MORE than four in ten of the most actively traded US-listed international companies – including well-known firms like Alcatel-Lucent, Vodafone, Barclays and Petrobras – are not using paid PR wires to distribute their earnings releases and other disclosure information.
And more companies are likely to follow suit in coming quarters after rule changes by the New York Stock Exchange and the NASDAQ Stock Market now recognize SEC filings and website postings as fully meeting their disclosure requirements.
The results suggest that not using paid PR wires to disseminate disclosures has no negative effect on US trading volumes or on investors’ ability to obtain information about the companies from alternative sources, such as the SEC’s EDGAR database or the companies’ own websites. It could give more domestic companies confidence to follow their international peers’ practices.
Fully 50% of the 10 most active US-listed foreign companies — all of which had 200-day average daily volumes in excess of 8 million shares — do not issue PR wire releases.
Growing use of advisories and summaries
IR Web Report reviewed the most recent financial results disclosures of 100 of the most actively traded US-listed foreign companies to determine how they disseminated their results to US investors. The research was conducted to assess the impact of recent stock exchange rule changes to no longer require their international issuers to use PR wire services.
We found that while 59% of the most active international issuers continue to use PR wires, several are cutting back on the length of their releases or using summary or advisory releases that link to the full text disclosure on their websites. Nokia’s (NYSE:NOK) recent 41-word release is one example. Others include:
- Unilever (NYSE:UN) and Randgold Resources (NASDAQ:GOLD), which issued advisories via Market Wire and RNS, the regulatory news service of the London Stock Exchange;
- SQM (NYSE:SQM), which issued a summary release linking to its website;
- Gafisa (NYSE:GFA), which issued a summary linking to its website; and
- FEMSA (NYSE:FMX), which used a summary release linking to its website.
Interestingly, among those companies that still issue full-text earnings releases via paid PR wires, most are being advised by US-based IR firms that typically benefit financially from coordinating the release with the PR wire service. In other cases, PR wire services offer exclusivity discounts to IR firms to direct their clients’ releases to them.
This suggests that when companies handle their own communications with the US market, they are less likely to pay for PR wire distribution, probably due to the costs involved.
SEC filings new standard
Companies that do not issue press releases via a paid PR wire are instead submitting their releases to the SEC’s EDGAR database. This has the effect of spreading the information to services like Bloomberg, Reuters, Dow Jones and to hundreds of investment portals popular with retail and professional investors, such as Yahoo! Finance.
Earlier this year, NASDAQ eliminated the requirement for its international issuers to use press releases to publicize their quarterly results and mandated that they submit the information to the SEC on a Form 6-K. It did this at the same time it revised several references in its rules affecting domestic issuers to no longer require press releases but to permit companies to file the information on EDGAR.
In its application to the SEC, NASDAQ said that it “has had the opportunity to observe market reaction to news disclosed in ways other than via a press release. NASDAQ’s experience since adopting this rule indicates that there is broad acceptance of Regulation FD compliant methods of disclosure, such as through the use of a Form 8-K.”
In April 2009, the NYSE amended its timely alert policy to permit companies, including foreign companies, to comply with the policy by “using any method (or combination of methods) that constitutes compliance with Regulation FD for a domestic U.S. issuer.” That would include filing or furnishing their earnings releases and other material information on an 8-K, 6-K or using their websites in a Reg FD-compliant manner.
In explaining the change to the SEC, the NYSE said that some of its issuers had long been confused by the exchange’s policies that required press releases even if companies filed their information with the SEC. It said some companies view the requirement as “redundant.” It also said that “some companies wish to publicize material news through the company website” as allowed by the SEC’s guidance.
However, the NYSE didn’t do a thorough job reviewing its requirements because it was forced to go back to the SEC in September 2009 to clean up a reference to using a press release for earnings releases in another section of the company manual. The change now means that companies can distribute their quarterly earnings releases using any Reg FD-compliant method.
In approving NASDAQ’s rule changes earlier this year, the Securities and Exchange Commission said: “The Commission notes that the information required to be reported on a Form 8-K is material information that could impact an investor’s decision to buy, sell or hold a security. For this reason, the Form 8-K is made easily obtainable by investors on the Commission’s EDGAR Web site, as well as many major financial web sites, and the information it provides is also commonly reported by the news media. The Commission also believes that the public has become more familiar with the Form 8-K method of dissemination since the original adoption of Regulation FD.”
Level 1 ADR companies rely entirely on web disclosure
Meanwhile, hundreds of foreign Level 1 ADR companies are able to maintain exemption from SEC registration and have their securities traded on US over-the-counter markets simply by posting their disclosure information on their websites.
While many of these issuers are thinly traded due to a lack of visibility, some like Roche Holding Ltd., Nestle SA, E.ON AG and AXA are able to achieve respectable daily average trading volumes even without distributing information into the US market via paid PR wires.
Many of these over-the-counter ADR companies are also now harnessing social media such as Twitter and Facebook pages to provide information and establish closer ties to their US-based shareholders. This can help them to lower the costs of servicing their US investors and reduce the need for frequent US road shows.
Of course, even while international companies are harnessing these new methods of disclosure and disseminating their disclosures exclusively via their websites and EDGAR, most US issuers continue to use old and increasingly ineffective disclosure via paid PR wires, although a growing number also have begun using advisory releases.