom. But Asian stock markets have been trending down since early 2018 due to a slowing Chinese economy and by the time the coronavirus crisis hit western markets, China had already dealt with it for almost two months and the impact was largely priced in.

Lull or double-dip?

• By looking at previous crashes, it appears that we may now enter a “lull” or sideways-trending period for 20-30 weeks (five to eight months) as the market digests the news and re-values equity prices and risk. It is not impossible that, similar to the Global Financial Crisis of 2008, we may have another downward shock or “double-dip”, perhaps triggered by a second wave of virus infections when lock-down measures are relaxed.

Road to recovery

• In almost all the cases, markets started to properly recover and resume a rising trend after about 40 weeks (10 months) following a crash and within two years were more or less back to pre-crash levels.

• The JSE appears to have started its recovery trend a month or so earlier than these other markets in the past and was also back to pre-crash levels quicker. But those were back in the days when we had a more robust economy to begin with. This time may be different as our economy has been ravaged and may take much longer to stabilise, never mind recover.

• Whatever the case, stock markets tend to be six to nine months ahead of fundamentals and we should see the JSE and other markets start to price in the “green shoots” long before we get the proof. It will take a while for stimulus measures and/or potential vaccines to be deployed and have an impact though.

U- V- or W-shape recovery

• The shape of the recovery is probably the one issue most investors are grappling with now. One can make an equally compelling case for each.
  • If the virus cannot be brought under control or a second wave of infections happen, it will almost certainly result in a W-shaped recovery (“double-dip”).
  • Conversely if a vaccine is discovered in the next month and rolled out quickly, lock-down measures are lifted and economic stimulus measures applied, one can easily get a strong V-shaped recovery.
  • However, using history as a guide and excluding any further surprises, it looks more likely that we will have a sideways period for a few months, driven by governments taking a cautious and systematic approach, followed by a gradual and then accelerating recovery, the so-called U-shaped recovery.

Dot.com bubble was different

• Interesting to note that the dot.com bubble crash was almost the opposite of the other crashes; a slow-motion crash starting very slowly and then gathering momentum, with the real crash happening almost two years after the initial shock and accelerated by the 9/11 event. It is included here for interest, but is probably not too relevant to the coronavirus experience.