In marginal African markets, broker coverage is poor, stock exchange outreach initiatives are poor so listed companies end up being responsible for getting their own message out. This is an opportunity. The extent of disclosure can be an issue especially where the corporate website is used as a communications tool. Forecasts are meaningful information and preliminary work we did a few years ago on IPO forecasts showed that more than 70% of the time the actual results differed from that in the prospectus by more than 10% of the forecast – this is where there is usually a few months to the year end.
Its not illegal to put forecast information on corporate websites in Africa, and if this is the case the company should take to care to ensure this information is posted responsibly with apppropriate “safe harbour” information.The information should also be posted without prominence. Directors tend to shy away from this disclosure as there is a constant responsibility to ensure that the information is not misleading.
An alternative solution is paid broker research. The concept is new in Africa and there are best guidelines with which to comply (disclosure of how much has been paid for the report etc.) . We like the idea as a means to avoid the possible pitfalls of posting forecasts directly on the IR website.