In an issue in which we celebrate the accomplishments of Europe’s best analysts, it,s worth noting the changing relationship between the researchers, two main constituencies, investors and public companies.
By David Schutt
February 2001
Institutional Investor Magazine
Rapidly expanding across borders, corporations are finding that it’s hard to go anywhere without the support of their shareholders, who have become increasingly assertive. Analysts find themselves caught in the middle.
This month we present cautionary tales about two companies, one British and one Dutch, that have learned painful lessons on the new dynamics of shareholder relations.
Late last year Orange, a London-based subsidiary of France Télécom, went out of its way to invite virtually every interested analyst and investor to a briefing about its upcoming initial stock offering. But what first appeared to be an admirable effort to reach out quickly became a major investor relations blunder. Orange asked the researchers to sign a waiver allowing its own investment bankers “to amend or correct anything” the analysts might later write or say about the company. Big mistake. As Staff Writer Justin Schack relates in his story about the 2001 All-Europe Research Team and the changing rules in Europe’s equity markets, many analysts and investors were livid, deeming the request a none-too-subtle attempt to censor them. As Orange management discovered, any rule that disrupts the flow of unbiased information from a company to analysts and then to investors will not be warmly received.
Paris-based Staff Writer David Lanchner reports that senior executives at the Netherlands, Vedior were even less fortunate. After acquiring a thriving U.K. temporary services company, Select Appointments Holdings, Vedior needed to raise equity capital. But restive investors, some of whom had been burned by Vedior’s failure to deliver on previous promises, refused to participate unless chairman Gert Smit stepped down. So he, and much of his management team, quit. The stock jumped on the news, and it now looks like Vedior will be able to raise its money.
As Orange and Vedior managements learned, it’s best to pay attention when shareholders are unhappy.
