Q We are considering listing in the US and are always trying to attract more US investors, but I know some companies have found Sarbanes-Oxley requirements very onerous and unrewarding. Any insight?
A Most small US issuers, industry organizations and high-profile groups have publicly commented on the cost and time commitment of complying with the Sarbanes-Oxley Act, particularly with Section 404, which sets standards for internal controls over financial reporting.
In testimony at an SEC roundtable in April, a representative of the Business Roundtable reaffirmed the organization’s support for the principles of Sox law but stated: ‘The benefits of Section 404 have not always outweighed the burdens.’ The US Chamber of Commerce and the Financial Services Roundtable have taken similar positions.
However, the consensus among most investors is that the regulation is worth the added cost, even though they often indirectly pay the bill for compliance. They frequently ask about the financial impact of compliance and see the long-term benefit to the overall market psyche.
The Council of Institutional Investors said recently that effective internal controls are ‘critically important in reassuring investors about the reliability of financial statements, and in helping companies to deter fraud.’ When viewed as insurance against corporate malfeasance, Sox compliance is a reasonable cost of doing business in the US.
Q What is the best way to build international interest in your stock without doing a roadshow? Our budget doesn’t allow for an elaborate trip overseas but I would like to target European investors. Obviously the first step is finding the contacts – but how do you then attract their attention?
A Some years ago, AT&T ran an ad campaign with the theme: ‘Reach out and touch someone’. The telephone continues to be an effective tool for reaching people overseas. Simply call and introduce them to your company. E-mail is another avenue when time zones come into play, though it lacks the personal touch.
Offer to send background materials and to put investors on your list for news and invitations to future conference calls. Then follow up at appropriate times, particularly after a major announcement, to solicit their feedback. This type of personal attention can go a long way in differentiating your company from the myriad of firms out there with a similar investment profile to yours.
I would also recommend maintaining a simple log of investor reactions and comments, including what time of day they like to be contacted and why. This can be helpful in fine-tuning your targeting and outreach efforts.
Hulus Alpay is senior vice president of New York-based IR and PR firm Makovsky & Company.
