What should treasurers do when IR calls during a quiet period?
Recent back and forth with The NeuGroup’s Treasurers’ Group of Thirty (T30) suggests continuing interest in investor relations compliance. One focal point concerns policies and practices for meeting with investors during blackout, or quiet periods.
In response, most treasurers indicated that they are conservative about Reg FD compliance generally, and thus are not inclined to meet with investors during blackout periods. If for some reason, an analyst call is required (and treasurers actively discourage this), care is taken to keep questions directed to events from prior quarters.
Defining periods of silence or trading inactivity. In The NeuGroup’s T30 dialogue, companies indicated a quiet period as extending from the end of the accounting month, or the first day of the quarter, to the release of earnings. A survey released last March by the National Investor Relations Institute (NIRI) suggested that quiet periods tended to be four weeks for the majority and more than six weeks for 40 percent.
As for trading blackouts (which tend to cover all C-level executives, line of business leaders and employees possessing material information), 70 percent of the NIRI respondents indicated blackout periods of more than 30 business days, with the remaining 30 percent of mega-caps having blackout periods of 21-30 days following quarter end. Major events such as M&A activity might also trigger a trading blackout.
Avoiding temptation or not? The NIRI survey also suggests that firms are divided on whether to have conversations with investors during their defined quite periods. With respect to meeting timing, the most common practice among the NIRI respondents (28 percent) was to meet with investors until the 15th of the last month of the quarter. However, the “other” responses were of equal proportion and, according to NIRI, “these responses largely indicated that IR professionals use their judgment to determine if a call or meeting should be accepted given the specific circumstances involved.” Knowing they are better off not, though, 64 percent of the NIRI respondents reported that they do not participate in broker conferences during their quiet period.
Taken together, the NIRI survey results and the T30 exchange, indicate that that prevailing sentiment to avoid investor conversations during quiet periods is subject to pressure from investor relations departments who are loathe to disappoint.
Where IR insists, then perhaps best practice is to let them take the meeting alone. Indeed, nearly half (47 percent) of the NIRI respondents said that only IR representatives (i.e., not management) take calls or meetings with the investment community during the quiet period. This practice is even more pronounced among larger-cap companies, where only 15 percent let management talk in quiet periods, and where, unlike with small-caps, investors may still take a meeting when the CFO or CEO is not attending.
Treasurers that wear an IR hat thus have data to back them when they say no to quiet-period investor meetings; those that don’t have a good excuse not to participate—and encourage other management figures to do the same.