In the realm of investor relations, one common misperception revolves around the idea that trading volumes influence the obligations companies owe their shareholders. This misunderstanding couldn’t be further from the truth. Whether your shares see significant trading or minimal liquidity, your obligations as a company remain unaltered.

Equal Obligations for All Shareholders

Your common law obligations, legal requirements, stock exchange rules, and corporate governance regulations stand firm, regardless of the trading volume. Companies owe the same duty of care and diligence to their shareholders, irrespective of market liquidity.

The direct link to shareholders is sacred and should be upheld at all costs. Maintaining and protecting shareholders’ rights to vote and participate in the Annual General Meetings (AGMs) is a critical aspect of this relationship.

Upholding Shareholder Interests

The volume of shares traded is inconsequential. Companies and their directors have a common law obligation to ensure they facilitate shareholders to trade their shares at a fair price. This principle lies at the heart of investor relations.

Ensuring that timely, complete, and relevant information is accessible to all shareholders is a non-negotiable responsibility, irrespective of whether shares are traded or not.

Stimulating Share Activity

Company boards may actively engage with capital markets, regulators, and other participants in illiquid markets to stimulate share activity. However, at the very least, they must fulfil their fundamental duties to respect the potential for shareholders to sell their shares at a fair price.

Availability of Information

Companies should provide vital information such as dividend details, share price, governance information, and all other material information that could influence an investor’s decision.

Companies with illiquid shares—those that don’t frequently trade—are often overlooked by broker analysts driven by profit motives. Here, the value of paid research can’t be underestimated. By taking extra steps to ensure the company’s investment narrative is available and compelling, companies can counteract the inevitable undervaluation of illiquid shares.

Communicating Effectively

Directors should comprehend that relying solely on third parties for communication with shareholders isn’t sufficient. Companies must be responsible for their interactions with shareholders and stakeholders, as this direct relationship is critical in managing reputation and other risks associated with public communications.

Investor relations events such as reporting earnings, AGMs, and attending investor conferences serve as excellent channels to sustain active interest in the company and share complete information with shareholders.

A Proactive Approach

In essence, the investor relations function of companies with low trading volumes should be just as progressive, if not more so, than those whose shares trade actively. A direct connection with shareholders and the wide availability of meaningful information for investors to make decisions is crucial.

Even if market liquidity is low, it’s unacceptable to disregard investor relations efforts. Listed companies may be motivated by various reasons to maintain a listing, and therefore, these situations need careful management.

It’s worth noting that there’s no excuse for companies to prioritise communication with institutional investors over retail shareholders. Activities such as preparing transcripts of earnings events and making them publicly available are valuable, infrequent activities that shareholders greatly appreciate.

To sum up, companies should treat all shareholders equally, maintain open and direct lines of communication, and ensure that relevant, timely information is always accessible, regardless of the liquidity of their shares.