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OTHER INVESTOR
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| Commentary provided by John Scherr, President, WhisperNumber.com |
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Recently I was interviewed by the Wall Street Journal for a personal finance section piece entitled "A Shareholder's Guide to Grilling Companies". The article included the following: 'Shareholder advocates say action is overdue. In a November study by WhisperNumber.com, a research firm that studies investor sentiment, 80% of respondents said corporate investor-relation offices aren't individual-investor friendly. "It should not be a struggle to learn about the companies you are investing in," says John Scherr, WhisperNumber's president.' The conclusion of the article led to the fact that IR departments are not exactly going out of there way to meet the needs of individual investors. We ran a number of extensive surveys in 2002, and we thought the results would be interesting for your review:
November, 2002
An Extensive Investor Relations Survey Involving Feedback
and Data from IR Departments and Individual Investors
Over the past year WhisperNumber has conducted a number of surveys focused on the information provided by and communication between IR Departments and Individual Investors. Results indicate that IR Departments and Individual Investors have very different opinions. The survey results indicate the possibility of a large degree of misunderstanding between these two groups.
Method
Our response group was based on four separate email surveys with 1100 IR Departments and 2650 of our registered Influential Individual Investors. We looked at General Corporate Communications with Individual Investors, IR Department Communications with Individual Investors, and Individual Investor Perception and Preference.
Survey Highlights
The majority of IR groups surveyed feel that they communicate 'well' to 'very well' with the individual investor and the majority also believe that improving their IR website is the best method of communication.
Investors, on the other hand, had a very different take on the subject. The majority of investors feel that IR departments do not sufficiently communicate with them and believe that IR departments are not Individual Investor friendly. As far as the corporate website is concerned, the study suggests that Investors would be happier receiving brief communiqués or email messages from the company concerning important news or plans. Investors have indicated they do not have the time nor do they want to spend the time visiting each and every corporate website they may be interested in investing with. There currently is no one centralized source of information to access or contact public firms. Companies interested in better communication with Individual Investors should investigate alternative and direct communication methods.
Although the corporate web cast appears to be a viable and effective means of presenting information to all investors, Individual Investors are not exactly thrilled with these events. Data presented by NIRI is showing an average web cast having only 142 listeners, the least of which are Individual Investors. And the results of our survey question in regard to web casts may provide a clue as to why: 'Too long, Boring, Just Corporate Hype, Not For me' - combined for 73.5% of the results, while 'Helpful and Informative' came in at 26.5%. Corporate web casts, while appearing cutting edge, may not be the most effective and efficient solution to communicate with the investment public. While web casts appear to be helpful on a limited basis to a small number of portfolio managers and analysts, they are not in any way helping to shape or solve the current crisis of confidence in the investment public.
Is communication with Individual Investor's important? Yes. 94% of those IR departments surveyed believe that individual investor sentiment and/or expectations are important to their company. 74% are aware of individual investor sentiment or expectations affecting their stock price. And 86% believe that individual investor's have a greater impact (today) on stocks than they did 5 years ago. With this in mind more than 87% of IR departments said that they anticipate enhancing their own web site to communicate better with investors.
And while this appears to be positive change, have IR departments misinterpreted what investors really want and what they are looking for? Or has there been too much focus on satisfying disclosure rules and not enough on satisfying investor needs?
Investors have indicated they are fed up with biased Wall Street analysts and sell side data. Investors want unbiased data straight from the source - that being the company itself. Our survey data shows that there is much less confidence in analyst data, and more confidence in independent and direct corporate information. This is mirrored in an online poll conducted by the Wall Street Journal that showed a majority of readers giving very little weight to analyst's recommendations and information. The majority of investors surveyed by WhisperNumber indicated they would like to see a standard method of accounting utilized for earnings reports, and 89% considered GAAP earnings information the most useful.
Disclosure vs. Relationship Building
Enhancing a corporate web site means disclosing more information. Have IR departments been forced by the SEC's hand to dehumanize the communication process? The word 'disclosure' is not an investor friendly term and should not be confused with relationship building. Investors can perceive disclosure as a sterile legalistic term that implies being forced or coerced to provide data on a web site or by some other means. Oddly enough, by disclosing data on the web site without marketing or communicating to the individual investor, the company may actually be doing more to exacerbate the problem of individual investors feeling left out or ignored in the communication process.
Conclusion
One could conclude from these results and the feedback gained that Investor Relations departments should be utilizing methods to communicate on a pro-active basis with the individual investor. The re-building of trust and confidence can be gained through a true understanding of the needs and wants of the investor. This is done through relationship building rather than just 'disclosure' of sterile data. Current direction and means may have been well intentioned (ie: web casts, website enhancement), but this direction does not necessarily appear be based upon the sentiment and true needs of the investor.
Survey Questions and Results
General Corporate Communication With Individual Investors
The following questions were asked of 2650 Individual Investors currently registered with WhisperNumber.com:
In general, how well do the companies that you follow or invest in communicate with you?
| No communication | | 24.63% |
| Some communication | | 49.75% |
| Satisfactory communication | | 20.20% |
| Good communication | | 3.94% |
| Very Good communication | | 1.48% |
Do you believe the companies you follow care about feedback from the individual investor?
