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Coca-Cola's Investor Relations Revisited
By Matt Richey (TMF Verve)
ALEXANDRIA, VA (August 9, 1999) -- Two weeks have passed since I asked Coca-Cola (NYSE: KO) to open the calls and reform its investor relations. With broadcast.com now offering Internet conference calls for free, it's inconceivable to Fools why a consumer behemoth like Coke doesn't take advantage of available technology to level the playing field between Wall Street and Main Street investors.
On July 27, the day after the original article was published, I spoke with Coke's Director of Investor Relations, Larry Mark, who was courteous enough to send the following response to my article:
August 5, 1999
Mr. Matt Richey
The Motley Fool
123 N. Pitt St.
Alexandria, VA 22314
First, I would like to express our appreciation for your strong loyalty to our brands. We hope that you will continue being a strong supporter of diet Coke and of our fundamental business model.
The purpose of this letter is to provide clarification on the approach taken by The Coca-Cola Company's Investor Relations Department to keep the investment community fully informed. We will also take this opportunity to address several of the inaccuracies that were included in your article entitled "Open the Calls, Coke" on The Motley Fool website.
As you know, it was not until after the article was published on July 26th that we had our first conversation with you regarding The Coca-Cola Company's approach to interacting with the investment community. Therefore, I hope this letter will now serve to clarify our approach and provide some context as to how we provide information to all of our share owners.
The overall premise of our Investor Relations approach is to ensure that investors have complete information to be able to make an investment decision related to our Company. We take a multifaceted approach to reach out to all of the different investment constituent bases including individual share owners, institutional investors, brokerage houses, investment clubs, pension funds, endowments and trusts, and others. We seek to have an active, ongoing dialogue with investors and analysts so that we can address questions that each individual or institution has about our Company.
In fact, we often receive requests to give presentations on The Coca-Cola Company to investment clubs, consumer goods conferences, and other organizations. During these events, we focus on the business fundamentals of our Company and our historical results. The Company's annual report to share owners, SEC filings and press releases form the basis from which we develop the material that is presented.
As we respond to the many investor inquiries that we receive, we are always mindful of our responsibility under the law not to discuss material non-public information. We do not discuss material, non-public information with anyone, including analysts, institutional investors or individual share owners. All material information is distributed through press releases that are provided to all major media services at the same time and subsequently posted on our Internet site. After releasing this information, we then individually address any questions that are raised by our broad share-owner base. We do not hold conference calls with investors, as we prefer to take a more personal approach to answering each individual's questions. Should someone ask a question about information which has not been disclosed publicly, we will refuse to address that particular issue. In short, everyone has access to the same information at the same time.
We believe it is important to address several of the points made in your article. We disagree with your article's characterization of our activities as selective disclosure. Specifically, you referenced an "earnings conference call" on Thursday, July 22nd, and an "analyst meeting" on Friday, July 23rd. The facts are: There was no "earnings conference call" on Thursday, July 22nd. Our second quarter earnings were released via written press release on Thursday, July 15, 1999. We followed our standard practice of providing the written release to all major media services and subsequently posting it on our internet site. As previously mentioned, we do not hold conference calls, and this quarter was no exception. On July 15th and 16th, we personally answered all calls and e-mails that were received from analysts, institutional investors and individual share owners to discuss our second quarter earnings.
We did meet with a group of analysts, institutional investors, and media representatives in New York on Thursday, July 22, 1999. The purpose of that meeting was a general business discussion about the recent temporary product withdrawal in Belgium and France, reiterating what had already been widely covered in the media, and a brief review of our second quarter results, focusing on the impact of a difficult world economic situation as was reported in our July 15th press release. During this meeting, there was no new information discussed.
Of utmost concern to us is your implication that The Coca-Cola Company is unethical in its approach to communication with investors. We feel that our approach of addressing individual share owners and institutional investors on a personal level is the right one. As you pointed out, there are certain companies that use additional technologies to communicate to investors. We agree that there are alternative ways to reach different segments of our constituent base, and we are considering various technologies that will allow us to be even more effective in this effort. We also have taken numerous strides over the past year to improve our Internet site, and we hope to continue doing more in the future.
However, it is important to not confuse the use of technology with selective disclosure. We believe your readers will recognize that just because a company is not using the latest Internet technology, it is inappropriate to conclude that this company is being unethical or participating in selective disclosure.
Going forward, we anticipate maintaining a multifaceted approach to communicating with our share owners because we feel that this practice will allow us to provide accurate information to investors. The Internet is one of the many tools which we will consider as we choose our means of communication.
I hope this clarifies our policy and practice not to participate in selective disclosure in any way. We appreciate your brand loyalty and support of the Company. If you or any other share owner has further questions, please feel free to contact our Investor Relations Department at (404) 676-5766.
Director, Investor Relations
Upon receiving this letter, I sent the following response:
I appreciate the letter. Let me clarify that my article's inaccuracies regarding conference calls and certain dates were purely unintentional. I was under the impression that Coke holds earnings conference calls because on a number of occasions in watching CNBC, I've seen interviews of sell-side analysts who have spoken of "just getting off the phone with Coke" or similar comments that led me to the impression that these analysts had been participating in a conference call. I apologize for this error, but as for the rest of what I wrote, I continue to stand by my conclusion that the company's current practices put individual investors at a disadvantage to Wall Street and institutional investors. As a PUBLIC company, Coca-Cola has significant room for improvement in its policies for communicating with the entire PUBLIC.
