Luke Ahern, Director of Broking at smaller company specialist stockbrokers Corporate Synergy Plc, discusses the contrasting ways companies deal the issues surrounding the release of RNS announcements and examines how they can exploit the opportunities presented by this dialogue with their investors.

It was one of the hottest soccer transfer stories for years. Would Michael Owen leave Real Madrid to rejoin his old club or move to Newcastle United?

The sports pages last Wednesday splashed that Owen had signed for Newcastle for a club record of £16 million. The club’s website was trumpeting the news that, subject to a medical, Owen was now a Newcastle player.

Shareholders might have been forgiven for thinking otherwise. Newcastle is listed on the Stock Exchange and obliged to announce developments that could influence its share price.

Yet there was only silence, which was even more remiss considering Newcastle had also been in takeover talks for some weeks. The official announcement only came later the same afternoon when confirmation of the transfer appeared on the London Stock Exchange’s news service, RNS.

Considering the size of the deal, this certainly ranked as a significant event in the affairs of Newcastle FC Plc.

Despite FSA guidelines and the threat of censure, the issue of making shareholders aware of price sensitive information remains a grey area.

Equities markets need a flow of relevant information to enable shareholders to monitor and make decisions about their investments. The listing rules oblige companies to disclose certain information which is not public knowledge and which may lead to a substantial movement in its shares.

So when is an announcement necessary and how should companies take advantage of the opportunity of directly communicating with their shareholders?

Incentives for RNS announcements vary. Routine events in the financial year such as results, board changes, acquisitions, rights issues, share dealings by directors, or offers of securities, are perhaps the most obvious. News of such events is often anticipated by the market.

If the announcement concerns an acquisition, it is vital that shareholders are told precisely the rationale behind the deal, its potential value to the company, the quality of its products and services, any new markets it opens up, and the calibre of the existing management and whether they are staying on with the business.

In presenting interim and preliminary results, in addition to information regarding sales, profits, earnings per share, dividends, and the state of the balance sheet, it is worth delineating the market place in which the company operates and how well it is performing compared to its peers.

Moreover, get in the habit of releasing results figures at the same point in the financial calendar. The City looks for companies that deviate from their normal reporting schedules, and late filing of results can spook the share price as investors anticipate bad news.

Other events which are likely to be price sensitive range from the launch of a new product which could transform the trading fortunes of the business, the fact that an existing product or service is not meeting expectations, or that the company has won a significant new order.

Wherever possible, companies should make use of their advisors to help determine whether information is price sensitive.

However, some companies gorge themselves on RNS announcements. They use the service as way of sustaining interest in the share price even though the content of the announcements hardly justifies an alert to the stock exchange. Frequent announcements lose their impact.

Of course, the most important reason for a jump in a company’s share price is because it has received a takeover approach. It is imperative for the board to be prepared to issue an announcement the moment it believes the approach is serious even if it does not finally lead to a full scale offer.

The amount of information it will be able to release will be limited. There are few occasions when the company can disclose the identity of the likely predator. Sometimes, however, that is not necessary especially if the story has been trailed in the weekend newspapers. The responsibility still rests on the company which has been approached to confirm the news.

Timings of announcements are sensitive in themselves. Despite universal censure it is still not unknown for a company to slip out a profit warning or some other bad news a few minutes before the market closes on Christmas Eve or a Friday after trading has finished. Be warned. Financial journalists are on alert for that sort of trickery and offenders can expect severe admonishment when publication of the newspaper resumes.

But whatever spin a company attempts to put on an announcement it will still be judged by the speed in which it reacts. The FSA cracks down on anything which creates disorderly markets in shares of listed companies.

Professional advisors have a key role to ensure that companies use the RNS service responsibly, putting out accurate statements punctually. Abusing RNS risks damaging a company’s credibility, and should be avoided.