Guidance on guidance

2 countries separated etc. Following my post regarding the SEC guidance on the use of web postings and news releases (which highlighted the distinction with the highly structured European, TOD inspired rules - and by the way prompted some challenging observations!), the US National Investor Relations Institute has sent a timely reminder of the use of quarterly EPS guidance.

It reminds us that no one size fits all, and that for some companies this form of guidance is appropriate, however that for all companies “a focus on long-term business value drivers by all financial markets participants - public companies, financial analysts, investors and the media – will lead to reduced volatility and a lower cost of capital” is essential.

Meanwhile for most European companies, guidance has always required word smithing. Some companies play a “hotter…colder” game with analysts who want to check their numbers against the investor relations team. But in these darker days, what about more extreme cases - such as when companies say they do not have a clue?

BMW and Allianz are among those European companies that have traditionally provided US-style guidance, but have dropped the practice. Both announced last week they were dropping the practice, saying that market conditions made "accurate earnings predictions" impossible.

Investors traditionally attach a significant premium to those companies that communicate well, and for consistency of performance. Does that mean they are likely to punish companies that don’t – or cannot – forecast accurately? Not judging by the BMW and Allianz examples, where share prices since their announcements have remained stable – or even rising.

Nonetheless, as always this blog will argue that communication of longer term strategies is essential, however admitting you do not know about the short term is simply to recognise reality.

News releases and websites in disclosure – the experts offer their view

The joy of having a portfolio existence. Last Friday I was on a call with members of the Disclosure Advisory Board, to get their views on the SEC Guidance on the use of company web sites in disclosure. These are genuine experts in their theme. IR Directors from large and small companies, veteran sell side analysts, legal counsel and investor relations consultancies. Many served on the original SEC Disclosure Committee. So when they talk, we listen.

And they have issued their reactions in a paper today.

In summary, their view was that the SEC guidance was very helpful in clarifying what has been a very difficult area for companies. When and whether to use the company’s website to communicate with shareholders has been contentious for some years, and getting assistance from the SEC is great.

However that Guidance falls short of stating that a web posting on its own will satisfy disclosure obligations. Indeed, the detail lays out a check list of things companies should consider before doing so.

In the Board’s view therefore the news release will remain the cornerstone of the communications strategy – especially of earnings releases – for the vast majority of US public companies. Telling the company story – a consistent theme on this blog – is crucial. And it is pointless if no-one can see it.

A ha! I hear you cry, you would say that wouldn’t you, with your affiliation with PR Newswire? Well, yes, except that I didn’t, the DAB did.

Corporate website posting for disclosure compliance?

The SEC has issued a guidance document helping companies decide whether their current disclosure distribution strategies are appropriate.

My Collins English dictionary defines guidance as “Leadership, instruction or direction”. (It also has the flight path of a guided missile; perhaps that is more appropriate)?

So the question is whether the SEC guidance helps or hinders, or provides the guidance needed by different communities.

First the good news. The fact that the debate is going on, and the attempt to provide clarity is terrific. It is without question that electronic distribution lies at the heart of today’s disclosure world. By identifying that the SEC has done a service.

It is also good that IRO’s spend time thinking about the full process of their disclosures; so often it is tempting to say “same as last quarter”. And in these days of having to fight for every investment pound, Euro or dollar, I will always argue that good disclosure is simply the best.

However there are concerns as to whether the SEC document sheds heat or light. After 40 years (yes its true!) in the financial services information business, from paper tape to the web, I believe * that best way to harness the full power of the internet, rather than just one tiny part of it (the corporate website or blog), is through technology, which can reach - in the words of the Heineken ads - parts that other means cannot reach.

• And for good disclosure I argue that as an individual not with my PR Newswire affiliation.

For all its benefits, the SEC document will not help all.

Public companies will struggle to find clarity in whether a sole website posting (and EDGAR filing) satisfies Reg FD. There are many IF’s.

Institutional investors and analysts will worry that their datafeeds will miss news from some companies, to their disadvantage.

Retail investors relying on tickers not URL’s will worry that their favourite Yahoo Finance or Google Finance site will miss news.

And the news vendors such as Reuters, Bloomberg and others will worry that their editorial processes may not be as comprehensive or as fast as before.

Meanwhile it is a step away from the growing coherence between EU and US corporate disclosure practices, which have been growing ever closer. Transparency Matters understands from EU regulators that there is currently no review to move away from current EU compliance obligations – the PIP/SIP system.

More to come I suspect!