BGC Partners, Inc. (NASDAQ: BGCP), a small-cap inter-dealer broker of financial instruments, yesterday announced its earnings using the notice-and-access news release method we have been advocating for several years.
Despite heated hand-waving by one big PR wire service — and some hand-wringing by ourselves — the earnings release process went off without a hitch, even if the results themselves were not all that great (they missed consensus by 7 cents).
BGC’s notice-and-access earnings release — essentially a PR wire service release containing links to the full-text information on the company’s website — met its objectives. Interested investors got the information they needed and no one was disadvantaged by the process.
The notice, which was issued via PR Newswire, was released at 5:15pm ET. At the same time, the company posted the full-text of the 17-page release on its Thomson Reuters-hosted website in a PDF download. You can see BGC’s notice on MarketWatch and in the screenshot below.
|The notice BGC issued yesterday advising investors that it had posted its earnings release on its website.|
Briefing.com reports news
One of the concerns raised by detractors is that the media and financial news services will have difficulty covering news issued in this way.
But yesterday we learned that that’s not the case. BGC’s earnings announcements are rarely picked up by the media or financial wires, but yesterday its news was covered by Briefing.com, a provider of live market analysis.
I also noticed that there was little difference in the speed of Briefing.com’s reporting on BGC’s results compared to a company that issued its news five minutes earlier using a full-text earnings release issued via Business Wire.
It took Briefing.com 10 minutes to post a note on Hersha Hospitality Trust’s results, which issued a full-text earnings release at 5:10pm, and 11 minutes to do the same for BCG’s notice-and-access release. See the screenshot below.
|Claims that financial wires have trouble using notice-and-access releases are not substantiated. Briefing.com filed a note on BGC’s results 11 minutes after the notice was issued via PR Newswire. This is only 1 minute more than it took Briefing.com to file a report on a company that issued a full-text release via Business Wire five minutes earlier.|
Cost and time savings, better metrics and recognition
BGC has proven once again that the notice-and-access approach works. That should make many more companies confident to adopt the process. Thomson Reuters has assured its corporate clients that it is ready to support them in implementing notice-and-access disclosures.
As I reported last August, a few other companies have already implemented the notice-and-access process. One small-cap company told me they will save $30,000 in earnings release costs and cut up to 20 hours from the release preparation process.
The approach also gives companies more control over the experience that investors have when they access the information. And since all investors are using the company’s website rather than third-party sources to access its news, website traffic statistics can give IR departments a more accurate measure of investors’ interest in their news.
Finally, as investors become comfortable over time using corporate websites to access scheduled disclosures like earnings releases, IR departments will be able to transition to using their sites as standalone disclosure sources under the Securities and Exchange Commissions requirements for web disclosure under Reg. FD.
Room for improvement
While I can’t really fault BGC, Thomson Reuters and PRNewswire for how they handled yesterday’s announcement, there are still several things about the process that need refinement.
- Provide a release time. I mentioned this in my earlier post when BGC announced that it would use the notice-and-access process. I’m more convinced now that companies should tell investors when they will post their releases on their websites.Imprecise release times like “before regular trading hours” or “after the market close” aren’t helpful to investors who are highly motivated to obtain the news. In BGC’s case, investors had to sit on its website from 4:00pm to 5:15pm, periodically refreshing their browsers to get the news at the very instant it was published. Highly motivated investors have to do this rather than wait for the notice to move over the wire because PR wire service distribution is not simultaneous. For instance, I retrieved the release on BGC’s IR website at 5:15pm, but it wasn’t until 5:17pm that the PRNewswire notice, which is time-stamped 5:15pm, appeared on Yahoo! Finance and MarketWatch. If you can’t provide a precise time in advance, at least provide a 30-minute window or post the estimated release time on the site on the day of the release.
- Enhance the user experience. Under the notice-and-access approach, almost all investors will be visiting your website to get your company’s earnings releases. View this as an opportunity to put your company’s best foot forward by providing engaging and easy to use content. In BGC’s case, the earnings release was initially available only in PDF. However, within an hour an HTML version along with Excel downloads was also provided. For a small-cap company like BGC this is a good standard to aim for, but larger companies should consider additional value added practices.
- You don’t need a forward-looking disclaimer in the notice. Since the notice release contains no information other than an advisory about the availability of information on the company’s website, there’s no reason to include a forward-looking statement (FLS) disclaimer in it. In BGC’s case, the notice included a FLS disclaimer that is three times as long as the notice itself. According to Jason McGruder in the company’s investor relations department, this is simply because the company’s legal department requires the disclaimer on all releases at all times. That’s not unusual, but it doesn’t mean you should follow suit.
- Make sure you have a verifiable audit trail. If you are going to use your website as your companies primary disclosure source, you must be able to defend your practices against a possible legal or regulatory action. That means not only keeping records of the earnings release drafting process, but also of the publishing process. This is an area where the big IR website hosting services need to get their acts together.
The notice-and-access approach for scheduled disclosures is a win-win for companies and their investors. If you are reading this in anticipation of using the process yourself, then please see our earlier article about BGC, and feel free to contact me if you have any questions.
P.S. It’s important to understand that this notice-and-access process is really just a transitional measure and is by no means leading-edge. There are many ways that companies could be distributing their information without ever having to use a paid PR wire service. New technologies exist today that are faster than anything the PR wires are using. But companies and their investors have to start somewhere, and this notice-and-access approach is a safe entry point.