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Saturday, March 27, 2004
Listed firms try to keep faith of investors by bearing gifts
By TOMOKO OTAKE
The rationale is simple: If you want investors to hold on to your company's shares, send them gifts.
An ever-increasing number of listed companies in Japan are sending out the best grains of Koshihikari rice, designer clothes and gift certificates worth thousands of yen as tokens of gratitude to investors, a move that signifies both the rising stature of small-scale investors and desperate bids by some firms to secure stable funding.
And investors are hooked on it -- investors who would not otherwise be typical clients of private banks or don't have the nerve of day traders.
For them, annual or semiannual home deliveries of regional delicacies, movie tickets and other freebies seem more attractive than the meager gains they can get from bank deposits in the age of zero interest rates.
"I bought the stocks just so I can get the sweets, but I'm happy the price is going up," an anonymous shareholder of Seiwa Sangyo Co. posted recently on the Yahoo! finance site.
"I will be holding them for a while!"
Seiwa Sangyo, a drug wholesaler based in Hiroshima Prefecture that is listed on the second section of the Tokyo Stock Exchange, offers every stockholder who has 100 or more shares in the company an assortment of local cakes, cookies and jellies worth 2,000 yen once a year.
The firm's closing share price Thursday was 1,030 yen, which means the box of sweets is yours if you are willing to make an investment of 103,000 yen or more.
The Yahoo! woman was probably not the only one eyeing the perks.
Talk of buying shares in time for last Thursday abounded on various online message boards, with Thursday being the last business day on which investors could register themselves as shareholders in the hope of qualifying for giveaways from companies closing their books at the end of March.
This year, more than 800 companies -- nearly a quarter of all listed firms in Japan -- plan to give shareholders something plus -- or without -- cash dividends, a growing trend that started a few years ago, according to Kiyoshi Sawabe, an editor of The Japan Securities Journal, a daily that specializes in stock market news.
Traditionally, companies have used giveaways as a tool to promote their business among investors -- like train tickets from railways and boxes of canned drinks from beverage companies. But nowadays, gifts don't necessarily match the sectors in which these firms operate.
An industrial machinery leasing firm in Hokkaido will send a salted salmon and a 10-kg bag of potatoes to stockholder with 3,000 shares or more, while a Mie Prefecture food-chemical producer pledges to give investors vouchers for a one-night stay at a local hot spring resort.
Seiwa Sangyo wants to lure more investors and thereby increase the volume of trading for company shares, which had previously been low, spokesman Eiji Kimura said.
"We wondered about ways to increase liquidity in our shares, and studied what other firms are doing," Kimura said. "Lots of firms are offering their company products, but we deal in prescription drugs so we can't give them away. In the end, we decided regional foodstuffs are the most suitable."
Some analysts attributed the trend to the nation's long-standing -- though fading -- gift-giving culture.
The Japanese custom of exchanging boxes of gifts, most often foods, in summer and at year's end, may be partly why this corporate practice -- apparently unique in the world -- is favorable among individual investors, said Kiyoshi Kimura, a securities analyst and director of the nonprofit Japan Association for Individual Investors.
"Japanese like freebies," Kimura said. "It's a cultural thing."
But Kimura voiced a degree of skepticism, stating that it contravenes the basic investment principle of more money, more return.
"The practice unfairly benefits only a select group (of small-scale individual investors)," he said. "A Tokyo restaurant chain giving out discount coupons usable at its outlets will be of no use to investors who live in Kyushu -- or for that matter, abroad."
Certified financial planner Yoshiko Kimura said, however, that the perks are giving people an opportunity to learn more about businesses, as the majority of Japanese individuals tend to shy away from stock investments.
As the nation's asset-inflated bubble economy burst in the early 1990s, many people got burned pretty badly on the stocks they had bought -- often on their brokers' advice. Listed companies have also been cold to small-scale investors while fawning over institutional investors, according to Kimura.
At the very least, companies are now fawning on investors of all kinds. Many firms are facing downward pressure on their stock prices as banks accelerate efforts to sell off cross-held shares.
"It has dawned on many companies that they must attract individuals or they will soon have serious trouble raising funds," said Kimura, who owns shares in 10 firms that offer nonmonetary perks.
Kimura warned, however, that investors should not buy shares just for perks.
Investors should watch out for warning signs, such as huge interest-bearing debts or scandals, when picking companies in which to invest, or they could risk seeing their money go down the drain, she said.