Tim Treadgold: Briefcase - Technology poses AGM time trap

Some Perth investors with an eye on BHP Billiton will be hoping for an insight into the company when they toddle along to its annual meeting in Perth tomorrow (Friday November 25).

Smarter investors with an eye on being first with the news about BHP Billiton will stay at home.

If you think this is curious advice from Briefcase, you’re right – but so is the advice.

As was pointed out last week, the annual meeting season has become a bit of a farce. The target in those remarks was Wesfarmers. More than 700 of the faithful dutifully listened to reports from the chief executive and chairman at the annual meeting on November 8, but would have been shocked to discover that the same reports had been posted on the Australian Stock Exchange website 40 minutes before they were delivered.

In other words, shareholders who went to the trouble of attending the annual meeting were treated as second-class investors, which Briefcase reckons is not just rude, it’s outrageous – and a great example of bureaucracy gone mad.

The theory behind the farce is that everyone should get market sensitive news at the same time. The problem is that this is only true if you’re all logged on to the Internet, which is a little difficult at an annual meeting, and probably not allowed.

This ridiculous situation of the unfaithful stay-at-homes (or stay-in-the-office types) getting better treatment than those who attend a meeting begs two questions: (a) how widespread is the problem and, (b) is there a financial advantage for those not attending?

To help resolves the puzzle, Briefcase ran a small test of other big companies that have recently held their annual meetings, and can report that the issue is both widespread, and may indeed contain the seeds of financial advantage.

Take Telstra, a company with its own set of separate problems, but one that had a serious issue on the day of its annual meeting. According to stock exchange records, the company’s annual meeting started at 10.30am on Tuesday October 25. But the same records (as reported on tradingroom.com.au) show that the chairman and chief executive’s reports were posted at 9.46am – and marked with an exclamation mark which denotes “price sensitive”.

Briefcase reckons that the time difference between the reports being posted and actually being delivered is probably greater than the implied 44 minutes, because annual meetings rarely start at precisely the correct time, and it is normally 10 minutes (and more) before the speeches start.

In other words, investors in Telstra who couldn’t be bothered attending the annual meeting had an advantage of around an hour – which is wrong, with a capital W.

Of added interest, on the day of the annual meeting the share price of Telstra rose from opening sales of $4.16 to a close of $4.22. The six cents doesn’t sound much but it’s the trend which is important, plus the fact that when the six cents is applied to the 43.9 million shares exchanged on the day the dollar figure difference is $2.6 million, with the earlybirds who sat on the ASX website getting first peck at a rising market.

Qantas was another example uncovered by Briefcase. Its annual meeting started at 2pm on October 13, but the chairman’s address was posted on the ASX website at 1.49pm, and the chief executive’s report was posted at 2.01pm.

Foster’s is a third example. Annual meeting at 10.30am on October 24, chairman’s address posted at 10.21 and chief executive’s address at 10.24.

A final example is Coles Myer. Its meeting started at 10am on November 17 with the chairman’s address posted at 10.07am and chief executive at 10.08am – also probably before they actually spoke at the event.

Briefcase is not sure how best to handle this issue because the Internet is such a marvellous tool for the widespread dissemination of information. However, one possibility is to do what Telstra did on November 15, the day it released its future plans – ask for a share trading suspension while the information is both delivered and posted.

Perhaps in future all such set-piece presentations, such as those at annual meetings, will require a share trading halt while everyone (including those who physically attend such an event) have time to absorb what’s been said before acting.

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Meanwhile back at this week’s BHP Billiton gabfest in Perth it’s a fair bet that nothing useful, or new, will be said, simply because the rules are too tight, management is simply not allowed to make forward-looking comments without also issuing a blizzard of disclaimers – but also because of something far, far, simpler.

It has all been said before.

This year’s BHP Billiton is farce in the extreme, because it is a dual-listed company, a structure which means that the British end of BHP Billiton (the ‘PLC’ version as distinct from the Australian ‘Ltd’ version) held its annual meeting on October 20 at the Queen Elizabeth conference centre, Westminster, with the key speeches posted on the ASX website on that day.

It is difficult to imagine that much new can be said at the Perth meeting because the British investors would also be required to receive their own update.

In effect, the whole annual reporting process has become so controlled (dare it be said, contrived) that no-one really learns anything – except that the process is more important than the content.

While it is impossible for Briefcase to imagine much new being said, it is possible to speculate on what might not be said or, more to the point, who might not be mentioned.

In fact, to lighten the event it might even be worth running a book on the chance of anyone from BHP Billiton mentioning the name of Andrew Forrest and/or Fortescue Metals Group.

Despite Mr Forrest being a bit of a home-town hero for tweaking the tail of BHP Billiton and winning the first round in a long legal stoush over gaining access to its Pilbara’s iron ore railway, Briefcase reckons he’s a 100/1 shot for even the slightest mention, and even then it’ll be accompanied by a painful grimace from BHP Billiton management.

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“Our years, our debts, and our enemies are always more numerous than we imagine.” Charles Nodier