In the second of two articles about video
conferencing, Neil Stewart checks out desktop and mobile systems
she reviewed some Asian stocks to invest in, Cynthia Tusan, a portfolio
manager in Orange County, California, was thinking, ‘You can’t trust what
you read, especially when it’s about emerging markets. You need to talk to
the people on the ground.’ Out of the blue, she got a message from a
start-up in Thailand called Capital Connections, offering to set up video
conference meetings with companies of her choosing.
As president of Strategic Global Advisors, which has about $230 mn invested
internationally, Tusan’s biggest challenge is getting a ‘real, first-hand
heartbeat for what’s going on with foreign companies.’ The traditional way
when she was running $1 bn in international equities for Wells Capital
Management was to jump on a plane and go there. ‘But now, with the flow of
information so quick, by the time you fly back, it’s old news,’ she says.
‘Travel makes sense to get the cultural feel of a country. But for simply
talking to management, the technology is there.’
From high-end ‘immersive telepresence’ systems to low-cost desktop video
conferencing, investors and companies have slowly begun replacing real
meetings with virtual ones. The technology has been around for years, but
now firms have the data bandwidth for higher-quality pictures and sound,
their IT people are more comfortable with the security issues, and
individuals have grown accustomed to using consumer products like Skype or
Capital Connections is an offshoot of Irideus.org, a group of independent
research firms that do ‘intermediated’ equity research (paid-for research
via stock exchanges). In the same way Irideus.org forged a new research
model, Capital Connections is promoting a new corporate access paradigm. The
concept is that company management members produce a presentation from a
studio. Investors, sitting at their computers, can watch, listen and ask
The difference between this and a normal webcast is the quality – Capital
Connections’ meetings have high-definition video and clear audio – and
interactivity (investors can talk to management in real time). Plus
investors need an invitation to join in.
Shane Smith, founder and CEO of the group behind Irideus.org and Capital
Connections, hopes to build studios around the world starting with one in
Bangkok, which the group launched in March, followed by Hong Kong,
Singapore, New York and Sydney. Mexico City and other Latin American cities
are also in his sights.
The first and perhaps most obvious question is who pays. Smaller-cap issuers
hungry for attention have to pay. ‘It’s important not to raise hurdles for
the buy-side audience,’ Smith explains. ‘The key is to make it viable for it
to connect with issuers smaller than it otherwise could connect with. The
buy side’s investment is its time.’
But for larger, more liquid issuers, Capital Connections gets the buy side
to pay – typically around $2,000 for a non-deal roadshow presentation
including both a group session and a one-on-one. Smith says that works out
to less than an institution would pay through commissions and logistics
costs for a traditional live corporate access meeting.
Boston-based OpenExchange is taking a different approach to both the set-up
and payment structure. It was started by finance industry veterans like Mark
Loehr, who says he has cracked the problems of cost, quality and security by
building OpenExchange’s calendaring system on the Vidyo conferencing
By contrast to Capital Connections, with its studio-based set-up,
OpenExchange allows meetings of all types and sizes, with participants at
their desktop computers or laptops or using mobile devices, up to eight
visible at a time. And while Capital Connections gets paid by the meeting,
OpenExchange is subscription-based – $3 per day per user.
The company has angel backers, a new version of its software just released
and contracts already being signed. It has gone from being tested by
mid-tier sell-side companies to several bulge-bracket firms plus around 10
Fortune 100 companies, adding up to around 60 users – and growing.
Whereas a lot of companies don’t allow services like Skype across their
firewalls, OpenExchange’s Vidyo platform appeases IT geeks and compliance
officials with top-notch authentication. The other
big advance is that the video is scalable, so desktop users and mobile
participants with slower connections can be in the same meeting, with the
video signal adapting to their different bandwidths.
Loehr dispels any visions of a future where companies and investors are
connected by technology without the involvement of the sell side. ‘I come
from the sell side, so I have a bias, but I don’t believe the sell side is
going to be disintermediated,’ he insists. ‘It has an important role
filtering information and setting up meetings.’
The logic behind virtual meetings is simple. As Smith explains it, they
convey the same non-verbal communication – body language, facial
expressions, and so on – that come across in face-to-face meetings, but
without the associated costs.
Many analysts, investors and IR professionals still say nothing can replace
an eyeball-to-eyeball meeting. On the other hand, Tusan – and many like her
– are already virtual meeting converts. She says using Capital Connections
‘is no different from having management members walk into our office and sit
down with us. They may not look polished – but then I don’t want them to
All that’s missing is a live tour of company facilities, but Tusan expects
features like that to arrive soon. She believes investors like her will
happily pay for virtual meetings, especially if they are located off the
beaten path and get left off roadshow itineraries (she’s based far enough
away from Los Angeles that many companies don’t make the trek).
Still, Tusan recognizes the challenge Capital Connections, OpenExchange and
other firms like them face: they need a large pool of companies for
investors and analysts to become interested, but they need a user base of
investors and analysts to get companies on board.
Emerging markets companies in particular are hot beds for virtual meetings,
Tusan concludes. ‘There’s a huge amount of interest in emerging markets,’
she points out. ‘And all those asset managers running that money want
meetings with companies.’
This article appeared in the
October print edition
of IR magazine.
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