Setting aside the issue of ethics, your "personal approach" to communication strikes me as inefficient and inferior to alternatives. Now that I know you don't hold conference calls, I suggest that you do so! -- so long as they are open to the public, via a publicly announced call-in number and/or via the Internet. That way, all parties hear the same information, the same tone of voice, and the many subtleties that come out in verbal communication.
Second, any meetings with analysts and institutional investors should be broadcast live via the Internet. If it's important enough for Wall Street to take its time to hear, then it's something that all investors should have access to. Even if technically-defined "non-public material information" is not being provided in these meetings, why would Wall Street analysts who get paid hundreds of dollars per hour waste their time attending these meetings if all of the same information was available in press releases and public filings?
Coca-Cola is the world's #1 brand. Yours is a company with broad public ownership and an investor-friendly dividend reinvestment plan. I expect a company of Coca-Cola's stature to be a leader in proactive investor communications, including rapid adoption of available technology and of best-practices in investor relations. I encourage you to look at the model of investor communications at Intel, Microsoft, and so many other companies -- and they're not all in high-tech -- that are putting individual investors on an equal playing field with the Wall Street and institutional investor communities.
So, what do you think? Is Coca-Cola's "personal approach" the best way to communicate with investors? Come share your opinions on the Rule Maker Strategy board, or if you feel the urge, contact the company directly using Coke's e-queries page.
Coming up this week, we have two more Rule Makers to report quarterly earnings. Tomorrow, Cisco reports its fiscal fourth quarter earnings at 4:45 p.m. including... ahem... a live webcast of the conference call. The consensus estimate is for earnings per share of $0.20.
Then, on Thursday morning, Gap will be reporting its second quarter earnings, which will be followed by an -- oh, get this -- analyst-only conference call. If you're a Gap shareowner or prospective shareowner, I encourage you to call the company at 1-800-333-7899, ask for investor relations, and ask why they aren't broadcasting their earnings over the Internet like so many companies are doing these days. Then, come to our Rule Maker Strategy board and let us know what good excuse Gap gave you.
If it sounds like I'm getting a little irritated, well -- I am. It's ridiculous for any public company -- and especially consumer brand name companies like Coca-Cola and the Gap -- to think that individual investors can't understand their businesses and can't understand the dialogue of an earnings conference call. Please! These are great companies, and ones we want to partner with as shareowners, but it's difficult to act as a non-managing partner when we're not given access to the same information as another "class" of investors. Fool on.
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Day Month Year History R-MAKER -0.32% -3.29% 8.18% 36.23% S&P: -0.19% -2.33% 6.16% 31.35% NASDAQ: -1.14% -4.53% 14.88% 52.40% Rule Maker Stocks Rec'd # Security In At Now Change 6/23/98 68 Cisco Syst 29.21 59.81 104.80% 2/3/98 54 Microsoft 45.13 83.81 85.69% 5/1/98 82 Gap Inc. 23.05 37.75 63.75% 2/13/98 52 Intel 46.93 73.44 56.49% 2/3/98 66 Pfizer 27.43 33.56 22.34% 5/26/98 18 AmExpress 104.07 125.00 20.12% 6/3/99 11 *Delphi Au 17.19 17.81 3.62% 8/21/98 44 Schering-P 47.99 48.06 0.14% 2/6/98 56 T. Rowe Pr 33.67 33.50 -0.51% 2/27/98 27 Coca-Cola 69.11 59.75 -13.54% 2/17/99 16 Yahoo Inc. 126.31 121.19 -4.06% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Exxon 64.34 80.38 24.93% 3/12/98 15 Chevron 83.34 96.63 15.94% 3/12/98 20 Eastman Ko 63.15 72.63 15.01% 3/12/98 17 *General M 61.28 62.50 1.99% Rule Maker Stocks Rec'd # Security In At Value Change 2/3/98 54 Microsoft 2437.28 4525.88 $2088.60 6/23/98 68 Cisco Syst 1985.95 4067.25 $2081.30 2/13/98 52 Intel 2440.28 3818.75 $1378.47 5/1/98 82 Gap Inc. 1890.33 3095.50 $1205.17 2/3/98 66 Pfizer 1810.58 2215.13 $404.55 5/26/98 18 AmExpress 1873.20 2250.00 $376.80 6/3/99 11 *Delphi Au 189.09 195.94 $6.85 8/21/98 44 Schering-P 2111.7 2114.75 $3.05 2/27/98 27 Coca-Cola 1865.89 1613.25 -$252.64 2/6/98 56 T. Rowe Pr 1885.70 1876.00 -$9.70 2/17/99 16 Yahoo Inc. 2020.95 1939.00 -$81.95 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 15 Chevron 1250.14 1449.38 $199.24 3/12/98 20 Eastman Ko 1262.95 1452.50 $189.55 3/12/98 20 Exxon 1286.70 1607.50 $320.80 3/12/98 17 *General M 1041.80 1062.50 $20.70 CASH $255.59 TOTAL $33538.90
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*Although DPH is not a Foolish Four stock, it was spun-off from GM on June 3, 1999