Searching for long-term holders: Cynthia He of Baidu.com

We talk to Cynthia He, IRO of Chinese internet search engine Baidu.com, dubbed one of the hottest IPOs of 2005

Beijing-based internet search engine Baidu.com listed on Nasdaq on August 5, 2005. By August 8, its share price was trading 450 percent above its listing price of $27, near $154. By late March, it had dropped to $50, before moving back up to $90 by mid-May.
 
But the company’s head of IR, Cynthia He, is focused on delivering long-term value to shareholders. She joined the company in February 2005 to head its IR efforts, reporting directly to CFO Shawn Wang. She recently sat down with IR magazine to discuss what it’s like heading IR in such a highly watched sector. 

What is the advantage of being in such a fast-growing sector?
The Chinese search market has been growing rapidly over the past few years but is still at an early stage of development. The market has tremendous long-term potential given that internet penetration and customer penetration rates are still relatively low. 

We are encouraged by the growth of China’s online population and the growing demand for search-related products as more Chinese businesses realize the benefits of keyword marketing. As the leading search engine in China, Baidu is well positioned to capitalize on this exciting opportunity. 

How are you addressing new competition from Google, which launched a Chinese version of its search engine in January this year?
With Baidu’s proven success in China’s search market and the country’s vast growth potential, it’s only natural to see increased interest in this space. We were not the first company to provide a Chinese-language search engine, but we were able to quickly overtake the market and become number one. 

We offer the best Chinese-language search experience.We are the only pure-play engine focused on Chinese language searches and we have a better understanding of the search behaviors and needs of Chinese users.We will continue to execute our winning strategy of listening to our users and customers and offering the best user experience. 

What does your shareholder base look like these days?
As of now, insiders and venture capital firms that invested in the company prior to our IPO hold the majority of our shares. As our extended lock-up periods expire, more shares should become available to institutional and retail shareholders, subject to the amount being sold by original shareholders. 

What sort of investors would you like to attract into the stock?
Baidu is committed to solid and longterm growth, so we like to attract growth and value investors who share the same philosophy. 

How do you cope with the pressure of being the IRO of such a high-profile company? What’s your policy on dealing with the media?
The IRO of any company acts as a hub of knowledge in terms of company developments, market conditions and relevant regulations. The IRO also acts as a communicator, linking the company to the investment community and the general public through the media.

Responding to the huge demand for information from the various parties involved requires a very high degree of organization and a comprehensive system of information management. It is imperative for the investor relations professional to keep abreast of company developments through frequent communication with senior management and line managers, and to monitor local and international media daily to gauge the public’s perception of the company along with industry information and developments. 

We are very conscious of providing accurate and meaningful information to the investment community on a timely, regular and transparent basis, and we have procedures in place to ensure that we are consistent and responsive. 

The media plays an integral role in educating the investment community about the company’s strategy and development, and also influences the company’s public perception. 

To ensure we are understood by the investment community and the general public, we have been very open in sharing our thoughts with the media.We respond to media inquiries in a timely manner and our senior management conducts regular media interviews. 

What advice would you give to other IROs about dealing with foreign investors?
For China-based companies listed overseas, it is important to ensure there is plenty of information available in English for foreign investors. But more importantly, the IRO must identify aspects of the company’s business that are most difficult for foreign investors to relate to and provide contexts for these aspects, including culture, market maturity, user behavior and customer preference. 

Given the time differences involved, it is also critical that the IR web site is regularly updated with current developments. And, if possible, a contact person in the same time zone should be available to respond to investor inquiries on a real-time basis. 

Last but not least, each company has a unique strategy, and successfully conveying that uniqueness is what sets a company apart.

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