Conference Buzz: Bored of Directors

Rising shareholder activism clearly topped the hot topic list when the National Investor Relations Institute’s senior-most members got together recently at their annual roundtable bash at the posh Montage resort in Laguna Beach.
 
Two take aways…
 

First, consider having a large institutional shareholder sit on the board. Other professional shareholders will like that and sense that their interests are being well represented. It will keep activists away. 
 
Second, in a swing of the pendulum and score for baby boomers and smart young dot-com retirees, seek board board members. No, that was not a typo you just read. The wisdom being imparted relates to seeking directors who have time to be directors, rather than time-strapped CEOs and others who are actively engaged in their careers.

 
As for Laguna Beach, it was too chilly to get a suntan.

 

Roger Pondel, President, rpondel@pondel.com
 
 

OTCBB – Stock Symbol Requests Not an Option

Issuers with stock trading on the OTC Bulletin Board (OTCBB) need to be aware that a corporate transaction, which results in the issuance of a new cusip number, triggers an automatic change in the ticker symbol. According to the folks at the OTCBB, the issuer is “not allowed” to reserve or request a specific ticker symbol.  No ifs, ands or buts about it.  While no one I spoke with at the OTCBB could tell me why requests and/or reservations are not allowed, the only possible conclusion is that allowing reservations on the OTCBB would reduce the pool of ticker symbols available to Nasdaq traded issuers.

 

PondelWilkinson, investor@pondel.com
 
 

Do Retail Investors Matter?

A recent survey by Thomson Financial noted that only 18% of 102 investor relations officers (IROs) surveyed actively court individual investors and that less than 25% had plans to begin doing so in the near future. In a report on the survey, IR Magazine, noted that while some IROs believe individual investors can add to the stability and diversity of their company’s investor base, many do not think the effort is worth it, citing the tribulations of dealing with mom-and-pop investors who might panic with downward price movements, bombard companies with questions and increase the risk of securities class actions.
 
However, for a public company that is largely held by institutions, increasing the retail base might not be a bad idea. Increasingly, large institutions and mutual funds are becoming activist in nature and many are opposing proxy initiatives. The National Association of Investors Corporation (NAIC) notes the following characteristics of retail investors:
 

  • On average, NAIC’s 119,000 members hold a stock for at least four years (that is much, much longer than the average institution holds a stock).
     

  • The combined portfolio value of NAIC members is $70 billion.
     

  • Cumulatively, NAIC members invest approximately $75 million of new capital per month.

 
So, if you’re an IRO looking for a way to bring new interest into the stock, it might be worth investigating some of the retail-oriented investor communications programs that are available to help you reach this powerful group of long-term investors.

 

Laurie Berman, Senior Vice President, lberman@pondel.com
 
 

Goldman Outshines Forecasts

Goldman Sachs Group Inc. on Tuesday reported a 2.2 percent increase in fiscal fourth-quarter net income, bolstered by investment gains that apparently offset prickly market conditions. The Wall Street behemoth posted net income of $7.01 a share, clearly out swimming the $6.61 a share estimate that Thomson averaged from analysts’ forecasts.
 
But don’t think for a moment that all that glitters is a sign for better times ahead for the financial services sector. According to analysts, about 75 cents of the net gain in earnings per share came from sales of equity investments and electricity plants. That means Goldman’s clients aren’t necessarily trading stocks because of new-found faith in the economy. On the contrary, it points to the lack of faith Goldman has in the economy as it tries to fatten up in anticipation of what could be a rather fruitless period ahead.

 

Evan Pondel, Senior Associate, epondel@pondel.com
 
 

Wall Street’s Dress Code

From Brooks Brother’s and Armani pin stripes to those who found True Religion, it’s hard to tell  whether Wall Street’s dress code is changing again. Along the trail of PW’s last 2007 roadshow—this one exclusively with institutional investors—business casual still rules. 
 
