We’re often asked for advice on managing quarterly quiet periods successfully, so that management can focus on tying up financials and developing good messaging for the earnings call and press release.
A well-thought out and consistently applied quiet period can provide a much-needed respite from investor communications for management around busy quarter ends. But one reason for confusion about them is that, unlike quiet periods following an IPO, which are closely regulated by the SEC, end-of-quarter quiet periods are more loosely defined and not strictly regulated.
In short, companies are allotted far more latitude in managing end-of-quarter quiet periods. Yet that flexibility leads to potentially costly mistakes that companies can — and do — make. You can avoid them and make the most of these opportunities by following these four guidelines:
- Be consistent about the duration. If you use a two-week quiet period during one quarter, try to stick to the same time frame in subsequent periods. It’s a lot easier to defend management silence in your conversations with investors if you can point to a history of similar quiet periods. Why? Investors may try to read into quiet periods of differing lengths and get nervous if the period is seemingly longer than usual. Don’t let your silence create a kind of static that outsiders perceive as meaningful on the downside.
- Be reasonable about the duration. Just as it’s important to be consistent about duration, it is likewise vital to be reasonable about what the duration should be. Think through the quiet period strategy so that there is enough of a break from investor interaction, but at the same time there is not too big a break that the flow of conversation is stunted. Analysts and investors can generally handle a few weeks of silence, but if the break is too long, the investment community can start to feel out of touch. Also, when possible, the timing of newsworthy events should be scheduled outside of a quiet period so that the event can be discussed freely. It is frustrating to investors if they also can’t get color around other items of interest when you’re sharing developing information. Although not all news can be timed, having a well-thought out investor relations strategy and press release plan can help alleviate some of these potential issues.
- Keep the entire IR team fully informed about the quiet period. Although analysts and investors know that the quiet period isn’t a good time to gather color, sometimes calls can be mistakenly scheduled if there are any members of the team who don’t know the quiet period plan. Calls held at this time can often be a poor use of time and frustrating to investors, which is certainly not the goal of your investor outreach plan.
- Be consistent about what you say, and to whom. Occasionally, a conversation with an analyst can occur during a quiet period and management should strive to keep this as short and concise as possible. Since management can be in front of major messaging changes, such as altering guidance, it is best not to say anything that can be construed as forward-looking at all. Additionally, it can appear that management is playing favorites if one analyst is allowed a conversation while others are not. In the interest of good analyst relationship management, being consistent with communication in regard to both whom and when is key.
One final point: a quiet period does not necessarily mean you have to go completely silent. Although that is an option, it’s permissible (and often advisable) to continue communicating about topics that are not off limits and/or that are already in public view, as outlined here by my colleague Tom McDonald.
Quiet periods can be a complex topic. Don’t hesitate to contact us about how a quiet period may — or may not — work for your company. We’re always happy to lend a hand.