January 5, 2018
Investor “One-on-Ones”: Pushing the FD Envelope?
When Reg FD was adopted back in 2000, some predicted the death of the
investor “one-on-one” – private meetings between investors and top
corporate brass. That prediction turned out to be about as accurate as
the one that said we’d all be flying our
jetpacks to work by now.
Instead, these meetings remain common, particularly among companies
seeking to raise their profile with investors. But now the smarty-pantses
at Harvard Business School have published a
new study that looks what gets
asked at those meetings. While a lot of questions are pretty mundane
– e.g. “what keeps you up at night?” – some clearly represent an
effort to obtain more timely information about companies than what’s
been publicly disclosed. Check out this excerpt:
The cash balance of the firm two months after the release of the
quarterly report may be stale information. Understanding whether the
firm has sufficient cash to continue operations may be salient for
an investor’s investment decision so the investor will seek more
timely information from management. From a regulatory perspective,
timely questions appear to pose the greatest regulatory risk for
managers in responding. Nonetheless, we find that most private
interactions include at least one timely question posed to
management.
Representative examples of timely questions include:
– “How much cash do you have now?”
– “Do you know additional sell side analysts that will be launching
initiation reports?”
– “Are you done with recruitment or still enrolling?”
– “Are the Q2 earnings call expectations still valid?”
Management’s responses to any of these questions may raise Reg FD
issues – and reaffirming quarterly guidance has been specifically
flagged by the Staff as a problem under Reg FD. The study’s results
suggest what many of us have long thought – that these private
investor meetings are an FD compliance minefield.
Posted by John Jenkins
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