My professional organization, National Investor Relations Institute (NIRI), hosted a webinar about Quiet Period practices on May 20, 2015. I joined two other experienced investor relations professionals to comprise the panel of speakers for the webinar. The archive is accessible on www.niri.org by members only. The following are my webinar speaking notes for people who do not have access.
I am a proponent of quiet periods prior to the release of earnings. It minimizes the risk for misinterpretation and the spread of rumors and/or speculation prior to an earnings announcement. All of which can cause stock volatility and a distraction while preparing for the actual release of earnings and conference call. This is particularly a risk for companies offering “earnings guidance” or management outlook on future earnings.
The quiet period for the release of earnings is not well defined. Stock offerings such as an initial public offering by new issuers or stock offerings by established, listed companies such as secondary common stock or convertible preferred offerings have more defined quiet periods.
The absence of well-defined regulations result in greater variability of application, and that leads to confusion . . . both sell side and buy side. Let’s call this the downside of quiet periods. There will be external pressure to make exceptions to accommodate a scheduled investor event unrelated to the release of earnings.
The earnings quiet periods at my previous companies typically began at the close of business on the last day of the fiscal quarter and ended when we publicly disclosed our financial results. During quiet periods, we discontinued all one-on-one and group meetings with members of the financial community as well as declined invitations to speak at investor conferences. As IRO, I would continue to take phone calls.
IROs have a lot of experience talking to people without disclosing material, non-public information . . . regardless of whether they are in a quiet period or not. In the event a telephone conversation during a quiet period led to pending financial and/or operational results for the quarter, I would explain that the topic would be covered in the earnings release or conference call . . . and then made sure it was in the release and/or script for the call or made sure we were prepared to answer a similar question on the conference call.
Over time, the consistent practice of adhering to quiet periods led to a reputation for being accessible, but not available for investor conferences, group meetings and one-on-one meetings immediately prior to the release of earnings. It was viewed as fair and equitable to everyone. Time will increase the acceptance of quiet periods and alleviate the pressure to make exceptions. Here are some actions to accelerate acceptance.
1. Quiet periods should be as short in duration as possible.
Depending on the complexity of your business and the sophistication of your financial system, it is possible to release earnings two weeks or less after the close of the quarter. With the help of the CEO and CFO, the length of the quiet period can be shortened. I have done it several times by shaving off a day or two at a time. The reduction was still appreciated by the financial community.
2. Incorporate quiet periods into Disclosure Policy.
About ten years ago, I started incorporating the quiet period into our Disclosure Policy, which was distributed to all employees to achieve consistent application throughout the company. This helped create a distinction between quiet periods to promote full and fair disclosure of information and blackout periods, which clarify and enhance the prohibitions against insider trading. It also represented an opportunity to discuss quiet periods objectively with the CEO and CFO independent of outside influences such as an invitation to an investor event. (A sample disclosure policy can be found on The Heights’ Resources page.)
3. Increase awareness of the end of each fiscal quarter.
Another action to increase acceptance was posting our fiscal calendar on the IR web site, which showed the end of each quarter. We did not indicate the quiet period since it hinged on the earnings release and we did not want to commit to a specific date for the release one year in advance. The financial community could still plan around the end of the quarter, which is important when your fiscal year end is anything but December 31.
4. Offer appealing alternatives.
In the event we had to decline an investor conference due to a quiet period, we would make ourselves available for a non-deal roadshow with the sell side firm in one or two cities at a future date. As it turned out, this was an appealing alternative for the sell side as well my management team. It was also fair and equitable to all sell side firms publishing coverage on the company.
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