INVESTING IN INNOVATION AS CORONAVIRUS DISRUPTS EVERY INDUSTRY

26 Mar INVESTING IN INNOVATION AS CORONAVIRUS DISRUPTS EVERY INDUSTRY

As the number of Australians infected with virus rises, the COVID-19 emergency continues to dominate headlines globally. So, here are the insights we have collected over the past 24 hours to share with you.

International news

• Bloomberg reports on calls from some billionaires to get people back to work soon, with the founder of payroll processor Paychex Inc quoted as saying, “The damages of keeping the economy closed as it is, could be worse than losing a few more people”. Employees, which would bear the brunt of any return to work, beg to differ. Read the article here. (Subscriber access)
• As more people transition to working from home, The Economist has advice from start ups who have “grown up” working remotely. Read more here.
• Even the biggest companies in the US are cutting spending and bolstering their balance sheets, proving that cash is king. According to the WSJ, “The median amount of cash and other readily available assets on an S&P 500 tech company’s books at year-end was enough to let it operate about 270 days in an extreme scenario without revenue or cost cutting, while the median was closer to 60 days for retailers”. (Subscriber access)
• Just as we saw some ASX-listed companies yesterday cancelling dividends, The Financial Times reports that investors are calling for companies to prioritise shoring up balance sheets and stepping up pressure to slash dividends. Read the article in the FT.  (Subscriber access)

Australian company news 

• Will big businesses who get in first to renegotiate debt and raise equity will get the best deal?
  • Companies who get in early are starting to benefit from the government’s support including Qantas and Transurban who are renegotiating debt deals and Cochlear who announced a capital raise yesterday, which was upsized overnight. Read The Australian article. John Durie notes that “in times of crisis it’s the first in the door that gets the best deals.’ He says that big companies are using this time to “prudently reduce their long-term interest bill and at the margin get hold of the money while they can”. Read The Australian article. (Subscriber access)

• Investing in innovation as coronavirus disrupts every industry
  • We are seeing a focus on innovation as companies pivot business models in reaction to coronavirus. Bill Ferris, who has been appointed chairman of the Medical Research Commercialisation Fund, says coronavirus is “an opportunity for our world-leading medical ecosystem to strengthen its position and step up to the next level”. He can see the possibility of a different sort of Australia emerging on the other side of the coronavirus disruption. Read The AFR article here. (Subscriber access)

• Some investors are calling the bottom and communicating about it to their clients
  • For example Caledonia Investments has been on a $2 billion buying spree over the last fortnight and are reaching out to clients to remind them of their “most important investing tenet… we undertake to do deep fundamental research. We don’t panic and make drastic portfolio changes in reaction to market volatility because we believe the biggest mistake is to get bluffed out at the bottom”. Read the AFR article here. (Subscriber access)

• Pressure on ASIC to shield directors from legal action for cancelling announced dividends

• • While insolvency laws have been temporarily relaxed to shelter company directors from personal liability from trading insolvent, lawyers are also pushing ASIC to change laws to protect company directors from cancelling announced dividends. Over the last few days, we have seen an increasing number of companies wcancelling their announced dividends in response to the virus, including Super Retail Group and Corporate Travel Management.

• Companies start communicating with customers
  • A two-page advertisement by Commonwealth Bank appeared in this morning’s print edition of the AFR, and other outlets, aimed at both their customers and their customers’ staff, as well as retirees (See below)
  • It’s a highly unusual way to advertise: lots of information (although accessible), and no mention of CBA anywhere, except in the copy itself. Has the COVID 19 emergency started to change the way some companies advertise? See below.

Australian markets 

• Company directors urged to think ahead
  • Moelis Australia is urging company boards to think two to eight months ahead and assess drawing on a range of capital sources. Chris Wyke is urging company directors to think ahead on modelling various scenarios and doing due diligence around tapping various pools of capital, including alternative forms. “If you don’t, you are not as best prepared as you can be. Undoubtedly this is going to cause considerable dislocation,” Mr Wyke said. “Be in a position where you are ready to go. My anecdotal read is that those that go early … tend to do better.” Read The Australian article. (Subscriber access)

• Coronavirus taking attention away from new initiatives as ASX delays blockchain project
  • Increasing pressure on registry providers and brokers on surging trading volumes triggered by COVID-19 means they are unable to focus on better understanding the complexities of the ASX’s blockchain project. Read The AFR article here. (Subscriber access)

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Our daily briefing is not meant to be a summary of media coverage but rather, insights that may be helpful in understanding how organisations are communicating with stakeholders in a time of crisis – and what comes next. Sign up via email.