While observing 23 portfolio managers and buy-side analysts from firms as large as $800 billion under management in Boston (guess which one) and as small as $50 million:  five, equal to 21.7%, were dressed in denim, including the only female; 11, or 47.8%, donned slacks and open collar shirts; and seven, or 30.5 %, were of the old school vintage, wearing ties.  Of the presenting executives, 100% wore suits and ties.
 
Other roadshow observations … 
 
Less than two hours from bustling Manhattan, money managers abound.  In a day, we visited firms in Greenville, DE, just outside of Wilmington, plus West Conshohocken, Malvern, Berwyn and Radnor, PA, all within a stone’s throw of Philadelphia.
 
And what to eat? Picks from the trip: Oceanairre in Philadelphia; Luca in the North End of Boston; Town in the always hip Chambers Hotel on West 56th Street in Manhattan. Try the lamb.

 

Roger Pondel, President, rpondel@pondel.com
 
 

To Audit IC or Not to Audit IC

That is the question.
 
Small public companies with less than $75 million of public equity may get another one-year reprieve from having to comply with one of the provisions of the 2002 Sarbanes-Oxley Act.  The Wall Street Journal (December 13, 2007, page C4) reports that SEC Chairman Christopher Cox is considering submitting a formal proposal in early 2008 that would exempt such companies from the rule requiring that they have their internal accounting controls audited and reported on by an outside auditing firm.  Meanwhile, the SEC will continue conducting a study on the estimated costs of complying with the external-auditor review provision to determine whether to phase in that requirement for small public companies in 2009, or propose a further delay or modification to the Act. 
 
The chairwoman of the House Small Business Committee has gone on record in favor of the delay, pending results of the study.  If the delay is approved, most small public companies will likely breath a sigh of relief, while shareholder advocacy groups will likely express their angst at what they perceive to be yet another move to undermine the important shareholder protections called for by Sarbanes-Oxley. 
 
Of course, voluntary compliance with the internal control review provisions remains an option for any small business and can help the board and management convey to investors their strong governance values.  A thorough assessment of the costs and benefits (both real and intangible) should precede any such decision.  PondelWilkinson is uniquely qualified, together with legal counsel, to assist your board and management in weighing the available options. 

 

PondelWilkinson, investor@pondel.com
 
 

It’s a Go for Murdoch

It’s official.  Shareholders of Dow Jones & Co. approved the sale of the publishing company to News Corp., a deal that was bemoaned by media but lauded by shareholders. The question is whether News Corp. is able to run the Journal without compromising the quality of its content.  Of course, News Corp. Chairman and CEO Rupert Murdoch has pledged to keep the Journal’s reputation fully intact as a go-to source for business news.  But how could he say otherwise?  Only time will tell whether another monolith of a media conglomerate will force the ink to fade and yellow.

 

Evan Pondel, Senior Associate, epondel@pondel.com
 
 

XBRL – SEC Asks for Public Comment

The SEC’s office of Interactive Disclosure began asking for public comment on the use of eXtensible Business Reporting Language, commonly known as XBRL, in public company financial statements.  Several large, well-known companies have voluntarily adopted XBRL in their EDGAR filings with the SEC and the agency has committed more than $50 million to make its public company disclosure system compatible with XBRL, according to the National Institute of Investor RelationsXBRL International, a not-for-profit consortium of approximately 550 companies and agencies worldwide working together to build the XBRL language and promote and support its adoption, reports that XBRL is an open standard, free of license fees that promotes the interactive sharing of financial data.
 
It is believed that XBRL will provide investors and analysts with more useful financial disclosures by allowing companies to present their financial information in a format that allows investors and analysts to more easily locate and analyze this information.  It is also anticipated that XBRL will provide greater efficiency, improved accuracy and reliability and cost savings to anyone involved in supplying or using financial data.
 
While there will likely be some growing pains when public companies are required to adopt XBRL in their financial statements, over the longer term its use should make it easier for the investing public to analyze a company’s financial statements and easier for public companies to get their story out into the investing marketplace.
 
The public comment period ends April 4, 2008.

 

Laurie Berman, Senior Vice President, lberman@pondel.com