Some Questions About Rangers International Football Club PLC and Market Disclosure

It is a hard job, running a PLC. As well as all of the normal struggles of business: cash flow, personnel, delegation, and customer satisfaction; there are extra responsibilities both to shareholders and to people who are not shareholders but who might wish to buy – “the market”.

The nature of a PUBLIC limited company is, as the name suggests, public. This does not mean that Bob from accounts having an argument with Joan from legal need be announced but, where information could influence share prices, either up or down, investors and potential ones need to be on the same page. “Insider dealing” or the potential for it is one result of not doing so.

So where there is significant “news” about a PLC, one would expect a public announcement. Confirmation of Sir Alex Ferguson retiring from the Old Trafford dugout had to come on the back of an announcement to the New York Stock Exchange.

If we turn our eyes to Rangers International Football Club PLC, to pick a random example 😉 we see uncertainty and confusion, even amongst those who have more than a passing knowledge of Ibrox affairs.

I have no doubt that RIFC will have been advised of its duties and decided carefully what to report and what not to. As its legal advice too will have been expensive, being the cost of using highly experienced and knowledgeable advisers, we won’t be looking at decisions made on a whim.

But that does not stop questions being asked.

1 What is Mr Green’s position today? The announcement that was made said he was resigning as he had become a distraction and would leave by the end of May after an orderly transition.

He is still a director of RIFC and a myriad of subsidiaries. A Prominent Rangers-connected source suggests he was in fact sacked with a £600k payoff. Is he still active on the Board? Was he dismissed? Why?

2 What if, before he concludes his “orderly transition”, the independent investigation into links with Mr Whyte puts Mr Green in the clear? Suspicious cynics will suggest that means the investigation did not look in the right places but this blog has no place for cynicism!

As Mr Green has been hailed as a triumphant CEO, responsible for saving Rangers and masterminding a hugely successful share sale, surely RIFC would want him on board if his name is cleared? Why lose him?

3 What about his shares? His 7% stake is rumoured to have been sold to the Easdale Brothers. Has it? He remains a director. There is a duty to report a director’s dealings in the company’s shares. That has not happened. The sale of such a large block of shares is surely of note to the market?

4 What of Mr Ahmad? He was labelled a key employee, alongside Mr McCoist, in the prospectus. His role was seen as important enough for him to be mentioned there alongside the directors. He remains a director of The Rangers Football Club Ltd. He is still a major shareholder in PLC.

The same “inky trades” source suggests that he has been fired too but with no recompense. Is this true? If so then one would have thought that what seems to be summary dismissal of a key employee was worthy of official comment?

5 What about Mr Murray, the Chairman? The BBC reported he had lost a no confidence vote. The rampant speculation on the Chairman’s position is something, Naively, I would have thought worthy of comment. Is coverage by the national broadcaster and the press of the apparent imminent demise of the Chairman, when the CEO has resigned/been fired, not worthy of a statement?

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RIFC can’t say that it refuses to comment on “media speculation”. It has done so officially in the past, indeed twice in April it issued statements referring in the title to “media speculation” or “media reports”.

One answer is that the shares, though in a PLC, are very lightly traded. Therefore, as there is no significant market for them, with the largest number of shareholders being fans who bought with their hearts, and the major players generally being tied in for a period, there is no real issue about influencing the share price.

However one must take the rough with the smooth. RIFC was created to take advantage of being a PLC by making a public offer of shares. With that right comes the responsibilities to play by the rules.

As I said, I have no doubt that those in charge have carefully considered what to announce.

As the London Stock Exchange Guide to Investor Relations states:-

However, companies must also operate on an ad hoc basis to ensure that any new developments are also disclosed to the market without delay. This will normally involve consideration of whether there is any ‘inside information’ which requires disclosure to the market. The concept of disclosing inside information is set out in the UK Listing Authority’s (UKLA) Listing Rules. Listing Principle 4 states that a “listed company must communicate information to holders and potential holders of its listed equity securities in such a way as to avoid the creation or continuation of a false market in such listed equity securities.”

The principal provisions relating to disclosure of inside information are set out in the Disclosure and Transparency Rules (“DTRs”) which implement certain European Directives on disclosure and transparency. These apply to all companies on a regulated market, such as the London Stock Exchange’s Main Market. Companies quoted on AIM are subject to their own rules relating to the disclosure of price sensitive information, although the principles are very similar. The initial assessment of whether particular information amounts to inside information must be made by the company, with help from its advisers. In reality, unless the case is obvious, input from the company’s advisers will be vital, as there will be a number of different factors which will need to be taken into account when assessing the significance of the information, such as the company’s size, recent developments and market sentiment about the company and its sector, the swing in share price, including other market variables affecting price, the source of the information, the company’s financial condition and information previously disclosed by the company to the market

Certain rumours or speculation circulating in the market or the press may prompt the company to consider whether such information is inside information. In general, if the rumour is accurate and is inside information, an immediate announcement will be required. If the rumour is false, then the company may choose to delay disclosure, probably indefinitely. There is no obligation to respond to a false rumour, although a company may wish to correct significant errors where they lead to general market misapprehension or the market being misled.

I am sure that RIFC has carefully considered all of these matters and determined that the answers to the questions raised above do not amount to “inside information”. I can see how opinions on that could differ.

As the guidance says, there is no obligation to respond to false rumours, and it may be that beyond the terms of announcements made, everything else is untrue. But there has still been no public announcement about Mr Ahmad’s departure. That is not a rumour? What about Mr Green’s Schrodinger position – is he still on board (as distinct from being ON the Board)?

These, and many other questions, may be answered eventually.

Posted by Paul McConville