New lines of communication
Dissemination of corporate
information gets more complicated as issuers contemplate the new DIY options
In 1988, sending out news was a simple affair – your
chief financial officer would sign off on the quarterly earnings, and the
public relations office would then fax the press release to one of the
various dueling business news distribution services. What they did with it
was anyone’s guess, but the information went to the wires and the Wall
Street Journal, and everyone was happy.
Today, the dissemination of information is a
carefully regulated, technologically compounded industry. Companies aren’t
simply charged by the word, as they used to be; instead, they can choose
from a shopping list of options. Expectations for information are
exponentially higher now. There is ambiguity, however: what does ‘instant’
mean? How does the SEC define fair and equal access to information?
The distribution people who are quarterbacking the
changes maintain they are making communications faster and easier – and
often cheaper. But a company has to make some hard choices about how much
information it wants to put out there, who needs to see it, and how much
more sophisticated than mere on-screen text it needs to be. Some providers
even offer ‘DIY’ options in addition to their showier multimedia packages;
these are cheaper for companies, as they are priced by distribution rather
than word count.
A world of options
For example, it’s possible for an investor relations officer (IRO) or
corporate secretary to prepare and proof a release announcing quarterly
earnings, and time to the second exactly when that information should show
up on BlackBerrys and Bloomberg terminals. The release might have the full
EDGAR report as an attachment. It could include a video message from the
company president or chairman, analyzing the news with quotable phrases. The
release might contain photos of a new store or product, or include a
15-second video clip about some environmental or workplace innovation the
company is particularly pleased about.
Making material information public satisfies the
letter of disclosure laws, but these services can also deliver your
information onto the keyboards of business bloggers, place it on
industry-specific websites, insinuate it into social media and – possibly
most important – follow it up with detailed metrics showing exactly who
reads your release, and what they do with it. Most providers now offer
several tiers of service, depending on a company’s investor relations or
governance budgets, and its distribution ambitions.
The venerable PR Newswire and Business Wire are
sporting all sorts of new bells and whistles, while newcomer GlobeNewswire,
a division of NASDAQ OMX, is building on a more modern base. Even Thomson
Reuters, an old-school provider with a distinguished multimedia business
pedigree, has launched an enhanced distribution service.
‘Originally, we fed the newspapers, the Associated
Press and everybody else,’ says Scott Mozarsky, executive vice president of
commercial operations at PR Newswire. ‘It was all about text communication.
Now it has become possible for companies to engage in much richer and more
On the other hand, about a half-dozen public
corporations, led by Google, are now posting material information directly
on their websites and leaving it at that. They are still filing their Ks and
Qs and other mandated material to the SEC but they are cutting out the push,
to use distribution language, and gambling that investors, analysts and
others will find the information on the website for themselves.
Google’s site is a game changer, a technology-fueled
experiment in corporate hubris that has stabbed news distribution services
in the heart and forced IROs everywhere to question the nature of
communication. If we post on our website, will the news get lost? Will it
satisfy Reg FD and SEC regulations? What if nobody notices?
Although slow to catch on, self-posting does appear
to be legal. In the summer of 2008, the SEC issued guidance stating that
publicly traded companies could, in effect, forgo the whole issuing of press
releases and simply post their EDGAR filings on their websites. It was a
change that, while important, went largely unnoticed at the time. Google was
one of those companies that decided to test out the SEC rules, and it
believes self-posting is both legal and efficient. Many investors in the
company agree; the dissemination community is not so sure. It could ruin the
business if it catches on.
The guidance states that, given ‘the development and
proliferation of company websites since 2000, and our expectation that
continued technological advances will further enhance the quality, not just
the quantity, of information delivered and available to investors on such
websites, as well as the speed at which such information reaches the
market,’ the SEC believes the internet is uniquely useful in ‘promoting
transparency, liquidity and efficiency in our trading markets.’ It also
notes that approximately 80 percent of mutual fund investors have internet
access at home (see
'Commission guidance on the use of
The 21-page document has been endlessly pored over
by corporate IROs, traditional news distribution points and institutional
investors concerned they will miss something important. The language is so
dense and the implications are so broad that it took nearly two years for
the first company to test the waters.
In April, Google announced that it ‘intends to make
future announcements regarding its financial performance exclusively through
its investor relations website,’ thereby creating the expectation of a
veritable sea change in reporting.
‘To avoid potential Regulation FD liability, a
company considering adopting exclusive website disclosure must satisfy the
criteria in the SEC’s August 2008 interpretive release to ensure the
disclosures will be considered publicly disseminated,’ wrote Albert Rota, a
lawyer in Jones Day’s Dallas office, in
an opinion published earlier this year
by Corporate Secretary.
