Are Companies Scared of Transparency?

by: David Jackson

Dominic Jones, author of the IR Web Report, published an article suggesting that many public companies are scared of transparency:

WHY don’t more companies provide transcripts of their earnings conference calls and investor presentations on their websites? Of the 525 large-cap companies whose websites we review, only 12% are currently providing transcripts of their earnings calls on their investor relations websites. It’s NOT because investors don’t want them... It’s NOT because transcripts are expensive... It’s NOT because transcripts are ineffective... It’s NOT because accuracy is an issue... It’s NOT a legal issue... So why don’t companies post transcripts?

It’s a transparency issue. Plain and simple. Companies don’t want to provide transcripts because they believe transcripts make management vulnerable to investor criticism... Companies that currently do provide transcripts of their conference calls and presentations demonstrate higher levels of accountability and openness....

SeekingAlpha.com, a fast-growing company which provides market opinion from expert bloggers to Yahoo! Finance, offers free transcripts to investors for over 500 companies. Investor relations departments can post these transcripts on their own websites for just $200 per event, or they can buy four transcripts, a year’s worth, at a discounted rate. And there’s no fee to provide a link from a corporate website to a free transcript on SeekingAlpha.com...

...Transcripts make it easier for analysts and other influencers, including journalists, investment writers and bloggers, to write about your company and raise its profile. Look at the screenshots I took from Yahoo!’s Site Explorer beta site showing there were 949 “inlinks” to Seeking Alpha’s transcript of Google’s most recent earnings conference call... Meanwhile, there were only 397 inlinks to Google’s most recent earnings release on the company’s website. That’s a lot of traffic going to a transcript of a conference call and a lot of exposure for the company. People prefer to refer their readers to Seeking Alpha’s transcripts because they’re in HTML (and free). Web users don’t have to use other software or adjust to a new interface. Seeking Alpha also has links to transcripts on companies’ profile pages on Google Finance. Here’s the GOOG page on Google Finance (scroll to the bottom of the page and it’s under More Resources.)

Google Search Results for Finance Terms

Dominic's viewpoint is also supported by the fact that transcripts on Seeking Alpha are searchable in Google and Yahoo! Search. At the time of writing, links to Seeking Alpha are the top two results in a Google search for "conference call transcripts". In fact, links to Seeking Alpha account for 6 of the first 10 results (click for image).

Seeking Alpha now ranks in the top 10 for numerous popular finance search terms. For example, in a Google search for "GOOG" Seeking Alpha now ranks 6th after (1) the stock chart, (2) Yahoo! Finance, (3) Google Finance, (4) Business Week and (5) Forbes, and before (7) the NASDAQ (click for image).

Researching Value Stocks

Another data point highlights the transparency issue. Value investor Geoff Gannon has an outstanding series of interviews on his blog, Gannon on Investing. The latest interview is with Todd Sullivan of Value Plays. In response to a question from Geoff, Todd's answer confirms Dominic Jones's point that "Transcripts make it easier for analysts and other influencers, including journalists, investment writers and bloggers, to write about your company and raise its profile":

Geoff Gannon: How do you evaluate a stock?

Todd Sullivan: I look for industry leading companies who:
- Have a valuation that is equal to or at a small premium to other shares with a comparable earnings growth rate.
- Have a total return yield greater than the current corp. bond rates.
- Are buying back shares.
- Are increasing the dividend.
- And are increasing cash flow from operations.

All that takes about 20 minutes, if it passes those tests, I begin to dig deeper into SEC filings, annual reports, etc. Earnings call transcripts on Seeking Alpha recently have been providing me a ton of insight, not necessarily for the details, but the general "tone" of management.

You can find transcripts on Seeking Alpha in three ways: (1) by tracking the latest conference call transcripts, (2) by checking the sector pages (eg. Energy Stocks, Gold Stocks, Internet Stocks) for transcripts from those sectors, and (3) by checking Seeking Alpha's stock pages, such as those for Sirius (NASDAQ:SIRI), Google (NASDAQ:GOOG), Newmont Mining (NYSE:NEM) or KB Home (NYSE:KBH).

Investor relations officers can email Seeking Alpha to discuss publishing transcripts on their web site and on Seeking Alpha. Hopefully, that will lead to greater transparency from companies and better resources for investors.