Do we have a so-called twoclass system on the JSE? This would not be unique to the JSE, it happens on every exchange on earth. The official answer is no, we don’t have such a system, but activ it y surrounding t he Aspen* share on 27 June suggests that we certainly do in part.
In short, in such a system companies differentiate between one group of better-informed investors and another of uninformed investors. The informed class consists of analysts, fund and asset managers. They can call up the company’s top management and ask questions and will be invited on site visits, analyst presentations and conference calls. The second and lower class is the private, do-it-yourself investor who gets none of the above access.
In the case of Aspen (and I am just using the company as the latest example), the stock was off over 6% on the same day it hosted a private teleconference for analysts in which management said the second half would be softer for its local operations. Now one can argue if the information was sensitive or not, but certainly the price action suggests it was. The bigger question is why a private teleconference was held.
In Aspen’s defence, it made the call available via its website. Nevertheless, a Sens informing the market of this fact would have been useful.
Some companies will inform the market via Sens about site visits or an analyst presentation, or even make the presentation available for downloading. But without doubt there are questions asked and answered and unless the event is deadly boring (death by PowerPoint) the answers will be illuminating. This potentially amounts to insider information in that it was not broadly distributed.
The point is that there is information being shared and it is being shared with only a select few people. Sure, the theory is that this information will filter down, but that is exactly what Sens tries to prevent. The whole point of Sens is so that everybody gets the exact same information at the exact same time.
A solution doesn’t require banning site visits or conference calls and analyst presentations.
* The writer owns shares in Aspen. Africa and that is totally the fault of private investors. The concept has been tried before and failed, but if private investors are serious about not having a two-class system on the JSE, they need to do their part. The JSE could step in and help get such an association off the ground (office space and the like), albeit at an arm’s length.
The bottom line is that for the DIY investor class to f lourish, the playing f ield needs to be as level as possible. Otherwise, it is a distortion that heavily prejudices the DIY investor.