The art of knowing what to say, when and how if you are a public issuer

Woodbridge corporate and securities lawyer, Joseph Chiummiento, of Core Lawyers, discusses the art of preparing news releases or press releases for public companies.

Understanding when a news release is required, what you can say in a release and what is required to be said in the press release are important considerations when a public company is ensuring to meet its disclosure obligations.

What is a Press Release?

Simply put, a press release or news release is a statement that a public company disseminates using various services to report a material event or change as a required disclosure to its shareholders and for regulatory bodies. It is very normal to ensure a release is delivered to North American markets and European markets as those generally have the majority of investors in Canadian public market companies.

What is considered material information to include in a press release?

When do we have to Issue a News Release?

A publicly listed company or reporting issuer should “press release” any information considered to be “material” information. The TSX Venture Exchange defines material information as:

“any information relating to the business and affairs of an Issuer that results in or would reasonably be expected to result in a significant change in the market price or value of any of the Issuer’s Listed Shares, and includes Material Facts and Material Changes”.

Unfortunately, the “interpretation” of what may be “reasonably expected” is a subjective one, and regulators have looked to lawsuits, Tribunal Decisions (ie. Ontario Securities Commission) and Court Decisions to understand or further define what is or is not “material”. Section 3.8 of the TSX Venture Exchange, Corporate Finance Manual, Policy 3.3 Manual on Timely Disclosure set out a list of clearly defined material information for public companies, however, the definition ends with:

“any other developments relating to the business and affairs of the Issuer that would reasonably be expected to significantly affect the market price or value of any of the Issuer’s securities or that would reasonably be expected to have a significant influence on a reasonable investor’s investment decisions.”

Who is a “reasonable investor” and how do you interpret what is “expected” to have a “significant influence” on an investor’s investment decisions. This subjective test is even more difficult to manage amongst the poles of public opinion (social media) and what is generally happening in the markets (ie. frenzy in bitcoin, or marijuana stocks, or perhaps a financial crisis).

Can we help our shareholders interpret the relevance of our Release?

Helping your shareholders, stakeholders and future potential shareholders understand why you believe the release to be important or how the company is interpreting the information can be an effective way to set a context around the press release.

Generally, a President & CEO can provide a quoted comment in a release provided the comments are not designed to inflate, create hype and excitement, or intended to sway the market around its stock. Forward-looking statements about the believed impact of the release should not be made, and words or phrases that highlight why the Company believes the release content to be “material” or “significant” or “hugely impactful” should be avoided. Shareholders should be left to make their own interpretations on the information being provided, however, they also have come to expect Companies to provide indicative comments such as “we are pleased …., we are excited by…. it is promising…., our efforts remained focused on….

Caution should be exercised as every press release issued will be summarized in an information circular at a company’s AGM, creating an online personality that is judged by investors and regulators, and be measured against actual results (value add to the company) over the long run.

If you are not sure about the contents of a release have a second set of eyes review it for you. At minimum, it will provide you with certainty and a gut check opportunity.

Do you have questions about your disclosure obligations as a public company or what is considered material information? Please feel free to contact me to discuss your situation.