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Red Flag 26 of the 49 Red Flags

By Tom Winnifrith | Sunday 8 February 2015

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

My recent book 49 Red Flags serves up 49 ( its actually 50) signs that you should not be owning a given share. The book is dedicated to Rob Terry of Quindell (QPP) who serves as a case study for most of the Red Flags mentioned. You can get a free copy of the book sent to you today by filling in the form HERE. As a sample here is Red Flag 26.

26. A company listed in London must issue an RNS announcement every time there is price sensitive news to declare from a director share trade to results through to a contract win or loss which will alter forecasts by more than 5%.If a company wishes to announce what is not price sensitive information it can issue what is termed an RNS Reach – a marketing communication. Drafting any sort of RNS or RNS Reach is a time consuming business and since it has the CEO’s name on it he or she will be involved in that process.

Excluding director share purchases a proper company should not be issuing more than one RNS or RNS Reach a month. However you will note that some companies appear to issue statements almost every week and many of those statements are of so little relevance that you must wonder why they bother?

The suspicion must be that this is all part of the process of share promotion. And that almost certainly means that the company wishes to issue more confetti to keep the lights on or for yet another acquisition.

It might even be designed to help directors or their mates offload stock. It all points to a mind driven by a desire to inflate share prices rather than one focussed on creating real shareholder value. There is a pretty good correlation between those companies that issue confetti all too frequently and those who issue a barrage of RNS Releases and pointless RNS Reach statements.

Perhaps the worst offender is Motive TV which has done a fantastic job of destroying shareholder value although it would be unfair not to mention that Mr Robert Simon Terry of Quindell offers up another case study in regard to this particular Red Flag.

To get your free copy of 49 Red Flags fill in the form HERE

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