In the world of Investor Relations, the term “full disclosure” carries both special meaning and a unique purpose — a meaning and purpose that are more clear with a bit of historical perspective.

Two of the most important reasons for forming the United States Securities Commission (SEC) in 1934 included

• Trying to prevent abuses of the stock markets in the future, and
• Leveling the playing field between financial professionals and individual investors.

One of the stock-trading problems identified by Congress in the run-up to the SEC’s creation was insider-trading:

a situation where an individual with special access to corporate information was able to buy or sell stock before certain information became widely known by the public.

Congress was wise enough to recognize that it could not prevent people from knowing or coming across such “inside information,” but it did decide that it could penalize both corporations and individuals for abusing such information.

Hence, the concept of “Full Disclosure” was born.

Simply put, if a company decides that it is going to announce or disclose Material News to the public, it agrees that it will do its utmost to make that announcement in both a

• Full, and
• Timely manner.

Specifically, the announcement must be made so that no individual or group of individuals has an unfair trading opportunity because he/she or they have the information before others do.

Typically, the way companies have met the SEC’s Full and Timely disclosure requirements is to utilize a commercial wire service — such as Business Wire, PR Newswire or others — to distribute said material news annoucements. In this manner, it is believed that the greatest population of prospective investors (professionals and non-professionals alike) would get access to the same amount of information at the same time.

This is why it is extremely rare to see a publicly traded company make any announcements without using a commercial wire service.

BONUS TIP:

This is also why

publishing news on a corporate Website alone does NOT constitute full and timely disclosure.

For although more than 90 percent of the homes in the United States have a personal computer connected to the Internet today and therefore have the ability to access news and information on a company Website, such widespread use of Internet-connected PCs alone does NOT mean that everyone would learn about material news at the same time.

Hence, the SEC still requires today the use of a commercial wire service for

• Full disclosure, and
• Timely disclosure

of material news.

The question of whether or not a firm should or has to make an announcement to the public, whether that be via a news release, public announcement or press conference, is often more than just an internal debate comparable to the age-old argument about how many angels can dance on the head of a pin.

In fact, when it comes to companies that have shares that are available for sale and purchase in a public stock market, this question moves beyond the rhetorical realm into the practical world.

Why? Because in some instances, a publicly traded company has no say it the matter — it MUST make a public announcement.

The key to such a triggering event hinges upon the question of “Materiality” and understanding what the word “material” means from a legal/financial perspective when it comes to publicly traded companies.

A Layperson’s Definition of Material News

In the case of a publicly traded company,

News is said to be “material” if the average person would likely make a decision to either Buy or Sell the company’s shares if he/she knew such news.

If the answer is “Yes,” then the news is “material” to the company and triggers the need for a news announcement. If the answer is “No,” then the news is NOT “material” and a news announcement is not needed.

Clearly, what constitutes material news for one company may not come close to being material for another firm.

Materiality and the $1 Million Contract

Consider the example of top execs at a publicly traded firm that learned that one of their associates had just closed a one-year contract worth $1 million. Is this contract material to the company?

The answer is, “It depends.”

If a firm (call it “Company A”) had annual revenue last year of $100 million or more, the likely answer is “No,” a $1 million contract would not be considered material by most individuals. Certainly it would not be a contract to sneeze at, but at less than 1 percent of Company A’s top-line revenue, a $1 million contract would probably not cross the line of being considered “material.”

However, what if “Company B” had annual revenue last year of less than $20 million or even $10 million? A-ha — now we’re talking about additional annual revenue equal to 5% to 10% (maybe even more). Now we’re talking about a much bigger potential impact on Company B from just one sale.

In the examples outlined above, I believe that a $1 million annual contract is a material event in the case of “Company B” (with annual revenue of $20 million to $10 million, or less), while the same size contract would not be material for “Company A” since it has annual revenue of $100 million or more.

The gray area, of course, in these examples would be those publicly traded companies generating between $20 million and $100 million in annual revenue.

Other Types of Material News

Certainly material news is not merely defined by the size of newly won (or lost) contracts.

Material news can also include such things as

• Executives hired,
• Executives fired,
• Board members added,
• Board members dismissed,
• The health of a senior executive (think about Steve Jobs’ liver transplant and Apple’s handling of this news),
• The death of a senior executive,
• The opening of a new plant or facility,
• The closing of a plant or facility,
• Entering a new country or market,
• Leaving a country or market (think about Google’s position in China),
• Launching a new product,
• Issuing a product recall,
• Significant layoffs,
• Significant hirings,
• A flood,
• A fire,
• A storm,
• A natural disaster,
• A war,
• A riot,
• A burglary,
• Etc., etc., etc.

In conclusion, let me restate what I wrote above.

News is material if the average person would buy or sell stock if they knew the news.

And yes, it’s really that simple (or that complicated), depending upon the company, the news and your viewpoint

If you handle public relations or investor relations for (or with) a publicly traded company, this tip will serve as merely a reminder.

However, if you’re new to the IR world, please note that before sending out a news release for a publicly traded company you need to send an advance copy of your release to the stock exchange that lists your company’s shares.

Providing an advanced copy puts the exchange on notice and allows them to quickly evaluate if there is anything out-of-the-ordinary about your forthcoming news, something that might attract special interest from investors in your stock on that particular day.

Typically, an advance copy of a news announcement can be sent to the exchange a minimum of 10 to 15 minutes before a release is distributed publicly.

However, the greater the potential importance of the news to your company, the further in advance you should send a copy of your announcement to the exchange in case the exchange decides the market needs time to digest the news.

This is one of the reasons why we typically recommend distributing news before the markets officially open for trading. (If the news is big enough, there is no need to halt trading during the day.)

