October 18, 2005

Analysts and Soft Research

Lots of news lately about the relationships between analysts and the companies they cover. For example, it was widely reported last month that the SEC was looking into Altera Corporation and its alleged retaliation against an analyst.

Maybe I am missing something, but I think the SEC might need to create new rules here – because the potential cause of action is not clear to me as companies aren’t obligated answer questions from everyone who calls. I understand why retaliation doesn’t seem fair to analysts or good for investors – I just don’t see the legal basis for an enforcement action under the existing regulatory framework.

How about the story a few weeks back about how Cyberonics’ CEO objected to the hiring of some students by an analyst to crash an invitation-only video conference meeting during which the company’s new medical devices were discussed, as fleshed out in a September 7th WSJ article. I can understand how this could be irksome to a company due to the misrepresentation involved. On the other hand, this seems to be the type of soft research that the SEC encouraged when it adopted Regulation FD.

Along these lines, check out the website for the Gerson Lehrman Group. This summer, this site made the news due to this August article in the Seattle Times, which detailed how doctors involved in confidential studies were hired to leak results for the benefit of hedge funds and other clients. Here is a rebuttal to the Seattle Times piece from the Gerson Lehrman Group.

Don’t assume that your employees would laugh at the side money offered by groups like Gerson Lehrman. Despite the fact that your research people might have signed confidentiality agreements, I have spoken to more than a few companies whose employees didn’t realize that they weren’t allowed to communicate with the outside world about their studies. As part of the company’s compliance culture, it certainly makes sense to periodically remind them that such side arrangements would violate their employment conditions, etc.

Pleathora of Sarbanes-Oxley Articles

Yesterday, the WSJ carried a spection section on “Living with Sarbanes-Oxley,” including this article on “governance by gunpoint” with a quote from yours truly.

Winning Strategies in Auctions

We have posted the transcript from the webcast: “Winning Strategies in Auctions.”

Also on, in this podcast, George Casey of Shearman & Sterling discusses the SEC’s Divisions of Corporation Finance and Market Regulation jointly issued no-action and exemptive letter to Axel Springer providing relief under the tender offer rules (Axel Springer, a German stock corporation, made a cash tender offer for another German company), in particular focusing on the following questions:

– What is the significance of the SEC giving a cross-border relief in connection with an offer for a company that does not qualify as a “foreign private issuer”?
– It appears that the bidder would be permitted to pay for the tendered shares with a significant delay after the expiration of the offer period. Why was this relief necessary?
– Is the “prompt payment” relief likely to become recurring in German offers?
– The bidder will give withdrawal rights after the expiration of the offer. Why is this necessary?

Are You the MOH in Your Office?

Today’s Dilbert reminded me of the hilarious skit at yesterday’s Association of Corporate Counsel Annual Conference about widespread persecution of the “male office honey.”