COMMENT: Your company must ‘Get Up and be Counted’ on the Stock Exchange

A rich chief tax collector called Zacchaeus was seeking to see who Jesus was when Jesus went to Jericho and was walking through. According to Bible accounts, Zacchaeus found it very difficult to have a glimpse of Jesus because of the large crowd as he was small in size. So he ran ahead to an advance position and climbed a fig-mulberry tree in order to see him, because Jesus was about to go through that way. Clearly, Zacchaeus did not want to be left out of getting a glimpse of Jesus -- hence he needed to be smart, put in extra effort and to act fast so as to avoid being left out.

Naturally, nobody wants to be left out in society; everybody wants to move along with their peers and would do everything possible to achieve their aim. Sadly, that is not the case for some companies listed on the Ghana Stock Exchange. As to whether they are being left out or they are leaving themselves out is a question we all have to find answers to. There are thirty-four companies listed on the Ghana Stock Exchange, but not all of them are receiving equal investor attention.

Undeniably, all the stocks cannot attract equal investor attention. Although they are all listed on the same exchange, they are different companies operating in different sectors and in different environments under different regulatory regimes. This situation is wisely justified by Aristotle when he stated that, ‘the worst form of inequality is to try to make unequal things equal’.

Hence, we cannot attempt to unfairly suggest that all the listed companies must follow the same price trends at the same time all the time. Even so, bulls markets which are characterised by optimism, high investor confidence and expectations that strong results will continue, somehow work for a good number of listed companies at the same time. Although it is difficult to predict consistently when the trends in the market will change, part of the difficulty is that psychological effects and speculation sometimes play a large role in the bullish stock markets. Investors are always excited with a bullish market, regardless of the sectors their listed companies belong to.

Comparatively, out of the thirty-four listed companies on the Ghana Stock Exchange, some have not recorded a single trade for over eighteen months. In my opinion, these companies are clearly not getting up to be counted. The Stock Exchange is a secondary market where investors can sell their securities to other investors for cash, thus reducing the risk of investment and maintaining liquidity in the system. If it is true that the stock exchange is meant to provide an exit platform for shareholders, then imagine what the shareholders of the companies whose shares have not traded for a long time have been going through when they need money to pay school fees or pay the funeral expenses of a loved, deceased person, among other reasons for exit.

General stock market activity requires that prices move up or down or remain unchanged when shares exchange hands. Although every trade is not characterised by price movements, movement of shares from one investor to another is a primary function in the very existence of a stock exchange -- and price movement becomes secondary. Imagine a scenario where none of the thirty-four listed companies registers a single trade on the exchange in a whole year.

Happily, though, the Ghanaian stock market is quite active and exciting these days, because there has been a significant increase in trade volumes with a corresponding increase in the magnitude of changes in prices of shares. This has resulted in an impressive appreciation in prices of shares of most listed companies. Indeed, proud shareholders of these companies have recorded gains ranging from 7% to 82% while the mechanism that measures the performance of the Ghana Stock Exchange, (the GSE’s Composite Index) has recorded over 54% gain from January to-date. Although stock prices of some of the companies have recorded price depreciation, some have recorded no movement as in most cases there has been no trade in the shares of those companies. Logically, it is expected that most listed companies do well to record some market activity, especially when the larger market is in a ‘bullish mood’.

Ostensibly, trades occur when there are shares offered for sale with equal interest to buy those shares. Again, interest to buy shares is normally stimulated by several factors including the release of price-sensitive information about the company’s activities, its future prospects and its financial wellbeing. Sharing of information about public companies with investors is an essential component to the investment decision-making process by investors. It is said that ‘a cat is not priced when it is hidden in a sack’. The buyer must certainly see what he is buying; that way, he can effectively get a good bargain to guarantee value for money.

The least directors of companies that are not getting up to be counted on the stock exchanges can do is share information with their shareholders and the investing public -- whether such information is good or bad. Whatever the case, investors have a basic right to information so as to make decisions. That right must not be trampled upon. The natural investor reaction to non-disclosure of information is a boycott of the shares of that company on the market, and this largely accounts for the little activity in the shares of such companies.

However, the process cannot be completed one-sidedly; buyers are needed as much as sellers. Essentially, there are several ways by which companies can stay in touch with shareholders through the provision of information. This can be done through press releases, press conferences, or by appearance on the Ghana Stock Exchange’s ‘Facts Behind the Figures’ programme among others. These are fine and inexpensive platforms available for management to interact with investors.

Zacchaeus might not have been an expert in tree-climbing, but when necessity demanded it he rose to the challenge and found himself on a tree high enough to get himself noticed by Jesus. He certainly achieved his aim and even got rewarded by Jesus. Companies listed on the Ghana Stock Exchange must be willing to go the extra mile to share price-sensitive information with investors.

They must draw strength from the effort put into the Initial Public Offering (IPO) exercise of their shares to raise money. If companies recognise their statutory and moral obligations in the provision of information, they will realise that it is not a favour but rather a duty and respect of investors’ right when they start seeing the results of their effort.

By:Seth Q. Ofori

SIC Financial Services Ltd.