In response to an IR community
inquiry about providing an embargoed copy of an earnings release to
the media an hour prior to its issuance, we wrote the following advice on such
practices that we are sharing here as well.
The specific inquiry said that the
Company's CEO had been invited to appear on a "well-known" financial
news program just after they report quarterly results. The producers also asked
if the Company would provide them an embargoed copy of the earnings release
about an hour early so the host could digest the news, the program could
produce graphics, etc. to support the segment.
Here's what we said: There is no one
size fits all answer to this question - but you are free to share the news with
them in advance - but it does expose you to a modest risk should they act on
the news (trading) or report the news in some way in advance. Working
with reputable news organizations - that risk is virtually nil and therefore
not one that would inhibit my proceeding - but like everything - you have to
consider the ROI - does the expected benefit outweigh the modest risk?
And from a legal standpoint, you can protect yourself by
asking the journalist to confirm in advance - email would be fine - that they
acknowledge they are receiving material news in order to help their interview
preparation - and that they understand they cannot disclose any of this data to
any parties and that any trading or other action using the provided information
would be in violation of Federal Securities laws (and that in the event of any
inquiry, you would disclose to authorities that you have shared this
information with the media source under embargo, along with the related
communications.
The bigger question would be - to what extent do you think
the content of the release will help them in developing interview questions
that well best support the messages you seek to tell? If you think more time
with the release will lead to a far more effective interview - then I would
proceed with sharing an embargoed release.
Are there issues or themes that require more time to
consider - such as charges or other surprises vs. market expectations or other
new data that would take time to digest?
Is the source of the outperformance or underperformance easy
to discern - if they don't have an advance look?
Will their advance preparation enable them to dig deeper,
perhaps on industry issues or other elements on which you would prefer to not
be in focus?
You also have the ability to share with them the qualitative
commentaries in the release - and perhaps the conf. call script - rather than
the numbers - that would get them on message without providing them with
material earnings data.
IR is all about building relationships and credibility. Demonstrating
trust and working with the media to help them do their job can have long term
benefits in terms of future coverage and their willingness to listen to your perspective.
Saying no to the request will not help your being considered for future
media opportunities.
Lastly, we would argue that the smaller your company is, the
harder you have to work, the more such risks you need to take, to position your
company for media coverage. Larger companies can get away with doing less
(not that we recommend that!) because they are more likely a "must
cover" story.
Hope that helps!
Catalyst Global
