Why do regulators frown on this practice?

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Here’s a copy of an email I received this morning:

Dear Mr. Jones, In the following, you will find the compiled analyst studies on the RWE share from January 3, 2008 to January 7, 2008:

RWE with upside chances 01/07/2008 Finanzen & Börse Lauda-Königshofen (aktiencheck.de AG) – The security experts of “Finanzen & Börse” consider RWE shares (ISIN DE0007037129/ WKN 703712) an investment with upside chances. The suppliers of electric power will profit from rising oil prices. The recent price increases for electric power and gas back RWE’s current policy. In addition, stocks of utility groups are of a rather defensive nature and provide a ‘safe haven’ in times of unrest at the financial markets. The experts of “Finanzen & Börse” consider RWE an interesting name among the stocks of the DAX. (issue 01 of January 05, 2008)   RWE buy 01/07/2008 WestLB Düsseldorf (aktiencheck.de AG) – Sebastian Zank, analyst of WestLB, continues to rate the shares of RWE (ISIN DE0007037129/ WKN 703712) as “buy” and confirms his EUR 112 price target. At the beginning of the year, the analysts recommend overweighting the stocks of utilities groups. The European sector might offer above-average earnings growth, because the energy pricing story developed more positively projections made a couple of months ago. Utilities enterprises should present solid full fiscal year figures and meet or exceed their respective targets. However, there might be increased share price volatility as a result of high valuation levels and the loss of top ranks regarding dividend yields. In the current financial year, there will be a focus on the CO2 issue. RWE is the top recommendation for 2008. The shares offer a relatively low-priced opportunity to participate in the very strong energy pricing story. Owing to its coal-fueled power stations, there is some risk that RWE might be more exposed to political influence than other enterprises, though. But then, RWE has a chance to address this issue in February of 2008, when the group will publish details on its future strategy. With this background, the analysts of WestLB continue to rate the shares of RWE as “buy”. (Analysis of January 7, 2008)   RWE buy 01/04/2008 Société Générale Paris (aktiencheck.de AG) – Adam Dickens, John Honore and Thierry Bros, analysts of Société Générale, continue to rate the shares of RWE (ISIN DE0007037129/ WKN 703712) as “buy”. Owing to the high oil-price, the shares of RWE compensated the losses caused by the deferment of American Water’s divestment. RWE is one of the main profiteers from the high energy prices. The group is highly dependent on the German market, which is driven by wholesale pricing and not exposed to governmental influence. It seems safe to assume that CEO Jürgen Großmann will focus on the divestment of American Water, future share-buybacks, further efforts for expansion on segments with higher growth rates and new efficiency initiatives during his presentation of the new strategy on January 22. Since the analysts expect high wholesale pricing to continue and RWE to profit strongly from such a scenario, they regard the shares as undervalued at an 11% PER-based discount to E.ON. In 2006, RWE achieved EPS of EUR 4.38, implying price-earnings ratios of 21.7. For fiscal years 2007 and 2008, the analysts project EPS of 5.78 and 6.50, indicating respective price-earnings ratios of 16.5 and 14.7. They retain their EUR 105.00 price target on the stock. On this basis, the analysts of Société Générale reiterate their “buy” rating on the shares of RWE. (Analysis of January 4, 2008)   RWE buy 01/03/2008 Citigroup New York (aktiencheck.de AG) – Peter Bisztyga, security analyst at Citigroup, reiterates his rating of “buy” on shares of RWE (ISIN DE0007037129/ WKN 703712) and confirms his price target of EUR 111. Yesterday the oil price exceeded the level of 100 USD per barrel. The German forward prices continued to increase as well. Prices for 2009 and 2010 climbed to 62 and 60 EUR per MWh, respectively. The trend of the prices for electric power underlines that prices for coal are the main factor second only to CO2 costs. The rise in the coal prices since May 2007 was only partly reflected in the prices for electric power. With regard to the coming three to four months, prices for electric power are expected to keep increasing. The basic price for 2009 could surpass a level of 65 EUR per MWh. This scenario supports the positive assessment of the stock. RWE should be able to profit more from price increases than E.ON. For the time being, the analysts of Citigroup stick to their “buy” rating on RWE. (analysis of January 03, 2008)   Disclaimer for the analysts´ studies The studies and other analysts’ statements reproduced here are not based on research carried out by RWE AG, but on research, reports, recommendations or assessments by third parties, in particular by equity and bond analysts. Reference to such recommendations and assessments serves only for reader information and is non-binding. It does not imply that RWE AG subscribes to these recommendations, opinions or conclusions in any form whatsoever, or that RWE AG supports or confirms them. RWE AG accepts no liability for the selection, current relevance, completeness or correctness of the analysts’ recommendations and assessments reproduced here. None of the information on this Internet site is to be understood as an offer for purchase of RWE shares or RWE bonds, or to be advertising same. Any liability on the part of RWE AG for losses incurred by third parties arising from the information contained on this Internet site is precluded.

Publisher: RWE AG Investor Relations Opernplatz 1 45128 Essen T International (excluding USA): +49 180 1 451280 T USA: +11 49 180 1 451280 T Germany: 0180 1 451280 I www.rwe.com Chairman of the Supervisory Board: Dr. Thomas R. Fischer Executive Board: Dr. Jürgen Großmann (CEO), Berthold A. Bonekamp, Alwin Fitting, Dr. Ulrich Jobs, Dr. Rolf PohligCorporate Headquarters: Essen Registered with the Essen District Court Commercial Register Entry No.: HRB 14 525 V.A.T. No.: DE 8130 23 584

Now, isn’t that an incredibly useful and convenient service? The IR department sends these to me weekly when new analyst reports or notes are issued. The same information is published on the company’s website. As a retail investor, one far from proficient in German, I probably would never get this information if not for them.

So why is it illegal, or almost illegal, to do this in other countries? Whose interests are really served by discouraging companies from sending me this kind of information? Certainly not mine. The more information I have, the better.

It is high time for regulators to take a hard look at the rules around companies providing third-party content and independent perspectives. They should stop treating all companies as potential fraudsters and all investors as children.

What do you think?

P.S. I don’t own shares in RWE AG. We just subscribe to the email alerts of all the companies whose websites are included in our IR website benchmarking survey. And, no, this type of email is not common, but it should be.

P.P.S. Yes, they include downgrades, too. The one prior to this led with the downgrade news. Here’s a screenshot:

Related:

SEC urged to issue new IR website guidelines

Dominic Jones

Dominic (bio & disclosures) is IR Web Report‘s founder and an online investor relations consultant. He advises leading public companies and investor relations service providers worldwide on using the web for disclosure, engagement and profile building. You can contact him via the contacts page.