I wrote yesterday about Mr Green revealing that “Rangers” will make a loss this year. As I mentioned, his comments on the official Rangers website raised a couple of queries regarding (a) the correctness of the information given on the website and (b) the obligations of the Chief Executive of a quoted public limited company when telling people about potential profits and losses. I addressed the first point in my last post.
A quick reminder of the relevant extracts from the article:-
CHARLES GREEN has detailed how he plans to turn Rangers from a loss-making company into a profitable one over the next year.
As per projections in the prospectus made available to potential investors late last year, the 2012/13 campaign is seeing money being lost by the Light Blues.
Green said: “The company is currently trading at a loss and the reason for that is our income is halved from coming out of the SPL and Europe and going into the Third Division.
“Typically, Rangers would be close to a £60million turnover per year and we’re down to below £30million now.
“It’s not an overnight thing. All of those things will take a year or two but the losses are a one-year thing and they won’t be here next year. We’ll grow and grow thereafter.”
As I said, the article does not confirm precisely which “company” he is referring to. Reference to the prospectus might suggest he is speaking about the company which was the subject of the prospectus, namely Rangers International Football Club PLC.
As I commented, the Prospectus does not seem to contain a projection of a loss, nor does it have a projection of a £30 million turnover (at least to my eyes).
Why is any of this important?
The status of RIFC PLC as a quoted public limited company is what makes this important.
One of the fundamental rules regarding quoted companies in the UK is that there has to be a clear communication of information to shareholders and potential shareholders, so that, at all times, the market is fair. Market sensitive information requires to be publicised in particular ways, including by formal announcement.
It is unwise at best for a CEO of a PLC to talk in concrete terms about matters which could affect the company’s share price, if no formal announcement is being made.
I should say that I am NOT accusing Mr Green of breaking the rules. However, I wonder if, inadvertently of course, he might have erred in the article referred to above.
As you will recall, RIFC PLC is listed on the AIM section of the London Stock Exchange.
There is no requirement under the Prospectus Rules for a newly floating company, as RIFC PLC was, to give profit and loss projections. These might be especially difficult where the company is a new one (even although it was buying a slightly older company which had acquired the assets of a 140 year old football team).
The Rules for Companies on the AIM can be found here.
The most relevant for this purpose are contained in paragraphs 10, 11 and 17. The relevant parts read as follows:-
Principles of disclosure
10. The information which is required by these rules must be notified by the AIM company no later than it is published elsewhere. An AIM company must retain a Regulatory Information Service provider to ensure that information can be notified as and when required.
An AIM company must take reasonable care to ensure that any information it notifies is not misleading, false or deceptive and does not omit anything likely to affect the import of such information.
It will be presumed that information notified to a Regulatory Information Service is required by these rules or other legal or regulatory requirement, unless otherwise designated.
General disclosure of price sensitive information
11. An AIM company must issue notification without delay of any new developments which
are not public knowledge concerning a change in:
♦ its expectation of its performance, which, if made public, would be likely to lead to a substantial movement in the price of its AIM securities.
Disclosure of miscellaneous information
17. An AIM company must issue notification without delay of:
♦ any material change between its actual trading performance or financial condition and any profit forecast, estimate or projection included in the admission document or otherwise made public on its behalf;
The Rangers information service does not disclose any announcements about anticipated profits.
Strictly, I suppose, the fact that there has not been a projection or forecast means that there is no change from any previous forecast.
However, a Q&A with fans, some of whom might be investors, or an article on the club website, do not quite meet the needs of Rule 10.
If, until now, there have been no forecasts, then it is presumably of some importance for the share price that the company will not be profitable this year, on an income of £30 million.
A challenge for many entrepreneurs who take companies to the stock market is to restrain their natural buccaneering spirit. In a private limited company the owner can say effectively whatever he wants about plans, forecasts and strategies.
Once he heads up a PLC however, there is a need to obey the rules, to avoid being seen as having influenced the market inappropriately. Businessmen such as Rupert Murdoch, Stelios Haji-Ioannou and Richard Branson have fallen foul of the rules and structures imposed on PLCs and their owners and executives.
It explains why the CEO’s of major UK companies are generally interviewed after announcements of profits, acquisitions and disposals, rather than before them.
Does this matter? It depends why the shareholders bought shares. The institutional investors did so to make money – was this to earn profits via dividends, or to take profits by selling the shares at a suitable juncture?
Either way, a “forecast” of a £30 million turnover and, despite this, a loss seems information of interest to an investor or possible shareholder.
I am sure that Mr Green would be able to confirm that he was not referring to the PLC in his comments, or that he had already disclosed this information in the prospectus, or that it did not amount to a “forecast”.
I do not imagine that he will face any action for what, if a breach, was clearly inadvertent. However, as the PLC Board only has two executive members, Mr Green and Mr Stockbridge, there are not many candidates for making public pronouncements to do with the business. The Non-Executive Directors’ responsibilities generally do not extend to being spokesmen for the company.
Should Mr Green be “gagged” to avoid him being too outspoken, then it would be a sad day for the Scottish press, as a most quotable chap would be silenced.
Posted by Paul McConville