Delayed corporate disclosures at the stock exchange confuse investors
After years of continuous disclosures, investors have found no value in the responses of listed companies regarding sudden, frequent, or sustained stock activity. The law mandates that all companies must immediately disclose any material changes or information. Consequently, if a company does not disclose any material information, there is automatically no reason or explanation from the company for the activity.
On the other hand, there are more practical requirements that can be amended legislatively, particularly regarding the speed of disclosures about changes in ownership percentages. According to regulatory rules, disclosure must be made within no more than five working days upon realization of the interest, whereas any change in ownership requires disclosure within no more than ten working days—a duration considered long by stock exchange standards.
In some cases, companies experience significant trading activity on their shares due to changes in ownership resulting from the exit of a major shareholder, or their purchase or reduction of holdings. The company discloses that it has no material information, and the cause of the activity is other exits, which are significant decisions, akin to material information, that shareholders should be aware of promptly due to their impact. This is especially true since some major shareholders are of utmost importance in investment decision-making, meaning that a change in ownership affects stock performance.
In this context, sources clarified that there are Gulf markets that have succeeded in implementing immediate linking and faster disclosures, such as the Saudi market, which applies a three-working-day period in line with the settlement cycle. Other markets, such as the UAE, implement immediate disclosure to avoid any undisclosed trading activities.
In a related context, it is worth noting that there are dozens of disclosures in which not a single company mentioned in its response to the activity. All of them carry the same formula: denying the existence of any material information. So, what is the benefit of these disclosures for investors and the market?
The repetitive preamble from companies states that “there have been no recent developments that could affect the company or its affairs in a manner that resulted in this unusual trading activity,” and “it is worth noting that trading in the company’s shares is based on supply and demand, and we have no knowledge of the buy and sell transactions executed on the company’s shares.”
• In some cases, accurate information is obtained through different channels and acted upon.
However, more important than those cases that justify stock price surges is the need for precise and close monitoring of the synchronization in disclosures of positive and negative material information.
In some cases, exits preceded decisions and sales situations, followed by disclosures of negative issues against the company. In other cases, heavy buying operations are witnessed, followed by the revelation of an exit or a positive deal.
Therefore, the most important aspect is ensuring fair access to information at the same time before it is exploited. This requires action, as it would be more practical than the repeated denials by companies, which can be divided between external and internal information, with each side having a 50 percent impact.
Furthermore, given that supervisory authorities possess all data and information and have the right to track and follow up, when there is a violation or breach, a decisive decision can be taken against the violator. Otherwise, there is no benefit to the companies’ repeated denials, especially given their weak utility in explaining the activity, since 100 percent of the disclosures justifying the activity involve denials and add no value.
