By Dominic Jones
BARRON’S technology journalist Eric Savitz has lashed out at companies that provide guidance in conference calls but not in their news releases, a practice he says discriminates against individual investors and leads to technical violations of Reg. FD.
Writing on the Tech Trader Daily blog, Savitz says companies that provide guidance only during their conference calls do so to avoid being accountable for their predictions. And he says the practice hurts individual investors and favors institutional investors because they have access to paid transcript services and also have more resources to cover live conference calls.
My own research finds that among U.S. large-cap companies only about half (52%) include some form of guidance — either annual or quarterly — in their earnings releases. I don’t know, however, what percentage of those companies not providing guidance in their releases are providing no guidance at all and how many are providing it in their conference calls.
Why don’t I know that? Well, because it’s impossible for me or my colleagues to listen to conference calls in full during our reviews of investor relations websites. Online audio really sucks as an information delivery medium, especially when you’re looking for something specific like guidance. It’s very easy to miss stuff in an audio replay, especially if replays are not indexed, which 59% aren’t.
It would help enormously if companies gave investors access to transcripts that they could search, but only 10% of the companies we survey offer transcripts on their sites. And almost all of them are our clients.
For the past six years, I’ve been publicly bitching at companies to provide transcripts, but I might as well have been a lone voice baying at the moon. Here’s a piece I wrote in 2001, and here’s a newer one which says transcripts are all about transparency, or rather a lack thereof. (Six years of saying the same thing. What a sucker I am.)
But you want to know something? I’m jealous. Eric Savitz has a much bigger pulpit than me. And he’s also way smarter. Because his solution is genius. Here’s what he wants, and I presume it’s aimed at the SEC:
–Earnings guidance should be published in the form of a press release, either with earnings or separately, and filed in an 8-K with the SEC.
–Transcripts from all corporate conference calls should be required to be filed with the SEC in an 8-K.Let’s do disclosure the right way – and make corporate managements fully accountable for their forecasts.
Go! Eric, Go!
Related:
Friday Rant: Let’s Make Companies Publish Their Guidance; Conference Call Aren’t Enough
Hi Dominic-
Enjoying your blog. It does amaze me how few companies provide call transcripts either on their sites or as 8-Ks. I’d be surprised if the SEC goes for this as a requirement, but I wonder if there is any stock price performance correlation b/w providing transcripts, even holding quarterly calls, not etc?
I know anecdotally at least over the years, I’m much more likely to become interested in more “transparent” companies and stick with them longer when they are more accessible and also aren’t afraid to be held accountable.
On a related topic, I’ve wondered how companies can often get away with webcasting conf presentations, but then often cutting off the Q&A portion of the presentation (not to mention the break-out sessions, which often have have the best info nuggets and let one get a sense of what institutions are thinking). Borderline skirting of Reg FD I would think? Thanks again-
cheers
Matt Ragas
http://www.mattragas.com
Matt,
Thanks for your comment. Is there a correlation between disclosure transparency and stock performance or valuation? I’m not sure it’s really ever been proven beyond doubt, although a couple of studies have found evidence that there is some benefit. I’m thinking of an S&P study and a McKinsey study on governance.
For me, though, it’s more about respect for the role of shareholders. If I’m giving my money to management to invest in a business, and that’s what investors are doing ultimately, then I figure I have a right to the same information as every other investor, and I shouldn’t have to browbeat them into giving it to me in a usable format.
“The management meeting can provide a rationale for a stock price level, market intelligence or at least some nuance about future plans. Unless he is doing forensic work, just talking to IR’s is like basing research on press releases.”
That’s a comment from a fund manager reacting to the news that Banc of America Securities analyst Frank Pinkerton started coverage on 7 drug companies without speaking to management.
Funny, thats precisely how retail investors are expected to operate. And here’s a fund manager saying that’s not good enough. So you have to wonder what gets discussed behind closed doors that’s so significant.