1. Complete Information

Giving investors complete information is a important characteristic in investor transparency. On the ASX, companies have to release material news and set reports to the market in accordance to the listing rules. These reports tell us about the company's assets, financial position, and material developments to the business. Examples include:

Well run companies also communicates their strategy in a timely and easily understood way. The strategy is very important to investors as it shows how management intends to grow the company and indeed outperform other alternative investment opportunities on the market. As investors, we should never assume a strategy is positive if we don't understand it - we should find companies who have sufficiently explained themselves first and provided context as to why they are spending shareholder capital in a particular way.

For instance, 1 Click Group recently invested in a mortgage lending business to add to their 1 Click Life platform. This was a interesting addition and didn't immediately make sense why this investment was made. Yet, through most of their presentations, they have reiterated their strategic rationale for this which is to reduce the cyclical nature of their business. The addition allows for a more consistence revenue profile with additional cross-selling options in their user base. This excellent and well founded explanation which goes a long way to helping us understand the rationale for this choice, and conversely, we should be wary of companies who do not explain seemingly arbitary decisions.

2. Accountability

As much as good news is always welcome, communicating bad news is often just as important as investors should always receive a transparent view as to the state of their shareholding company. As investors, we should pay particular attention to companies who own up to their shortcomings and look at what they plan to do to fix it.

Using the example of Tivan Limited (ASX:TVN), we can see they have setup a corporate scoreboard to examine their relative performance across different areas of the business. Indeed, they show of both their strengths, but also recognise their current weakness on the project level.

Similarly, Cauldron Energy (ASX:CXU) released a letter from the CEO outlining three key initiatives that are being driven in real time. The CEO admits that historical engagement has not been effective across the shareholder base which has affected investor interest and liquidity. Nevertheless, he then lists a range of responses to his problem which seek to address it. This is a fantastic sign by management that they are proactive about these issues and they want shareholders to be fully informed on the growth journey.

3. Investor Respect

Investor transparency is very important but can also reveal whether a management team respects retail investor. For many small, growth companies on the ASX, most of the share register comprises of retail investors; yet this is a cohort that is often underserved by investor relations activities. When companies demonstrate a focus towards effectively communicating the company's progress to retail, it shows that they respect the trust they have given management and likely have their interests in mind in the future.

We can identify this respect by numerous signs including:

This granular level of transparency goes a long way to show Race's respect for each individual investor regardless of their financial position. This engagement was maintained for a lengthy period of time (often multiple responses per day) until Hotcopper's authorised representative function was shut down in late January 2022.

Race Oncology also conducted an in-person, recorded investor briefing in Melbourne which gave investors an opportunity to meet and hear from Race's CEO and CSO. This is a great, cost-effective initiative that is often under-utilised by companies yet shows investors that management does not fear investors and their queries - and are willing to commit their valuable time to making sure no investor feedback is left behind. Often times, directors hide behind ASX announcements and refuse to engage properly with investors out of the fear of negative backlash. Yet in Race's case, dealing with queries and ensuring investors remain fully informed on the good (and bad) has created an incredibly supportive shareholder base.

Closing considerations

Seeing when a company's management has made a meaningful effort to communicate the granular details is highly important. We should always feel like we know what is going on, and why directors are making each choice.

I personally think point 3 above is very important but often missed. If they show investors respect, it shows they have our interest in mind and are likely to also be performing their job faithfully. After all, shareholders own the company and it is a director's job to ensure even the smallest shareholder knows what is going on.

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