Results of a Securities Commission survey show that investors generally find the investment statement and the prospectus useful and understandable, but there is room for improvement.
The survey also provides some useful anecdotal information on investor behaviour.
The commission surveyed 300 investors involved in he Auckland International Airport, Telecom Receipts and Capital Properties share offerings.
Michael Wydeveld says the commission plans to survey offer documents for unit trusts, group investment funds, insurance bonds and other managed funds.
Overall 136 (45.3%) responded to the survey. Seven people (5.1%) said that they bought the securities for short term capital gains, 91 (66.9%) indicated it was for long term capital gains, 79 (58.1%) said it was for dividend payments and 14 (10.3%) indicated other reasons, including diversification, enjoyment of company's facilities, to learn about shares, retirement saving, to support New Zealand companies and low interest rates affecting income maintenance.
Just 11 respondents said that they were first time investors, while a third indicated that they sought professional investment advice. (In 2 cases the respondents indicated that the advice they received was from a relation with professional knowledge and experience).
Wydeveld says there were suggestions that the investment statement (average length 50 pages) could be reduced in length. There were indications that investors believed the length was a result of both repetitious information and unnecessary information. Conversely, there were indications that investors appreciated the comprehensiveness of the prospectus.
There were investors who indicated that they kept the offer documents for future reference.
There were investors who had referred to other sources indicated under "What other information can I obtain about this investment?" In particular, the 0800 number was singled out as being useful.
There were investors who arranged their purchase through a sharebroker without receiving or desiring an offer document.
There were concerns over the book-building process, which establishes a price after the commitment to invest has to be made. There were indications that investors thought this process could be better explained in offer documents.
There were concerns over the amount of shares received, which were less than expected, in a number of cases. Some investors noted that this deterred them from participating in future initial public offerings.
Results of a Securities Commission survey show that investors generally find the investment statement and the prospectus useful and understandable, but there is room for improvement.