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Tracking shares in unlisted companies can be very challenging since they’re not required to submit compliance reports and disclosure statements to regulatory exchanges. Unlike listed companies, which have to submit disclosure statements and relevant documents to the Securities and Exchange Commission (SEC) when they sell their shares to new owners, unlisted companies don’t have to do these things.
This lack of need for reporting or public disclosure makes it more difficult to track down shares in unlisted companies. Fortunately, there are, still, ways you can track down the performance of your investments in unlisted companies. For one, you can monitor unlisted companies through the use of platforms such as Cake Equity and other similar sites.
Here are some tips and recommendations for tracking unlisted investments:
#1. Establish Active Communications With Corporate Leadership
The first thing you have to do if you invested money in unlisted companies is to establish good and active communication lines with those in charge of managing the unlisted companies in which you invested. The fact that you’re able to invest in an unlisted company means you might have some inside track as to how their shares are sold, bought, and traded. But, don’t be overcomplacent because companies change people in management all the time for just about any reason they could think of.
If you’re still in that stage wherein you’re thinking whether you should go or not into an unlisted company, the same advice applies. You should identify ways you can have good and active communication lines with the management—preferably the top management—of an unlisted company. As much as possible, choose companies that have a board that’s composed of professional executives and managers from a diverse set of independent and broad interests.
You ought to make sure to only invest in unlisted companies that have board members who are known in the business community for their integrity, honesty, and professional accountability. Read up on them, as well as know even the company’s business credit score. Remember that such companies are unlisted and don’t have the same disclosure obligations as the listed ones. In short, they’re not obliged to be as transparent to the investing public as listed companies because they’re not offering shares for sale to the general public in a listed exchange.
#2. Read Strategic Plans And Reports
You should always read the strategic annual business plans, as well as all the relevant financial statements and reports of the unlisted company you’re tracking. Most of these seem to be merely paper concepts and presentations, but, at least, they give you an idea of the public commitments of the corporate leadership about where they intend to take the company and what they intend to do in the near future. Some of them diverge from these plans, but, generally, they’re good information on corporate governance and accountability.
Having established good communications and business relationships with the senior management, as well as the finance and accounting teams, you should proactively ask for copies of all the relevant corporate and management documents, which you’re entitled to see. This will give you access to important updates about their company’s unlisted shares. As part owner, you’re entitled to this insider information. It’d also be your basis for any query that you can send to the management on their plans for future income growth.
#3. Read Financial Statements And Reports Regularly
It’s often easy to put up the best corporate visions and strategic plans. You just gather the resident geniuses in the company and make them come up with presentations containing the latest corporate buzzwords, and you’ll have a corporate vision that can sign up the hottest investors.
But, the only way you can make sense of how the company is doing is by reading and analyzing financial statements and reports on a regular basis. The only way you can find out what’s really happening without having to visit your company premises is by diving into the financial statements and reports.
Financial statements and reports contain the most pertinent information about how the company is spending its money and how much income it’s earning. As they say, this is where the rubber meets the road. The financial statements and reports say where the company’s money went. This gives you an idea whether or not the management is making the most of the company’s finances. The reports will also say exactly how much the company is making each month, quarter, or year. With this information, you can have an objective basis to assess the company.
Unlike listed companies, however, you won’t be able to get copies of these financial statements and reports lying around somewhere on the Internet. You’ll have to proactively ask for them from the finance or accounting departments of the company. If they’re initiating new projects or products, sometimes, you can also ask for information from their business development or product development departments. This gives you a sneak peek into what the road ahead looks like for your investment in an unlisted company.
#4. Stay Abreast Of Business And Financial News
You should also stay abreast of business and financial news. Certain fundamental factors, such as economic conditions, business and financial events, political stability, and other market developments, will affect both listed and unlisted companies alike. The unlisted company you invested in may have interests and investments in areas where disruptions could lead to loss or productivity, or even loss of income. It’d be wise to have a heads up about these things.
Aside from the big picture things, you should also keep track of what’s going on with the unlisted company at the enterprise level. You can do this by asking for sales forecasts and sales reports from both the marketing and sales departments, as often as they’d allow. This would enable you to have a sound idea of the company’s financial viability and performance by comparing the medium- to long-term view presented by the executive management in their reports with the company’s actual business performance indicated in the sales reports.
Takeaway: Make The Most Of Being An Insider
The most important thing to do to track your shares in an unlisted company is to nurture good business relationships with the management team, as well as the senior managers in business operations, finance, and accounting departments. These people would be the first to sense or know if there’s something wrong going on.
Be an active investor. Read business plans, financial statements, and reports. Ask for copies of marketing plans and sales performance reports. In your own way, support and promote your unlisted company.