...11 Feb 2020 09:22
We look at the various reasons why trading in a company’s shares could be halted.
There’s a cold dark dread that strikes at the heart of investors when they read the headline “Trading in shares suspended” – and if it’s happened to any of the companies you own, you’ll know exactly how it feels.
But what does it mean, and why does it happen?
The first question is easy to answer. It means that the stock market will not permit any trading in the shares in question. So while a suspension is in force, you can’t go to your stockbroker to buy or sell any shares. How long the shares are suspended depends to a large extent on the “Why” question.
For example, shares in Healthcare Locums (LSE: HLO) have been suspended for five months now, and a suspension for that long means one thing – something very bad has happened, In this case, that something is a big hole in the accounts. We’ll come back to Healthcare Locums shortly, but the majority of share suspensions are for less dramatic reasons.
There’s big news coming
Trading in shares is often suspended by request of the company itself, and usually because it has very important news to announce.
The rules of the London Stock Exchange (LSE) require that all interested parties should be given equal timely access to company information, meaning that all news releases, results updates, etc, are given to all investors simultaneously, via a Regulatory News Service (RNS) announcement – and the schedule for many of those is usually announced well in advance too.
The old days when it was considered just fine to first release information to the cosy backscratching club that was the City, leaving private investors to pick up the debris sometime afterwards, are thankfully now behind us. Well, in theory anyway. Though it is illegal to selectively release information to some interested parties but not others, such “insider dealing”, as it is known, is still a blot on the investment landscape.
But suppose a company has some unexpected news that is likely to significantly affect the share price – it might be great news, which would boost it, or dreadful news that would hammer it. An RNS release, especially an unscheduled one, would really not do a very good job of informing everyone who needs to know in a timely manner.
The professionals sitting in front of their news terminals will hear of it instantly, while ordinary investors, even the keen ones peering dimly over their cornflakes at their laptop screens, will be late. And with momentous news, sometimes only minutes is all someone needs to get ahead of the crowd.
Fair treatment
In cases like that, a company may request a suspension of its own shares, to give it time for the news to get out and to prevent any unfair profiting by those quickly in the know. And such a suspension would generally be fairly short – just long enough for the news to circulate.
But the reason a suspension announcement gets the knees knocking and the teeth grindin
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