Recent press coverage of directors’ dealings on AIM has emphasised the importance of making sure that an RNS announcement gets it right first time. If the announcement is ambiguous or confusing then a further announcement may well be required to deal with questions from investors and the press. The resulting uncertainty is, at best, likely to act as a drag on the share price. It may well result in a significant fall in the share price and lingering investor distrust.
The announcement should comply with the requirements of AIM Rule 17 and disclose:
- the name of the director;
- the number of shares bought or sold;
- the date of the transaction and the price;
- the aggregate number of shares held by the director following the transaction; and
- the other information listed in Schedule Five to the AIM Rules for Companies.
However, if the underlying arrangement which the director has entered into is complex, more detailed consideration will be required. Some obvious guidelines include:
- if shares are being sold and purchased then both parts of the transaction should be disclosed;
- if the overall effect of the transaction is to reduce the aggregate holding of the director then this should be clear from the announcement;
- if security has been granted over shares as part of the arrangement, then this should be disclosed in the announcement together with details of whether the security holder can:
- sell the shares; and
- exercise the voting rights attached to those shares; and
- the statements made in the announcement and terminology used to describe the dealing should be consistent with the terms of the underlying agreements.
Following these guidelines should ensure that investors understand the nature of the underlying transaction and are comfortable with the quality of the disclosure made by the company.
When reviewing and discussing draft announcements with AIM companies, nomads should remember that regulatory actions taken against nomads have highlighted that a nomad should take reasonable care to ensure that an AIM company’s management is appropriately challenged on the contents of announcements, especially where the nomad has information indicating that the announcement may be inaccurate or incomplete.