Money
Issue No. 23 - June/Nuly 2005
Sharemarkets’ sentimental journey
by Mr Geoff Thomas
Like you, when I opened up my copy of ‘in-business’ last issue, I immediately went to my article. To my horror, I read the opening lines “With the stock market at record highs …”. Readers would have noticed that from the time I wrote the article to the time of release in early-mid April, the stock market had a substantial decline in value.
Naturally I cursed the stock market itself, rather than my own stupidity for putting a definite statement at the start of the articles that may or may not be correct at time of publication. But it poses a bigger question of the usefulness of the stock market as a way of raising money when stable, long term companies such as BHP can change their perceived value by about 20% in a month on no more substance than “market sentiment”.
Companies perceive listing on the stock market as the ultimate goal. But the stock market imposes very tight rules on disclosure, and analysts impose short term viewpoints on profitability.
Disclosure rules in particular may affect smaller companies. While it may not worry BHP too much if it has to disclose the salaries of its top five executives, for a smaller company it may be a significant piece of information for its competitors or the next tier of staff. Listed companies need to also publish turnover by market and geographic segment, as well as profitability and other financial information.
Probably right now, you don’t publish all these statistics, put them on the web, and send them off to your competitors. And if you do compete with listed competitors, you probably are able to compare growth, market penetration, gross margin and overhead percentages with your listed rival, and don’t return the compliment.
In addition, there are compliance requirements – half and full year reports to the ASX, and regular disclosure of issues which may affect market price. Because of these regular disclosures, the stock market can be reactive – respo...
