Everything You Need to Know About Leaked Earnings Releases

Over the past several years we have witnessed ever-increasing changes in how we, as IR practitioners, experiment with efficiently and cost-effectively disseminating material information. Call it the age of dissemination experimentation. And while we can understand why the world’s largest technology companies would want to showcase their own solutions when disclosing material non-public information, time and time again we have seen that experimentation is a dangerous gam

Over the past several years we have witnessed ever-increasing changes in how we, as IR practitioners, experiment with efficiently and cost-effectively disseminating material information. Call it the age of dissemination experimentation.

At the dawn of this age was the SEC’s Regulation FD interpretative guidance, created to address the use of company web sites as a method of disclosure to investors.  The SEC guidance states that, for some companies, in certain circumstances, posting of information on the company’s website, may be a sufficient method of disclosure as long as the company, “disseminates the information in a manner making it available to the securities marketplace in general, which requires an analysis of (1) the manner in which information is posted on a company web site and (2) the timely and ready accessibility of such information to investors and the markets.”

And while we can understand why the world’s largest technology companies would want to showcase their own solutions when disclosing material non-public information, time and time again we have seen that experimentation is a dangerous game.

The first example of experimentation gone wrong occurred in 2007.  Sun Microsystems attempted website disclosure (prior to the SEC’s interpretative guidance) and upon posting of the release, site visitors found a “Page Not Found” message for six minutes.

Today the greatest irony is that in most instances global technology leaders depend on another organization’s technology, which may be antiquated, to satisfy regulatory requirements.  Yesterday’s “inadvertent” posting of Twitter’s earnings release prior to public dissemination was not Twitter’s doing; NASDAQ issued a statement saying its Shareholder.com business posted the earnings early due to an operational issue.

According to Business Insider, Twitter’s “earnings leak is not the first time that a company’s earnings results have been discovered early.” It’s happened before with numerous household name companies. Within these examples, we see two trends emerging: inadvertent disclosure due to web-scraping technology and gamesmanship by journalists.

So how and why does this continue to occur?

High-Powered Computers: USA Today reported on the power of “scraper bots,” stating data scraping has become a powerful tool for investors, like hedge funds, who want data they can trade on before anyone else notices it’s even there. Twitter’s leaked results shows how vulnerable some companies are to leaking sensitive financial data early, even in forms that may not be easily detected by the naked eye.

Of note, many firms conduct “scraping” of IR websites *and* said firms do not always share their findings with the general public.  From today’s USA Today article:

Brendan Gilmartin, an executive with Selerity, said the data-mining company was on Twitter’s website when the computer software detected a change in the URL.

One of the links was to a PDF document that had Twitter’s first-quarter earnings data. Selerity’s computers then “parsed the document and extracted the financial data,” which was then sent to Selerity’s clients and broadcast via Twitter.

Selerity doesn’t always broadcast the data it mines, Gilmartin said. But the company did it in this case to attract attention to the company’s capabilities, he said.

Gamesmanship via Man-Power: According to this Wall Street Journal article:

Bloomberg News journalists frequently scour corporate websites to see if they can find news releases posted early by companies who are parking news online expecting no one will see them.

These people say, for example, the Bloomberg journalists will type the Web address for a company’s first quarter earnings release, and then adjust the URL just to change the number of the quarter.

How do we break this cycle of inadvertent disclosure, yet continue to experiment with efficient and cost-effective disclosure practices?

One way to ensure leaks of material information do not occur is by using a trusted newswire service like Business Wire.

Business Wire is committed to seamlessly providing equal access to all market participants, leveraging our gold-standard distribution to provide full, fair and broad-based disclosure – both via the newswire and to IR sites.

By leveraging a newswire for financial news distribution, there is no need to post anything to an IR site early, potentially leaving the door open to bot scraping or gamesmanship by third parties.  Business Wire’s distribution ensures material information is posted to an IR site at the same time it reaches tens of thousands of websites and media points worldwide.

Founded in San Francisco in 1961 experimentation and innovation are part of our DNA.  We are firm believers in technology and the efficiencies it can drive, yet are keenly aware that experimentation and use of technology cannot come at the risk of jeopardizing security, performance and reliability.

About the Author: Michael oversees Business Wire’s global disclosure services, partnerships within the broader financial community, and is responsible for identifying revenue-generating opportunities for Business Wire. He also possesses overall responsibility for Business Wire’s Canadian and Hong Kong operations. Under Becker’s guidance, Business Wire today offers a comprehensive suite of services for the investor relations community, including: sophisticated investor relations sites, webcasting, corporate social responsibility and venture capital press release distributions, XBRL services, and Business Wire’s in-house EDGAR Desk, consistently ranking among the top SEC filers. Becker also worked closely with Business Wire’s European team, setting up more than a dozen disclosure networks throughout the European Union, keyed to the January 2007 implementation of the EU’s Transparency Obligations Directive [TOD]. Becker joined Business Wire in 1999 as Financial Information Services Specialist. Prior to joining the company he worked for Capital Link, Inc., where he created and implemented comprehensive media and investor relations programs for high profile clients, including SBF-Paris Bourse and the Athens Stock Exchange. Becker is a board member and past-president of NIRI-New York, NIRI’s largest chapter with some 400 members.  Becker holds an Executive MBA from Baruch College and is currently an Adjunct Professor of Management and member of the Executives on Campus Steering Committee at the school. 

While we can understand why the world’s largest technology companies would want to showcase their own solutions when disclosing material non-public information, time and time again we have seen that experimentation is a dangerous game
Tags: Twitter, Sec, Nasdaq, Earnings, Regfd, Financial Disclosure, Selerity, Investor Relations, Twitter Earnings, Usa Today, Business Insider

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