The latest green tea-and-PowerPoint presentations sponsored by Chinese companies eager to list on the Shanghai and Shenzhen stock markets certainly look like the real thing, according to a report in this week's edition of the Chinese magazine Moneyweek.
But new pre-IPO financial disclosure rules in China have effectively stripped road shows of the meaty information about companies that potential investors and their brokers want to hear before buying stock.
Quoting a Mandarin idiom, the report said Chinese company road shows are now "as tasteless as chicken ribs."
The rules took effect in January to coincide with the lifting of a ban on IPOs that had been imposed by the China Securities Regulatory Commission in late 2012. Regulators temporarily barred new listings so that they could rewrite IPO rules, improve market functions and discourage speculation.
In the weeks since the IPO gates re-opened, some 45 companies have gone public on the A-share board of the Shanghai Stock Exchange, reportedly raising about 30 billion yuan. Seven others are expected to launch soon. Meanwhile, the CSRC is reportedly reviewing another 695 requests from IPO hopefuls.
Road shows in the past were often raucous affairs attended by company executives, brokers and enthusiastic investors. Attendees often received samples of a company's products and electronic gadgets as gifts.
Now, the report said, these predictable, two-hour events are "empty and dull" with "no surprises" because securities rules have in effect turned them into "fake" road shows. For example, in step with the new regulations, all speeches are carefully scripted. And every bit of information made available to brokers and investors also appears in writing in a company's prospectus.
In some cases, company executives don't bother showing up because they'll have nothing new to say. Investors and brokers may be no-shows as well. The report said half the seats were empty at one company's recent event in Shenzhen.
"Everybody comes a long way to get something," the report said. "But the only thing they hear is what's in the prospectus."
At the time of publication, the author held no positions in any of the stocks mentioned.
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