African Investor Relations

www.africancapitalmarketsnews.com run by Tom Minney is a good source of information when it comes to some of the inside news in African capitalmarkets, I recommend you sign up for his blogs. His latest one on the Rwandan Stock Exchange is shown below. The Rwandan Stock Exchange is in a unique position to ensure that their information dissemination practices are World class on day one. I look forward to it.

Tom’s blog:

“Preparations continue in Rwanda for the listing of BRALIRWA, originally said earlier this year to be coming “very soon”. It will be the first Initial Public Offer on the Rwanda Over-The-Counter stock market. Recently Government officials announced the advisers, according to a report in New Times (www.newtimes.co.rw) newspaper.
Brasseries et Limonaderies du Rwanda (www.bralirwa.com) is the only brewer and estimated to have 95% market share, as well as the Coca Cola franchise. It is owned 70% by international Heineken Group and 30% by the Rwandan Government. According to previous reports, the Government wants to sell 25% to the public and 5% to Heineken, but was examining applications to be the transaction adviser and sponsoring broker.
Government has said that advisors will be a consortium of MBEA Kampala, MBEA Security Services Kigali and Renaissance Capital of Nairobi as the lead transaction advisor. Lead sponsoring broker is Dyer & Blair Investment of Kenya and African Alliance, also Kenyan, is co-sponsoring broker.
Sanjeev Anand, the Managing Director of Commercial Bank of Rwanda (BCR) said last week that BCR will join Kenya Commercial Bank as receiving bank, although KCB is the lead receiving bank, according to the report: “Applications will be presented to BCR which will reconcile them with the funds.” He said they had won the role through bidding and on the basis of expertise: “We have the capability to do it, given our experience in preparing IPOs in other countries like Uganda and elsewhere, and we are proud to be involved in the first IPO in the country.”
So far trading on the Rwanda OTC has been mainly treasury and other bonds, with limited trading in the dual-listed shares of KCB. The Rwanda OTC is operated, developed and regulated by the Capital Markets Advisory Council (www.cmac.org.rw).”

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In presenting to listed companies and spreading the word about progressive online shareholder communications there are always two questions that arises from the audience: “most of our investors do not have access to the Internet so why should we bother with our website?” and “nothing is happening in the company at the moment so we will wait until it does to sort out our website”.

This is my standard response in summarised points to the first question:-

• Investors bought your shares on two assumptions: firstly, that there is a market for the shares they purchased and they can sell the shares at a reasonable price. This last point is the crux of the matter. Directors have an obligation to employ all reasonable efforts to ensure that the information to make educated investment decisions is made available. What better complementary medium than the Internet? Low cost etc.
• It can take just one investor to change the fortunes of your company, it may be Mark Mobius or a local institution or indeed your retail shareholders. The benefits of a diverse array of shareholders is well documented in US markets and the same applies in African markets.
• There has to be a holistic approach to a communications strategy. Employ all reasonable means to get the message out. Mix your brand message with your IR message, investors are as important as customers.
• News of the growth in Internet capacity in Africa is coming thick and fast prior to 2010. I have recently been a participant of the roll out of mobile internet in Kenya, it is changing things significantly and quickly. Prepare now for the future.

On the second question my response is as follows:-

• If a new website is launched just prior to a major corporate action, to whom will the website be advertised and targeted? The online media game is competitive and the mere introduction of an online presence is insufficient to get the message out in the short time span of a capital-raising. Listed companies need to have an identified audience and ensure that the very brief sight that an investor has of the website results in a registration or “opt-in” to receive information
• It takes over a year to establish a meaningful online investor relations presence. It’s a process and not an event. Effective SOE initiatives will help but it’s the ability to establish a secure two way communications channel between every investor and you that is key. This builds a community. One off Internet events does not.

Keeping the status quo is not enough in this day and age. Corporate strategy should embrace the Internet. The tools exist and the upside is significant. It takes just one investor to make a difference to your company – perhaps he’s the guy with the computer.

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I have been involved in two IPOs where our software solution has been used to great effect to identify the investors interested in our client company. African IPOs are beautiful in this respect – huge demand and interest and an amazingly strong following from the diaspora.

A few statistics of interest relating to effective online IR at IPO stage (extracted from our clients and are indicative of course):  Online IR at IPO stage

• attracts 3 times the number of visits to your website than an established company in the first year post-listing
• generates visits from investors in 30% more countries than an established company websites in the first year of listing
• have 30% less time-on-site because of the absence of historical information BUT
• typically attracts twice the number of unique visitors to your website than an established company in the first year AND will attract twice the number of page views on your investor relations website
• have 30% less pages per visit because typically the absence of historical information, this reverses over time

During the IPO the ability to immediately communicate with the market (allay their fears about shortages of prospectuses or delayed timetables, IPO results etc) occurs at the press of a button. The ability to receive feedback immediately can really help avoid disasters and enable you to change the structure of the transaction administration or communication to avoid those little things that blow out an IPO – just ask some of the big advisory players that have implemented IPOs in Africa – there’s always one or two things that go wrong.

I have lead managed 5 IPOs personally and the comfort that you get being in control of the IR function online in the advisory funtion is huge. The PR and marketing agencies are secondary players as opposed to perceived primary players (in the absence of an online solution where the advisor is more in control of the IR / media function.)

Both IPOs I did also obtained regulatory approval to have application forms delivered with softcopy prospectuses. The legal issues associated with distributing application forms without prospectus is a significant legal one given the massive market scams of the South Sea Bubble etc.

How did we give the regulators comfort in our product?:- provided a SOX compliant online shareholder communications platform: the full audit trail that shows the investor reaceived the prospectus with the application form.

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