Google Move Steps Up Interest in Web Disclosure

Leave it to Google to keep pushing the boundaries of what can be done online.

Last month, the search engine giant published a press release touting its first-quarter 2010 results—without actually detailing what the results were. Instead, it directed anybody curious to visit Google’s investors relations Website and announced that it intends to make all future announcements about financial performance exclusively through news posted there.

That’s a departure from prevalent practice in Corporate America, which is to publish the full text of earnings information in a press release. It also puts Google in the vanguard of companies taking advantage of guidance the Securities and Exchange Commission published nearly two years ago to encourage companies to use disclosure via Website more often.

Google did not respond to requests for comment. Observers, however, say the company is not alone.

Jones

“It’s not widespread, but a high-profile company like Google doing this may shine more attention on the topic,” says Dominic Jones, founder of IRWebReport.com and an advocate of such disclosure. “It’s not rocket science. It can save money and help companies communicate and build better relationships with investors.”

Aside from saving money, Jones says the practice also strengthens companies’ ability to communicate with investors and other players in the capital markets directly; that’s a big concern for corporations, since they have poor visibility into who their shareholders are. Bringing investor traffic to their own Websites “is an opportunity to start to understand where interest in the company is coming from, so they can provide better services on their Websites,” he says.

Still, it’s been a long time coming. The SEC issued its interpretive guidance on Website disclosure in August 2008, to reassure public registrants that they can indeed use corporate Websites to provide information to investors without violating federal securities law. Companies have been particularly fearful of Regulation Fair Disclosure, which stipulates that material, non-public information about a company cannot be disclosed to select audiences.

In other words, if a company has something juicy to say, it must announce the news to everyone all at once. The question about Reg FD has been whether disclosure by Website qualified as “everyone at all once.”

Under the 2008 guidance, SEC staff indicated that Website disclosure can pass muster if it meets three criteria: the Website is a “recognized channel” of distribution; the posting disseminates the information in a manner that makes it available to the securities marketplace in general; and there has been a reasonable waiting period for investors and the market to react to the posted information.

“Just because Google can do it doesn’t mean everyone can. The SEC put the onus on companies to do the analysis.”

—Laura Richman,

Counsel,

Mayer Brown

The trick is that each company must determine, based on its own facts and circumstances, whether its Website is a recognized channel of distribution. “Just because Google can do it doesn’t mean everyone can,” says Laura Richman, counsel in the law firm Mayer Brown. “The SEC put the onus on companies to do the analysis.”

Littenberg

Michael Littenberg, a partner at the law firm Schulte Roth & Zabel, say most companies are likely to continue the traditional approach of issuing the full text of financial results in a press release disseminated by a wire service. But, he adds, companies are intrigued by the idea of Website disclosure, and Google’s move will probably fuel further interest. “I think we will see that become more widespread,” he says.

Why Do This?

Littenberg agrees that cost savings alone aren’t likely to motivate large companies to move to Website disclosure. Rather, it’s “potentially a way for companies to stay or become more engaged with their retail shareholder base,” he says. “It’s hard to argue that’s there’s any meaningful downside to investors.”

Jones argues that it’s a better approach. “No one is disadvantaged, because it ensures simultaneous access for everyone,” he says.

Wire services, which stand to lose revenue as the Web disclosure trend grows, are still keeping an arm’s length from the subject. Phyllis Dantuono, chief operating officer at BusinessWire, says she’s confident that the traditional model of disseminating earnings information by wire service will continue.

“The fact is that we are in the midst of a very robust earnings season; relatively little has changed in the way companies disseminate material news to the marketplace in the more than 18 months since the SEC’s interpretive guidance release was issued,” she says. “The reason is that the current disclosure system works exceptionally well. All market participants have simultaneous and equal access to market-moving news on a real-time basis. In fact, there is usually an outcry when companies seek to bypass proven disclosure channels.”

Google is not the first to take the plunge. Other companies, including Nasdaq-listed BCG Partners and Expedia Inc., have moved away from including their full financial results in a press release, instead favoring a short advisory press release telling investors the information is available on their Websites.

LINKS TO RESULTS

Click on the following links to access financial results for Google, Expedia, and BCG Partners:

Google

Google Inc. has released its first quarter 2010 financial results. Please visit Google’s investor relations Website at http://investor.google.com

to view the earnings release. Google intends to make future announcements regarding its financial performance exclusively through its investor relations Website.

Expedia

Expedia, Inc. today announced fourth-quarter and full year 2009 results through a press release that is available now at http://www.expediainc.com/ir. As announced previously, the company will host a conference call today to discuss its financial results at 8:00 a.m. Pacific Time (PT)/11:00 a.m. Eastern Time (ET).

In addition to the press release, the live audiocast and audiocast replay will be available to the public at http://www.expediainc.com/ir. Replays of the conference call are expected to be available for at least three months after the call date.

BCG Partners

BGC Partners, Inc., a leading global full-service inter-dealer broker of financial instruments, today announced the following:

In compliance with the U.S. Securities and Exchange Commission’s recent guidance regarding “notice-and-access” news releases (1), the company plans to discontinue issuance of full-text financial news releases via a wire service and will issue only advisory press releases notifying investors when new and material information is available on its Websites. BGC Partners plans to issue an advisory release after the close of market on Thursday, February 26, 2009, notifying the public that a complete and full-text financial results press release has become accessible at the “Investor Relations” section of http://www.bgcpartners.com. The complete release will also be available directly at any of the following web pages:

http://www.bgcpartners.com/ir

http://www.bgcpartners.com/ir-news

http://www.bgcpartners.com/news-centre/press-releases

BCG Partners adopted the practice in February 2009, according to Jason McGruder, the company’s vice president of investor relations. After an advisory notice is published on the wires, the company’s IR and PR departments e-mail the full-text of the earnings release and the Excel tables to their respective e-mail lists.

McGruder says the move has been a huge time-saver, since publishing the full earnings release on the wires required two versions of the earnings release document: an internal Microsoft Word version, and another that the newswire converts to text. Last-minute changes meant updating both documents, which took time and risked errors. The cost savings are an added bonus. On average, the company was previously paying about $5,000 per earnings release. With the shorter releases, that dropped to $500 from $1,000.

McGruder describes the change as a “non-event” for investors. “There was no feedback, positive or negative, from any of our investors or stakeholders,” he says. Analysts, meanwhile, like the downloadable Excel document for the financial tables.

In February of this year, Expedia also stopped including its full financial results in the press release, and began issuing advisory press releases directing investors to its IR site. “There were a number of logistical considerations that led to this decision, including time savings, cost savings, and of course compliance with SEC regulations,” company spokeswoman Katie Deines Fourcin says.

Jones says companies are more likely to go the route of advisory press releases rather than using their Website as the sole source of disclosure for Reg FD purposes, but that could simply be an interim step toward eventually relying on Websites alone for disclosure.

Richman

Still, observers say companies will be slow to change their ways. “Over the long term, I think there will be a greater move in that direction, but I don’t expect to see a stampede following this path,” Richman says. “There’s comfort in following custom you know works.”

Jones says getting support from the legal community, which “wields enormous influence over what IR departments do,” is crucial. “If they can get comfortable, then the floodgates will open,” he says.