Do you believe the companies you follow care more about the institutional investor than the individual investor?
| Yes | | 88.67% |
| No | | 3.45% |
| Equal | | 7.88% |
IR Department Communication with Individual Investors
The following questions were asked of 2650 Individual Investors currently registered with WhisperNumber.com:
How many times have you contacted an IR department?
| 1 to 5 | | 39.00% |
| 6 to 10 | | 3.00% |
| 11 to 20 | | 4.00% |
| 21+ | | 6.00% |
| Never Contacted | | 48.00% |
How would you rate your experience with IR Departments in general?
| Waste of Time (very poor) | | 37.68% |
| Poor | | 17.39% |
| Good | | 40.58% |
| Very Good | | 2.90% |
| Bought More Shares (excellent) | | 1.45% |
Do you feel IR Departments communicate sufficiently with individual investors?
Do you feel that IR Departments care more about institutional investors than individual investors?
Do you consider IR Departments to be Individual Investor friendly?
Do you consider an IR department a credible source of information in providing investors with information on subjects such as earnings, financial results, management strategy and direction?
In your opinion, has any IR department taken steps to help restore your confidence in their company (or in the market in general)?
Individual Investors Preferred Data
The following questions were asked of 2650 Individual Investors currently registered with WhisperNumber.com:
Please select what you would consider to be the Most Useful Earnings Estimate:
| First Call Estimate (provided by analysts) | | 21.29% |
| WhisperNumber.com Estimate (provided by individual investors of WhisperNumber.com) | | 33.17% |
| Company Estimate (provided by a company for its own earnings) | | 29.21% |
| None of the Above | | 16.34% |
Please select what you would consider to be the Least Useful Earnings Estimate:
| First Call Estimate (provided by analysts) | | 34.69% |
| WhisperNumber.com Estimate (provided by individual investors of WhisperNumber.com) | | 12.24% |
| Company Estimate (provided by a company for its own earnings) | | 29.08% |
| None of the Above | | 23.98% |
What would you consider to be the Most Useful Actual Earnings figure?
| Pro Forma | | 10.55% |
| GAAP | | 89.45% |
Which earnings reporting method would you prefer a company to use?
| Pro Forma | | 3.94% |
| GAAP | | 57.14% |
| Both | | 33.00% |
| Neither | | 5.91% |
Would you like to see a standard earnings reporting method used by all companies?
Individual Investors Preferred Communication methods
The following questions were asked of 2650 Individual Investors currently registered with WhisperNumber.com:
How would you like for IR departments to communicate more directly with you?
| Web cast | | 17.58% |
| Brief communication messages | | 51.65% |
| Would prefer no contact | | 30.77% |
Of the following, where would you most prefer to receive and/or access information from companies?
| Company IR website | | 15.96% |
| Other websites (like WhisperNumber.com, CBS Marketwatch, etc.) | | 28.72% |
| Email | | 40.43% |
| Press Release | | 14.89% |
Do you visit corporate IR websites?
If yes, how would you rate your IR website experience in general?
| Great resource | | 16.51% |
| Good Resource | | 34.84% |
| Poor resource | | 48.65% |
How many times have you listened to a corporate web cast?
| 0 | | 28.71% |
| 1 to 2 | | 19.80% |
| 3 to 5 | | 23.76% |
| 6 to 10 | | 7.94% |
| 11 to 20 | | 7.90% |
| 21 to 50 | | 5.91% |
| 50+ | | 5.97% |
If you listened to a web cast at least once, how would you rate your web cast experience in general?
| Helpful and Informative | | 26.51% |
| Too Long | | 15.66% |
| Boring | | 16.87% |
| Just Corporate Hype | | 30.12% |
| Not For Me | | 10.84% |
Investor Relations Department Perspective
The following questions were asked of 1100 randomly selected public company IR departments:
Do you believe that individual investor sentiment and/or expectations are important to your company?
Are you aware of individual investor sentiment or expectations affecting your stock price?
On a scale of 1 to 5, with 5 being extremely valuable and 1 being not at all valuable, how valuable is having information pertaining to the expectations or sentiments of the individual investor to your company and its industry?
| 1 no value | | 0% |
| 2 | | 7% |
| 3 | | 35% |
| 4 | | 30% |
| 5 high value | | 28% |
On a scale of 1 to 5, with 5 being extremely well and 1 being extremely poor, please rate how you feel your company communicates with individual investors:
| 1 poor | | 2% |
| 2 | | 19% |
| 3 | | 24% |
| 4 | | 44% |
| 5 very well | | 11% |
How do you plan to better communicate with the individual investor?
| Website Enhancements | | 87% |
| Press Releases | | 59% |
| Conference Calls | | 59% |
| Utilize Investor Monitoring Services | | 5% |
| Other | | 11% |
In today's market, does the individual investor have a greater impact on stocks than they did 5 years ago?
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