Japan Markets ViewIR Improvements to Sprout from Corporate-Investor Dialogue?

 

[Keiichi Nakayama, QUICK Market Eyes] On March 3, the Tokyo Stock Exchange (TSE) held a dialogue event between corporate investor relations (IR) personnel and institutional investors. The event was designed to help corporate IR practitioners deepen their understanding of institutional investors’ perspectives, enhance future IR activities, and promote smooth dialogue with investors. TSE’s steady grassroots activities may bring companies and investors closer together and nurture the seeds of IR improvement. A chain of corporate efforts could also improve the attractiveness of the Japanese market in the future.

 

*Corporate IR and Institutional Investor Dialogue Event at TSE Arrows

 

Chairs for participants were lined up at the open platform of TSE Arrows on the evening of March 3. For this dialogue event, the TSE initially set aside space for 30 participants. However, within 30 minutes of the start of the application process, all the spaces were filled. Since many applicants were on the waiting list, the second session was scheduled promptly. Nevertheless, registration reached its capacity within 1 minute and 40 seconds of the start of accepting applications. The TSE increased the number of seats available for each session. The event brought together IR personnel from 47 SMEs from all over Japan. The participants listened intently to the explanations of three fund managers and analysts from institutional investors.

The TSE collected questions from companies in advance of the event, and the three institutional investors answered each of the questions. Questions from companies covered a wide range of topics. They included “How much daily trading value is necessary for a company to become a target of investment by institutional investors,” “What elements are necessary in corporate IR to catch investors’ attention,” “What kind of communication is necessary with institutional investors,” and “Is it necessary to disclose cost of capital,” which was requested by the TSE in 2023 for companies listed on the Prime and Standard Markets.

 

 

“All Talk and No Action Is Fine” – Fair Disclosure Demanded by Institutional Investors

“All talk and no action is fine,” one institutional investor told participants about corporate disclosure. This was in response to a question about corporate medium-term management plans and financial results briefing materials. This investor said it is “first and foremost important” to show a company’s vision of its goals for itself as a company. Since failure to meet targets is not a reason to sell shares if the steps taken are logical, the investor said enthusiastically, “Don’t be afraid to fail to achieve your goals.” The companies asked many more questions during the Q&A session following the presentation.

The common message of the three institutional investors, who participated in the event as speakers, was easy-to-understand “fair disclosure.” They emphasized the need to explain in an easy-to-understand manner how the company achieves its goals, its vision, its uniqueness, and the progress of its performance, regardless of the investor demographics. All of the institutional investors cited SHIFT (3697) as an excellent example of IR.

SHIFT was one of the companies listed as an excellent example of dialogue with shareholders in the subsequent hearing on “Management Conscious of Cost of Capital and Stock Price,” which the TSE requested in March 2023 for companies listed on the Prime and Standard Markets. One institutional investor noted, “The story of the dialogue as IR to date can be seen in detail on the company’s website.” It was also explained that the company’s vision can be confirmed through the quality of its financial results presentation materials and the video message from the president.

 

*Source: Tokyo Stock Exchange, Key Points and Examples Considering The Investor’s Point of View in Regard to Management Conscious of Cost of Capital and Stock Price

 

The IR representative of a Standard Market-listed company who participated in the event said, “The event enabled me to confirm the viewpoints of multiple institutional investors.” Stating that IR is also a sales effort to spread awareness in the market, the participants added, “I would like to take away what I learned at this event and make a selection and respond accordingly.” Ryota Kimura, General Manager of TSE’s Listed Company Support Group, expressed his enthusiasm for this company-investor dialogue event. He said, “We have received many requests to hold such events in regions other than Tokyo, and we must continue to hold similar events.”

When asked about the status of IR in Japan, an institutional investor outside of Japan lamented, “In Japan, there are still many companies that fail to make fair disclosure.” The investor also said that there is “no cure-all” for IR, pointing out that companies need to face the market steadily and sincerely. Although some have noted a shortage of securities analysts, who can also speak on behalf of companies, companies are responsible for communicating with investors in various ways. In Japan, there are still many companies that have not caught the attention of investors. It would be interesting to see over the long term if improving the communication skills of companies will increase dialogue and enable better market formation.
(Reported on March 5)

 

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