Sober language overcomes share sale hype

By Peter O'Brien

Friday 28th May 2004

Thank God for laws that require people trying to raise money from the public to issue prospectuses and investment statements in sober language.

The advertising and public relations hype accompanying the offer of shares in new investment companies Colville Equities and Salvus Strategic Investments would be amusing if the companies were selling soap.

It became less than amusing when viewed in relation to its emphasis on personalities and their "experience," quick reaction to criticism (in Colville's case) and simplistic claims.

The advertising style seemed to vary depending on the target audience. For example, an advertisement in The National Business Review last week for Colville's float stated the amount of the company's offer, and what was proposed to be done with the money.

Nothing more, apart from how to obtain a combined prospectus and investment statement and a note regarding an application to New Zealand Exchange for listing.

The advertisement was also run in the daily press.

(It coincided with an announcement from my colleague Shoeshine regarding The Shoeshine Fund's $300 million initial public offering, of which more later).

Contrast that publicity with Colville's first effort.

It appeared in the dailies with heavy promotion of director Brian Gaynor, a noted investment analyst, business columnist and former sharebroker.

"You take note of his opinions. Now trust his judgement." The advertisement talked about transparency, the Colville team's integrity in the investment process and a commitment to best practice and quality corporate governance.

Most observers would consider those attributes necessities for custodians of contributed funds and distinguish opinion from judgement.

Everyone has an opinion but only a limited number have judgement. Trust must be earned and is unable to be called for as a synonym for blind faith.

Salvus Strategic Investments' advertising stated the obvious while hyping up management expertise.

That was an intriguing approach, given that "Salvus" seemed to be the use of the latin word for "uninjured," from which English derived "safe."

An investment company with those connotations would have set itself an extraordinary standard.

Salvus' advertising is best examined through quoting sentences, starting with the heading, and commenting on them.

* "Untapped potential in New Zealand small companies." The statement contradicted later assertions about the country's future being based on the thriving small company sector which showed strong growth and would undergo rapid expansion.

It also seemed to overlook the fact that those running small companies and the investors in them had tapped the potential.

* "The future of New Zealand lies with the small company sector." States the obvious.

* "Salvus believes the New Zealand smaller company sector is growing strongly and is due to undergo rapid expansion over the next few years."

Hardly a brilliant insight. Smaller companies have been regularly in the top 10 sharemarket price gain performers in recent years and consequently attracted investors who (circularly) put them in the top 10.

* "Salvus Strategic Investments offers a focused investment in this exciting sector." A factual statement and therefore fair enough.

* "The highly-experienced management team at Salvus have a distinctive and disciplined style." No more than subscribers are entitled to expect from people asking for up to $50 million.

"This has been developed through successfully managing funds at leading UK financial institutions." There is no difference between "successfully managing funds" in the UK, New Zealand, Australia, or anywhere else, although New Zealanders who suffer from cultural cringe might kow-tow to the bearers of European sophistication and civilisation.

Conspiracy theorists could have happy indulgence in post-float fallout from these companies.

Mr Gaynor is a columnist for the New Zealand Herald and Salvus director Roger Armstrong is a columnist for the Dominion Post (among others) and an independent financial consultant.

Fellow Dominion Post columnist Gareth Morgan had a swipe at Colville and Mr Gaynor on May 15.

The latter hit back in the Wellington paper on May 22, saying Dr Morgan's column "contained a number of statements that were either untrue or had a strong negative bias."

Dr Morgan is a highly qualified economist who runs Gareth Morgan Investments, listed in Yellow Pages as an investment adviser.

Perhaps the divas were singing to different scores. Mr Gaynor's reaction was interesting if it foreshadowed what he might do if he ever received at Colville meetings what he has given to other companies.

Now to Shoeshine.

The kid once gladly accepted 10¢ (a lot for a kid then) after buffing the leather of we business commentators as we mussed over our next commentary.

The world was upside down and the end nigh when $300 million replaced 10¢ and the kid was described as "New Zealand's foremost business commentator."

Just remember the bit about the old and young bulls, kid.

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