‘The company should establish its website as a
‘recognized channel’ of disclosure by providing its website address in all
press releases, SEC filings, and online posts,’ Rota continued. ‘One measure
of whether a company’s website constitutes a recognized channel is the
extent to which the general media reports on announcements made exclusively
through the company website. Thus, a company with less of a market following
or smaller market capitalization may need to affirmatively alert media
outlets before moving to exclusive website disclosure of financial
A matter of opinion
Not everyone is on board with Google’s innovation, however. ‘Some investors
are not online,’ says Tim Smith, an executive director at the socially
conscious Walden Asset Management in Boston. ‘A website-only policy would
discriminate against those without regular internet access, who are
primarily retail investors.’ Smith is all for full disclosure on company
websites, he says, but feels investors should have the option to receive
electronic or even paper notices if they choose.
In a recent study of IROs conducted by the National
Investor Relations Institute, only 7 percent of respondents had recently
changed their disclosure practices, and only another 7 percent had any
near-term plans to do so.
Google is a unique case, however, and it appears
that few other companies are as suited to make the change as the internet
giant. Google has been posting all filings, press releases and conference
calls on its website since 2005, and has already set up a distinct and
detailed portal just for investor relations.
This is the kind of move that could put a news distribution outfit out of
business so, unsurprisingly, PR professionals advise against it.
Self-posting won’t necessarily work, they say, unless your company is the
kind of rare beast that everyone pays constant attention to – and your
company probably isn’t that.
‘Whatever Google does is news, big or small,’ says
Demetrios Skalkotos, senior vice president of global corporate services for
NASDAQ OMX in New York. ‘If this will work for anyone, it might work for
them. For other companies, it’s not a good idea; not without sending out a
notice to tell the media and everyone else that the news has been posted.’
Google can probably pull it off, experts concede.
Apple may be able to as well, though so far it has chosen not to go down
this route. Whether recent converts Expedia and Marathon Oil can make a go
of it is still an open question. Both companies are hedging their bets, for
now, by sending out notices, or RSS feeds, to let investors, analysts and
the media know that something new has been posted.
NASDAQ has recently followed the lead of many
foreign stock exchanges, which have long sent out press releases for listed
companies. Traditionally the release was just a few sentences of
introduction followed by a link to forms or filings the company had just
submitted to the government or regulatory authorities, but things have
changed significantly. Last year NASDAQ acquired GlobeNewswire for its foray
into business news dissemination. The company will, effectively, send out
press releases for its listed companies for free, in conjunction with a
suite of other corporate services. Skalkotos acknowledges that the newly
announced service does not yet have clients, but is optimistic that it will
by the time of the rollout.
Changing of the guard
This is the kind of competition that may well spell trouble for the original
corporate press release distributors, Business Wire (established in 1961)
and PR Newswire (established in 1954). Both have scrambled to come up with
new products and services to keep their businesses from going the way of the
typewriter repairman and the broad tape. Both have thousands of corporate
clients in the US and internationally, and both have in recent years
upgraded their technology and expanded their offerings.
Observers and competitors are watching Business Wire
to see how the venerable company manages. Some IROs claim that senior
Business Wire officials have implied that disclosure regulations require an
issuer to use an established third-party service rather than self-posting or
going with an upstart. Company officials deny this is their intention.
Neil Hershberg, senior vice president of global
media at Business Wire, says his company is well positioned to compete with
newcomers in an expanding market. He says Business Wire has many of the same
features the others offer, plus 200 editors in 31 offices to catch copy
mistakes, fix transposed numbers and insert coding and keywords to optimize
a corporate release’s visibility in internet searches.
‘Distribution on Business Wire satisfies Reg FD by
making information available to all market participants,’ Hershberg
explains. ‘Whether you’re an analyst or trader with a Bloomberg terminal or
someone sitting at home with a laptop monitoring your portfolio on Yahoo!
Finance, you’ll get the information you need at precisely the same second.’
Hershberg says the SEC guidance has ‘muddied the
waters’ of fair and equal information, in part by disadvantaging the casual
investor. ‘Web disclosure is fine as long as you do it in conjunction with a
wire release, and send it to the press and individual investors alike,’ he
states, pointing out that even the Motley Fool missed Google’s last
quarterly numbers. ‘You’re dealing with a microsecond trading environment
Despite these reservations, some very large and very
successful companies are cutting wire services out of their information
distribution models. It is unlikely that this trend is going to stop, and it
means newswires and investors will have to adapt to the new reality or else
run the risk of losing relevance. Companies do not take the step lightly, as
they want investors to be well informed and up to date with the corporate
story – something that is likely to become even more important following the
new disclosure requirements that are part of the recent financial reform.
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