Here’s the scenario: an investor is working in front of his PC wondering whether to maintain his position in Plants-for-Food.com (a fictional gardening business) that just climbed eight points, or get out before his green thumb turns black. While he’s thinking, he decides to research the sector further online and comes across a new web ‘channel’ – Disclosure TV. He checks the program schedule and discovers that later that day there is a segment about seeds&stuff.net (yes, also fictional), a competitor of Plants-for-Food. Seeds & Stuff is about to disclose its quarterly earnings via a live webcast.
Our investor pulls on his virtual overalls and sits in on the discussion, learning more about the sector than he ever expected to know. Based on what he’s heard, the sector doesn’t seem to have the growth potential he thought it did. So he decides to reap his harvest and sell.
Disclosure TV, as described above, doesn’t exist yet. But it’s only a matter of time before Motley Fool, Raging Bull, or one of the more traditional media sources such as CNNfn or Bloomberg creates a web site that provides live video presentations from companies during earnings periods, roadshows, and other material corporate announcements. (Bloomberg provides many of these elements to professional investors via a proprietary network.) Within this web ‘network,’ investors could choose between several channels, perhaps selecting a program featuring technology companies or switching to the manufacturing channel where in addition to viewing the corporate officers in action, they can follow along with PowerPoint demonstrations, historical and projected graphs, and product demos.
As US Securities and Exchange Commission chairman Arthur Levitt pushes companies to disclose more information to the public, and as investors follow their companies more closely than ever before, we’re seeing a whole new range of corporate disclosure. That’s where the web comes in. With more than 64 mn US adults online and growing steadily (1999 CyberStats Report), the internet offers companies a timely, cost-effective vehicle to reach investors hungry for financial information.
Streaming video
A number of companies have already begun to use technology to offer their investors greater access by providing real-time video of earnings announcements. Real Player and Windows Media Player are available on the companies’ home pages for free downloading.
Investors are able to see, as well as hear, the chairman, president and CFO discuss the past quarter’s earnings and watch as they answer questions from analysts and investors. The webcasts are announced via traditional sources such as Business Wire, as well in chat rooms like Yahoo Finance and Silicon Investor, where there are large numbers of investors following stock. Investors are also able to submit questions via the web that company officials answer between questions from analysts.
Frequently, viewers watch these event and report back to the chat rooms details of the announcement, with comments like: ‘The CFO looked good’ and ‘He’s a good presenter.’ Investors listen to the details, but it’s evident that the visual impact of being able to see the people that run the company is also important. This is not to say that just because investors are able to see the CFO they’re persuaded to invest further. It is, however, one more tool to bring companies closer to investors. A video broadcast of what has been traditionally a conference call is not revolutionary, but evolutionary. It takes what is technologically available and uses it to open an otherwise exclusive forum to a much larger audience.
More disclosure
Technology innovations have opened a whole new category of disclosure tools and practices. Bestcalls.com provides investors with an online directory of conference calls that are open to the public. With more than 14,000 registered users, Bestcalls.com hopes to lead the way to greater access for individual investors. And recently a group of publicly traded companies announced their earnings during an online audio marathon session called VcallApalozza (named after the popular concert series ‘Lollapalooza’). Vcall was recently renamed Investor Broadcast Network. Net Roadshow, acquired by Broadcast.com, hosts webcasts of financial presentations to investment bankers on a password-protected basis, and Nasdaq-Amex.com provides audio webcasts of quarterly conference calls for many of its largest companies.
Another step toward a ‘level playing field’ is Thomson Investor Network’s online product, I-Watch, which allows individual investors to monitor institutional trading. This enhanced level of transparency has alarmed some on the buy-side, but seems to be a sign of things to come.
Investors online
Recent studies point to the growing number of individual investors participating in the securities market via the internet. A Yankelovich study commissioned by the Securities Industry Association found that almost half of investors (43 percent) go online to obtain investment information, a significant increase on two years earlier (35 percent). The proportion of online investors who used a computer to trade in 1998 (10 percent) grew from 1997 (8 percent) and 1996 (7 percent) levels.
Trading on the internet is likely to increase in the future as three out of ten investors not currently trading on the internet say they are likely to do so in the next twelve months.
Over the past two years companies have begun to feel the effect of individual investors’ collective clout. Chat rooms on sites such as Silicon Investor and Motley Fool are all filled with sophisticated, and novice, investors who are demanding equitable to access material information.
Several companies have already begun webcasting their annual shareholders meetings directly from their home page. Viewers see a PowerPoint presentation of recent benchmarks and are able to submit questions. Some companies also provide for proxy voting over the web, via hyper links from their home page to proxy solicitors.
For those contemplating webcasting an annual meeting, make sure that everyone entering the presentation room knows that they may be on camera. They need to understand that their image may be broadcast on the web, and that by entering the room they are agreeing to this. Also, many of the rules that apply to appearing on TV apply to the web – don’t wear dark suits if the backdrop is dark; don’t wear stripes or red; and speak clearly. And don’t be afraid to make it interesting. ‘We’re in an age where people expect theater. Maybe not lights, camera, action…,’ says Lisa-Anne Samuels, channel producer at US-based TV on the Web, ‘but more than just a talking suit.’
Reid Walker is director of media and public relations of PSINet Inc based in Herndon, Virginia.
