Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, August 6, 1995 TAG: 9508040021
SECTION: BUSINESS PAGE: F1 EDITION: METRO
SOURCE: BY JOHN LEVIN STAFF WRITER
DATELINE: LENGTH: Long
Others write monthly checks to purchase shares or have dividends from stock they already own reinvested in new shares.
Since late 1993, when the company launched a program making it easier for customers to purchase stock without paying a broker's fee, Roanoke Gas has nearly doubled the number of shareholders, from 901 to 1,703 as of July 1. More than half of the company's shareholders also are customers, and a majority live within a 50-mile radius of Roanoke, said John Williamson, vice president for rates and finance.
The influx of money means, among other benefits, that about half of the company's annual $5 million construction budget is financed with relatively easy money: neither debt requiring interest payments nor stock sold in traditional markets, where 4 to 6 percent of what's raised goes to pay selling costs.
"We think folks in the valley like to have a stake in a locally owned company," Williamson said. "We think they like to be able to ride by and see the building. And if they're a customer, they like to own a piece of the company they're paying for services."
Wayne Lewis would agree, adding that's especially true if the company is a bank where local residents are depositing their savings or borrowing money as well. Lewis, senior vice president and chief operating officer of Valley Bank in Roanoke, said he wasn't surprised when his institution's organizers sold $9.6 million worth of stock in a campaign to raise $8 million.
"There's more [money] here than people think," Lewis said, adding it was a good sign for a bank touting hometown ties to draw its initial capital from local investors.
Considering that neither stock is an especially hot investment, shareholders are buying something more than quick financial reward. Roanoke Gas Co. recently has downsized its operations in the face of substantial changes in the utility industry, and this year the company saw its sales drop when unseasonably warm winter weather reduced the demand for natural gas.
And Valley Bank's stock has traded only a few shares since it hit the open market less than a month ago. The initial shares sold at $10 each; the few that have traded since have been in the range of $9.50 as the price bid by prospective buyers and $10.25 asked by would-be sellers, Lewis said.
Those are buyers willing to wait for a payoff, said William Nash, head of the Roanoke office of Scott & Stringfellow Inc., the lead selling agent for the bank's initial stock offering.
"People who invest in local companies have a long-term investment orientation," he said. Although many stock buyers - apart from the so-called sophisticated and institutional investors who trade daily - may say they are buying shares in national companies with the idea of holding them for many years, they actually are less hesitant to buy and sell when broad market trends excite them, Nash said.
Someone who owns a piece of a local company is making a five- or 10-year commitment, he said. Or longer, considering that some Valley Bank shares were purchased in the names of children or for custodial accounts to benefit children much later in life.
There are some obvious reasons for the popularity of local stocks in any community. Chances are shareowners will know people who work at a local company, meaning "you can tell from talking with employees if business is good or lagging," said James P. Kern, first vice president and branch manager of Interstate/Johnson Lane's brokerage office in Roanoke.
Also, "people have a better idea for the prospects for a firm they can see and pick up clues in their own back yard," he said.
And knowing - even if just by reputation - the executives founding or running the company lends credibility, such as in 1955 when the late John Hancock peddled almost door-to-door to capitalize Roanoke Electric Steel Corp.
"There are still a lot of those original shareholders on the books," said Joe Crawford, the steelmaker's assistant vice president and corporate secretary. Many of those shares have been passed among family members and rarely are for sale, he said.
About 40 percent of Roanoke Electric Steel's stock is held by residents of Western Virginia, including the company's employees and retirees. Currently there's a push by the company to attract the attention of institutional investors, such as pension funds, that might buy the stock in bigger volumes.
Kern said his brokerage, a month-old branch of a Charlotte, N.C.-based company, expects to build its business partially on investors' affinity for local stocks. Its research strengths are in the furniture industry, especially along companies based in North Carolina and Georgia.
"We want to establish ourselves as the resource for research and advice on local companies. You'll find we're covering more companies with headquarters in Virginia," he said.
And he thinks that's especially worthwhile in Roanoke, where over the last two decades there has been a decline in the number of locally based companies.
"There are not many of them, so we value the ones we have more," he said.
tag- John Levin is business editor of The Roanoke Times.
by CNB