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Botched earnings releases cause compliance headaches

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Unauthorized earnings releases are rare, but there have been two examples in the past several months.

Back in October, Google's 8-K for the third quarter was released prematurely via printer R.R. Donnelly, a big brand in the IR industry. The botched released contained the now famous line "Larry Quote Here". The  release, which contained accurate numbers, nevertheless sent the market into a tizzy. And R.R. Donnelley's stock tanked as well.

The most recent botched release was more serious. An earnings release from Office Depot was released prematurely via vendor Thomson Reuters, which accepted blame for the incident. While the release appeared on the IR section of the firm's web site only briefly, it contained news of the merger between Office Depot and Office Max. That forced the companies' hands, and they promptly announced the deal, albeit with a lot of details lacking.

As noted by DealBook, "Instead of announcing a merger where the governance of the newly combined company was clearly established, the companies punted. OfficeMax and Office Depot said they would split the board equally, drawing directors from each side and have "governance rights from each of the two companies," whatever that means.

In other words, they split the governance, but offered few additional details. The parties didn't even appear agree on where the headquarters, since they didn't announce the location. The parties also couldn't agree on a chief executive. Instead, a selection team will be formed drawing from an equal number of independent board members from both companies. They will then select the chief executive."

The article also faulted the companies for not thinking through clearly the possible anti-trust angles.

Obviously, the companies would have been better off thinking through these issues. Unfortunately, the botched released precluded that. 

I can only hope that these sorts of events remain rare. Companies would be wise to query their release vendors about the processes in place to prevent these mishaps.

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