Highlights from IR magazine's China Rising IR Breakfast Seminar on May 19.
Crocker Coulson, president and founder, CCG Investor Relations
‘Some of the key factors behind great IR run counter to traditional Chinese business culture. During the early phases, when China was adopting capitalism, it was practically suicidal for entrepreneurial companies to be transparent. That habit is baked into the DNA of many of them.
‘In the recent downturn, many chief executives reduced the amount of communication going to the marketplace and reduced the frequency of investor meetings. Unfortunately, that’s the worst thing to do in a downturn: investors need as much hand-holding and frequent disclosure as possible during that type of period.
‘We’re now starting to see the payoff for the companies that stuck with a robust pattern of communications and disclosure – you can see it in the out-performance of their shares as the interest starts to return to the marketplace.’
Robert Wotczak, managing director and regional head of global client group, NYSE Euronext
‘After going through a reverse merger, a small-cap company typically has a small number of investors holding up to 80 percent of its shares. But other investors look at trading characteristics like volatility and liquidity, so it’s important to distribute the shares more widely and create liquidity in the stock. It’s in a company’s best interests to move to a national exchange – whether that means the NYSE or NASDAQ – as soon as possible to help create that distribution.
‘Look at China Green Agriculture, for example. It recently moved from the OTC Bulletin Board to NYSE Amex. It used to trade 10,000-25,000 shares a day; now it trades in the region of 150,000-250,000 shares a day. Clearly, getting on to a national exchange really helps your overall success in navigating the US capital markets.’
Verdun Edgtton, corporate governance officer, the Bank of New York Mellon
‘Listing on a recognized exchange is seen as a proxy for good governance. At the same time, investors realize there are country differences and company differences, so the way firms articulate corporate governance is very important. They need robust internal structures and processes so they can provide that disclosure and, if needs be, reevaluate it.
‘Companies from certain markets where there may not be a strong corporate governance heritage are coming to the US market where governance is viewed as very valuable by institutional investors. Disclosing internal structures and processes can be a very foreign concept for them. We help our depositary receipts clients navigate the governance space by keeping them apprised of rules and new developments. They learn these structures and processes so they can hit the ground running.’
Carl Yeung, CFO, ATA
‘When we listed on NASDAQ, we made the decision to be a US company with all the baggage that comes with that: good governance, transparency and IR practices. We stuck to that even during the downturn. We kept coming to the US, doing conference calls with investors, building relationships and continuing our internal governance development.
‘It has really paid off. For example, when we had to withdraw our guidance, we did it openly and followed up with good communications. Since that happened in February, our stock has almost doubled to its current price.
‘Before the downturn, investors’ questions were about growth. Throughout this crisis, however, they started asking about our cash flow situation, our cap-ex plan and our bank financing, so we added a lot more about our balance sheet to the back of our presentation.’
John Ma, director of China research, Roth Capital Markets
‘From 2006 through mid-2008, the interest in China was very high. But since last August and September, we have seen a dramatic decrease in interest. From November through February, my phone just stopped ringing. Whether or not I put out a research report, it made no difference.
‘There was more investor interest in short ideas. But look at a company trading at two times or three times earnings – what can you short? In the last couple of months, the interest has come back. With the market rising, investors are getting more confident.
‘Remember that your best friends can also be your worst enemies. We have seen a lot of Hong Kong-based based investors wanting to invest in foreign-listed Chinese names. They love China, but they are much more skeptical than US investors.’
Jan Childress, director of investor relations, Consolidated Edison
‘Every area of our company has performance indicators. We have a corporate dashboard that shows a green light if you’re on target, a yellow light if you’re weak and a red light if you’re way under. Our chief executive watches it like a hawk so, when the fourth quarter comes around, if you’ve got red or yellow, you are hustling.
‘In IR, we have a list of performance indicators that really goes to the heart of our mission, which is to get before the investor community. For example, last year we had a goal of 110 meetings with institutional investors; we did 200. We planned to do seven investment conferences and we ended up doing 13. Other goals were to have 18 meetings with sell-side analysts and to do five non-deal roadshows. Our compensation is actually pegged to those goals.’
