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MarketWatch’s reporters have been reading your earnings releases – and this article says they’re not impressed. It surveys a number of major companies’ releases, concluding that they’re generally a “confusing mess.”

However, the article saves its most pointed criticism for the practice of using releases simply to point readers to corporate website pages for earnings information:

MarketWatch has written before about the delay caused when companies make investors, and the reporters who serve them, search for earnings on a website, which almost invariably crashes under the strain of so many attempting to access it at the same time. The worst offender, in our view, is the video-streaming giant Netflix. This season, Netflix shares had moved almost 10% by the time most news services had started reporting the numbers, suggesting a clear advantage for institutional investors with machine-readable trading services that can scrape websites for relevant information at high speed. Retail investors are losing out.

My guess is that this practice is intended to provide shareholders with access to a more robust earnings presentation than what could be provided within the confines of a press release – but it looks like it’s giving retail investors the short end of the stick, and needs to be rethought.

Update: One of our members pointed out to me that for microcap companies, the costs associated with using news services for extensive earnings releases are often a factor – and that issuing a brief release directing investors to the website for more information is much more cost-effective for them. I think that’s a point worth acknowledging.

Enforcement: SEC Targets Control Contest Disclosures

Yesterday, the SEC’s Division of Enforcement announced two new actions involving disclosure violations that took place in the heat of takeover & activist battles. Disclosure in this arena seems to be an area of emphasis for the SEC – it recently sanctioned Allergan for failing to disclose merger negotiations with third parties while it was the subject of a tender offer from Valeant.

The first proceeding involves allegedly inadequate disclosures about “success fees” payable by CVR Energy to two investment banks that it retained to help fight off a tender offer. The second targets failures by individuals and investment funds to comply with beneficial ownership reporting obligations under Section 13(d) and 16(a) of the Exchange Act in connection with their joint efforts in several activist campaigns.

It’s interesting to note that disclosure of banker success fees was addressed in one of the new tender offer CDIs (159.02) issued in late 2016. Last month, I flagged a Cooley blog that said market practice on success fee disclosure would need to change as a result of the new CDI. The SEC’s press release notes that CVR’s cooperation and remedial actions resulted in a decision not to impose any monetary sanctions on it – but I suspect the fact that the company’s disclosures may have been consistent with market practice might have played a role in it as well.

Public companies and their advisors can be excused for enjoying the predicament of the targets of the second enforcement action – they’ve long complained about activists playing fast and loose with beneficial ownership disclosure requirements, and undoubtedly are relishing their comeuppance in this instance.

Speaking of disclosure requirements, there’s now one less – the SEC’s resource extraction rules are no more. This Davis Polk memo has the details.

Transcript: Privilege Issues in M&A

We have posted the transcript for the recent DealLawyers.com webcast: “Privilege Issues in M&A.”

– John Jenkins