Issuers need to do a better job of telling their credit stories to investors, according to a senior research analyst at Nuveen, which managed $188 billion in municipal securities assets as of the end of June.
"I would say don't be afraid to pick up the phone and talk to investors directly because we're not that scary and we just want to understand your credit story," Molly Shellhorn, a senior research analyst for Nuveen's municipal fixed income team, said. "Don't let someone else drive the narrative of what your credit story is."
The Nuveen analyst also urged issuers to have a single place on their websites where they can put everything that might be of interest to investors. Even if an issuer is a school district with just 1,000 students, "someone is still buying your bonds and they are trying to find information on your website," she said.
Shellhorn's comments came during an Oct. 22 session on disclosure that was part of the Government Finance Officers Association's
Dave Sanchez, director of the Securities and Exchange Commission's Office of Municipal Securities, who had been scheduled to speak at the session, did not appear at the virtual event, which occurred during the federal government shutdown.
Near the start of the session, Brock referenced poll questions put to conference attendees the previous day. Asked whether they had a formal investor relations policy, 80% of respondents said no, she said. Responses to another poll question revealed that 86% of respondents talk with investors either infrequently or never.
Shellhorn, however, said that even if issuers say they speak with investors only infrequently or not at all, "they are still communicating with investors." Investors are continuing to do research "and with the disclosure that you are putting out on your website, your audits, what's posted on EMMA, all of that is communication," she said.
Consequently, even if issuers aren't speaking directly with investors by phone or in Zoom calls or in roadshows, a line of communication still exists irrespective of whether issuers "are managing and participating actively in that communication," Shellhorn said.
Even for an infrequent issuer, the value of maintaining that line of communication, "is that you want to have a robust secondary market for your bonds and you want there to be liquidity and demand for your bonds," the Nuveen analyst said.
"Slow, inadequate disclosure is something that is noted by investors and rating agencies, and it's always a credit negative," Shellhorn said.
Investors and rating agencies notice when an issuer hasn't posted anything on EMMA in years but has a bond issue coming "and all of [a] sudden there's a data dump," the analyst said.
Brock asked Chicago Park District's Jarmoszka whether there were any commonly-held misconceptions among issuers regarding the disclosures they make to investors.
Jarmoszka, who served as the director of debt management for Cook County, Ill., prior to assuming her Chicago Park District role in August, said among the misconceptions she's heard over the years are that issuers only need to disclose "at the time of issuance or annually or when any of [the] 16 material events occur under SEC Rule 15c2-12."
However, what she's hearing from Shellhorn and other investors is that "the ongoing voluntary disclosures are very highly valued by investors," Jarmoszka said.
Another thing Jarmoszka has heard over the years is that issuers only need to disclose negative things. The reality, however, is that positive news such as budget surpluses and capital project completions can also strengthen investor trust, she said.
"And then finally, one of the last misconceptions I've heard is that we don't need to be proactive and there's no need to develop [an] investor relation plan," Jarmoszka said, adding that such a plan can help to open "this line of communication with investors on an ongoing basis."
Shellhorn has longstanding relationships with some of the issuers she's covered, she said.
"I have a great relationship with a large water and sewer utility in Michigan," the Nuveen analyst said, adding that the utility remembers her questions and provides updates regarding concerns she has raised.
"When we have a call prior to their bond sales …it's like we're picking up a conversation where we left off and they'll say, 'You asked about this last time and here's the update,'" Shellhorn said.
That continuity helps to build trust and makes Shellhorn feel as though that issuer cares about its investors, she said.
"So, I think having that continuity over time is really helpful," Shellhorn said.
