I'm going to let you in on a little secret about the world of media -- the stories they write or record can make a sizeable difference in your portfolio.
Journalists and their sources might not know every single detail about a company. But journalists know how to dig, scurry, and uncover leads that company executives don't want the public to know -- anything from confidential corporate memos to inside information that even the spouse of the CEO didn't know.
You might have heard that Groupon Chairman Eric Lefkofsky made comments about his company during its quiet period, leaving Groupon to (most likely) refile documents for its IPO. As you know, the US Securities and Exchange Commission limits what companies planning IPOs can say about their prospects before listing shares. Historically, this quiet period extended from the time a company filed a registration statement with the SEC until SEC staff declared the registration statement "effective."
Quiet periods got a little noisier in 2005, when the SEC ruled companies could continue publishing normal communications during the so-called quiet period. But companies are still subject to certain guidelines -- and some think Lefkofsky may have said too much.
I'm not surprised an executive talked about his company during the quiet period. Back in 2004, the SEC admonished Google's Sergey Brin and Larry Page for granting an interview to Playboy on the eve of the company's IPO. And later that year, salesforce.com had to postpone its offering for 30 days after the SEC discovered CEO Marc Benioff had talked to The New York Times.
What inspired me to write about this was learning that Bloomberg News got its hands on a memo issued by Groupon CEO Andrew Mason a day before Lefkofsky made his comments. The memo asks employees to keep quiet about the company during the quiet period.
How Bloomberg got the memo is open to speculation. But it presumably came from a Groupon employee.
But the whole situation got me thinking. Have any of the companies in your own portfolio had to do their own version of the Texas Two-Step because someone with loose lips mentioned something that should not have been discussed? And, if one did, how did the release of the information affect the company's stock price?
Here's an example. Last month, Sony Corp. (NYSE: SNE) CEO Sir Howard Stringer opened the kimono too much in informing Wall Street Journal reporter Walter Mossberg that Sony would be supplying components to the iPhone 5. Mossberg is a seasoned journalist who has his eyes and ears on the street, online, and anywhere else he hears buzz about a company. It is quite conceivable that, as a journalist, he had an internal source of information about the iPhone 5 and saw an opportunity to pop a question that could get Sir Howard to talk about things.
But Stringer's little slip of the tongue affected stock prices (not to mention reputations and operations) of two companies, Apple Inc. (Nasdaq: AAPL) and OmniVision Technologies Inc. (Nasdaq: OVTI), the current supplier of iPhone image sensors. (OmniVison has since received orders for the iPhone 5, as seen in this news report.)
There is a right and a wrong way to tell journalists what a company is doing. If executives from a company in your portfolio talk with a reporter, you'd better hope they understand that anything they say can and will be used against them -- in a court of public opinion, as well as a court of law. And hope what they say will help the share price climb, instead of making it dive.