Finweek English Edition - - INVESTMENT -

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.

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