This post was written by Michael Coffino and Marc Goldich.

The press release is an efficient and effective way to provide new or updated information about the operations, business and financial performance of public companies, especially during periods between formal public filings, such as 10Qs and 10Ks.  Where there have been recent, material developments, companies may be required to make public disclosure (through a press release, a Form 8-K, or both) on a more immediate basis rather than wait for their next Form 10 K or Form 10-Q.  At other times, companies may wish to make a disclosure that, while not strictly necessary, concerns a significant industry or company development.  Because the current regulatory environment commands increased transparency in public companies, doubts about whether issuers are duty-bound to speak often are appropriately resolved in favor of the disclosure.  Companies often must make strategic decisions regarding what, when and how to disclose such information.  This is especially true when a company is compelled to correct a prior material misstatement by disclosing bad news that, taken in isolation, presents a limited picture of the company’s financial and business condition and prospects.

It is important to keep in mind that press releases tend to pack a punch, and sometimes disproportionately so.  Markets tend to absorb the contents of press releases with a fair degree of immediacy, and press releases often will have a discernable impact on stock price.  When the news is bad, in addition to a decline in stock price, consequences can include reduced workforce, reduced compensation, damage to corporate credibility and reputation, and increased risk of litigation.  It is not unusual for markets to overreact to news that is not placed in the overall context of the larger business or financial picture.  Worse, corrective disclosures in a vacuum can precipitate a rush to judgment by potential class action plaintiffs or their lawyers champing at the bit to launch a securities fraud class action.Continue Reading To Bundle or Not to Bundle: Public Company Strategies in Packaging Corrective Disclosures in Press Releases