Risk vs. ROI in Providing Embargoed Material News to Media

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