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Industry Spotlight

Will a change in the way we work help DocuSign, Slack and Zoom's share prices?

Six months ago, Zoom Video Communications [ZM] wasn’t something the average person thought about all that much, but due to the coronavirus pandemic making working from home a necessity, the world has suddenly embraced video-conferencing. In response, Zoom’s [ZM] share price has risen 280% since January.

Of course, Zoom isn’t the only work-from-home platform to have also benefited from our new way of working.

Demand saw Slack Technologies’ [WORK] share price close at an all-time high of $39.90 on 3 June. San Francisco-based electronic agreement pioneers DocuSign’s [DOCU] share price, which had averaged around $65 a share in the 18 months to January, hit a record $177.58 towards the end of June and has continued to rise. Among the companies that make such software possible, cloud-computing content delivery service Fastly’s [FSLY] share price soared over 500% from $14.00 a share in mid-March to $84.51 as of 2 July.

280%

Zoom Video's YTD share price rise

  

This is more than a short-term, emergency reaction, though. Research shows that home-working has improved general productivity so much that many companies are likely to keep their staff at a distance when the virus retreats.

 

Empty offices?

“The WFH boom will recede,” Richard Waters writes in the Financial Times. “But it is already clear that many people hope to spend part of their working lives out of the office long after the pandemic has passed — and that they and their managers believe they can be at least as productive. This crisis has brought an alluring glimpse of a future way of working.”

Around three-quarters of British employees have now decided that they want to work at least some of the week from home following the pandemic, according to research by Dynata. One in six say they’d prefer to do so full-time. In the US, 75% of firms plan to offer at least 5% of their employees permanent home-working, with a quarter intending to allow one in five to do so.

“The WFH boom will recede. But it is already clear that many people hope to spend part of their working lives out of the office long after the pandemic has passed — and that they and their managers believe they can be at least as productive. This crisis has brought an alluring glimpse of a future way of working” - Richard Waters

Some bold moves have already been made in this direction, with tech giants — unsurprisingly — leading the way. In May, Jack Dorsey, CEO of Twitter [TWTR] and Square [SQ], announced that employees in certain roles could work at home “forever”. Mark Zuckerberg has offered the same for Facebook [FB] staff — although staff moving away from San Francisco to less expensive cities may also face a pay cut. Shopify [SHOP] CEO Tobi Lutke has told his workers that: “office centricity is over”.

While it may have started with them, this trend is stretching further than tech. French car manufacturer Groupe PSA [UG], which owns the Peugeot, Citroen and Vauxhall brands, said that for non-production staff, teleworking will become “the new benchmark”. Meanwhile, Indian food giant Curry Nation’s co-founder Nagessh Pannaswami has announced permanent working from home, citing the need for more “compassionate management” of employees.

 

The ROI from WFH

WFH arrangements have prompted another, wider stock market trend. Just as ESG has bumped up a company’s stock price, some investors are beginning to base their choices on how firms are looking after their staff during the pandemic.

It’s already known that more staff working from home can lead to higher retention rates, sturdier supply chains, and greater productivity, while investors see businesses that have leaned into flexible working as more adaptable in times of crisis, offering a solid foundation for growth.

Fund managers are now expressing a preference for companies that let staff work from home. Equity and credit investors at AllianceBernstein are reportedly quizzing companies about their work-from-home arrangements, and checking how quickly tech is being installed at employees’ homes.

Meanwhile, Japan’s third-largest life insurer Dai-ichi Life is surveying the 250 companies in which it holds equity investments on whether they are offering their employees permanent home-working arrangements.

 

Accelerating change

The idea that happier employees make a more valuable — and investor-attractive — company is not new. A 2017 survey by Australian company Culture Amp found that firms which effectively engage their employees enjoy a 24.5% higher share price growth compared to companies with lower engagement. “It’s probably not surprising to find that better-performing companies will have happier people,” says the company’s chief scientist Jason McPherson.

Furthermore, Chendi Zhang carried out similar research at Warwick Business School in 2016 that “found a definitive link” between happy employees and increased share prices. “Keeping workers happy helps with motivation, productivity, recruitment and retention. It is not just about higher wages either — there are many other happiness-enhancing practices such as flexible hours, non-financial perks and giving value to an employee's job through social responsibility projects.”

“It is not just about higher wages either — there are many other happiness-enhancing practices such as flexible hours, non-financial perks and giving value to an employee's job through social responsibility projects” - Chendi Zhang

 

More recently, New York financial services firm Moody’s Investors Services published a report in June suggesting that businesses’ operations in the face of COVID-19 will change investors’ attitudes towards them.

“The coronavirus outbreak will intensify the focus of companies, investors and other stakeholders on environmental, social and governance (ESG) factors, and increase the credit-relevance of ESG risks,” it said.

“The coronavirus pandemic has vividly illustrated how a social issue like a public health shock can have severe macroeconomic and credit implications," says the firm’s AVP analyst Matthew Kuchtyak. "Entities demonstrating a stronger capability and willingness to address such ESG risks will increasingly differentiate themselves from their peers over time."

“The coronavirus pandemic has vividly illustrated how a social issue like a public health shock can have severe macroeconomic and credit implications” - Moody’s analyst Matthew Kuchtyak

 

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