Many African stockbrokers offer the opportunity to their institutional clients to speak with the senior management of the listed companies. These conference calls with investors can be hosted and managed by listed companies themselves.
What’s the difference?
What happens in stockbroker hosted conference calls?
Here is what happens:-
- The stockbroker pays to host the conference call. The event is owned and co-ordinated by the stockbroker and in so doing the stockbroker builds a relationship and is appreciated by the institutional investors it hosts.
- The stockbroker invites their clients to participate in the call. If the institutions are not clients, then they don’t participate. The expectation is that stockbrokers that provide access to managements of listed companies will get the business of investors if they decide to trade shares.
- The call is not published to any other parties and there is no regulation that it has to be. The contents of the call remain private to the participants. It’s unclear whether the content of the call belongs to the broker or the listed company. If the listed company wanted to publish the transcript to its website would the broker allow this? Not sure.
- The detailed contacts of the participants may not be known to the listed company being interviewed.
Here are the 6 advantages that a listed company has of hosting its own conference call
ADVANTAGE 1 – The listed company can invite all investors it wishes to the call
Many listed companies, for various high-level PR and strategic reasons (e.g. transparency) like to invite regulators or Government officials or Group holding company representatives to their conference calls. Not only is a call an opportunity to publish information, it’s an opportunity to showcase governance and transparency.
All stockbrokers can be invited to participate in the call and this negates the need to host repetitive events and prepare for repetitive events. Warren Buffet speaks to investors ONCE a year according to this article.
ADVANTAGE 2 – The listed company can publish the results of the call widely online
If a listed company publishes its investor conference call information widely online then the company is likely to be followed by more analysts and high-level investors. A loyal following can be grown and corporate reputation improved.
The decision to publish all content of the call with audio podcast and transcript is a brave one for any company in Africa. Internationally this is expected.
ADVANTAGE 3 – The listed company can grow its own database of investor contacts
The growth of a company owned list of key investors is an absolute must in times of crisis, share price under-valuation or over-valuation. The ability of management to regularly interact with key investors (publicly) builds trust and reputation, or it may destroy it of course if management are inept at communicating.
ADVANTAGE 4 – The listed company saves time
The process of preparing a presentation, consulting with senior management and the latest results and agreeing what can and cannot be said is time-consuming. Why do it 4 or 5 times a year when it can be done once.
If management reports twice a year, once at half year results and once at full year, then the full involvement of the various management members can be dedicated and focused. The team can focus on presenting all possible aspects of the business to ensure that a complete a picture as possible is presented. The publication of this information by way of audio file or transcript can keep investors appetite for information satisfied for the next 6 months until the next call.
ADVANTAGE 5 – The listed company does not need to worry what has been said from one call to the other
If a listed company speaks to investors once and publishes what is said widely online, then it generally does not have to worry about selective disclosure. It communicates equally to all at the time that it communicates.
Given that generally legislation or stock exchange rules do not mandatorily require disclosure of these events and that African listed company executives are unfamiliar with investor relations best practice, it is likely that selective disclosure does happen in private conference calls. If it does, then it’s in neither the listed companies, stockbrokers or institutional investors’ interests to publicise that fact.
ADVANTAGE 6 – The listed company can be in control of the conference call and not the stockbroker
The tools provided by the conference call providers to manage a call in-situ are really progressive. If the listed company is in charge of the call process then it has control of what happens during the call.
There are disadvantages of course
OK there are disadvantages I admit, but these are outweighed by the advantages:-
- the cost of the call has to be borne by the listed company
- the event planning has to be managed by the listed company
- the investor relations function has to be managed diligently if the advantages I have set out above are to be realised.
There is nothing to stop a listed company doing both and using its broker-managed conference call to the advantage of its own, by for example, collecting contacts etc.