If you’d like more details about how (and when) to notify an exchange in advance of distributing a news release, please contact your CFO, in-house legal counsel, or an external securities attorney.

BTW: Here’s the link to the NASDAQ Electronic Disclosure Request page.

If you’re a public relations or investor relations professional who works for (or represents) a publicly traded company, remember that Wall Street likes predictability — predictable expenses, predictable profits, predictable locations (annual meetings held in the same place year after year), and so forth.

One simple way to communicate predictability to investors is through the timing of your news releases.

One way we try to do this with our publicly traded clients is to distribute news releases at the same time every time a release is distributed. For example, we prefer to distribute releases first thing in the morning before the stock markets are “open.”

Hence, if a release is going to be distributed on Tuesday via a commercial wire service (which is still required to meet the timely and full disclosure requirements of the U.S. Securities and Exchange Commission), we might recommend distributing that release at 7:05 a.m. (Eastern time). Similarly, any other release distributed by that same client we’d push to get it distributed at 7:05 a.m. (Eastern) as well.

I know it might seem silly, but in truth, predictability can be beneficial, especially with public companies.

If you’re at a trade show or other major event where there are a number of journalists meeting with lots of companies, consider using your business card to your advantage. How?

Use the back of your business card as a miniature billboard to help remind journalists what you discussed during your visit.

There are two ways to do this.

1. Print miniature stickers to describe your product/service and affix them to the back of your business cards.
2. Print one-time-use business cards that are specially printed on the back with a description of your product/service.

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BONUS TIP #1:

Since you’re gonna use the real estate on the back of your business card anyway, include a shortened URL (Web address) in your description that points the reader to the specific pages within your online newsroom about the product/service highlighted.

BONUS TIP #2:

Two great services for URL shortening are provided by Hootsuite and Bit.ly. I prefer Hootsuite’s service, but either works great.

Nevertheless, I’d bet that something newsworthy is happening each and every week at your company/client organization.

The challenge is to

1. Set proper expectations internally,
2. Target the right news to the right news organization and/or journalist.

One way to do this is through a Ranking System for your news releases.

At Politis Communications we classify news releases as being an “A,” “B” or “C” news release, and we do this by making a judgment call on every bit of prospective news we uncover inside our client organizations.

For example, “A” News Releases contain news or information we believe has the prospect of being translated into the top story, one that will

• lead the top of a newscast,
• be the No. 1 story in a particular section of a newspaper or magazine, or
• get picked up by a wire service, syndicator or online news aggregator.

Recent examples of “A” News Releases we recently worked on include the news that Schwinn Bicycles was launching the fastest re-charging electric bicycle on the planet. Another was the news that Coherex Medical had received CE Mark Clearance for its Coherex FlatStent EF PFO Closure System.

By contrast, “B” News Releases contain news or information we believe has the prospect of being used in a solid story, one that might

• Warrant a standalone story in a particular section of a newspaper or magazine,
• Be included in a larger story, perhaps a trend piece (online, in print or in a broadcast venue),
• Be mentioned in a newscast, or
• Generate coverage in specialized media outlets or blogs.

For example, Alliance Health Networks’ recent closing of a $3.3 million round of venture capital funding probably qualifies as a solid “B” news release.

And although still newsworthy, “C” News Releases, however, truly have limited focus and/or news appeal.

Examples of “C” news releases include most

• New hires or promotions,
• Moves to a new location or expanding office space,
• Smaller charitable donations or activities,
• Etc.

In other words, they’re still newsworthy announcements; it’s just that the probable impact of such news is limited in scope.

Which brings me back to the first three points made at the beginning of this post.

1. Be honest with yourself about the particular newsworthiness of any given event, news or piece of info.
2. Make sure others share your honest appraisal (i.e., set proper expectations).
3. Target the right news to the right journalist and/or media outlet.

If you take this approach to news releases, chances are you’ll have a lot more success (and less heartburn in the process).

In spite of thinking to the contrary, bad things happen.

That’s why you must have a Crisis Communications Plan prepared and ready for use at your company.

If you work in public relations, corporate communications, marketing or in executive management and your firm does NOT have a Crisis Communications Plan in place, ready to be implemented at a moment’s notice, I pity you and your organization. (The same holds true for PR, investor relations, marketing and advertising agencies and their clients.)

Especially in today’s world of hyper-connected media, social media/social networking, and citizen journalists, one’s world can be transformed from hunky dory to an absolute H-E-L-L within minutes. Just ask Domino’s Pizza or Amazon.com.

Not that having a Communications Plan in place will prevent bad things from happening. However,

• creating such a plan,
• reviewing the plan with all of the key players when it’s created, and
• then updating such a plan regularly,

will make it possible for your firm and/or client(s) to respond quickly and appropriately when bad things do happen.

Because you know and I know, bad things will happen.

If you want to generate positive media relations results, then you need to “become” an expert in your particular field of choice.

[NOTE: When I use the words "you" or "your" in this Tip, the advice also applies to positioning your boss, client or colleague as an expert too.]

If you are selling/marketing products or services with any degree of accomplishment, chances are you have at least some level of “expert-ness” or expertise. The challenge, however, often comes from getting journalists to

1. Know that you exist, and
2. Accept you as a reliable resource.

Identifying the right media outlets and the right journalists are key to leveraging your “expert-ness” into positive media coverage.

Such media outlets can range from

• your home town newspaper to your local TV station, or from
• an industry newsletter to the Wall Street Journal.

But if you can find the right outlet and the right journalist(s), you may be well on your way to Expert Heaven!

You can call it Web 2.0 or the Next Generation Internet; I don’t really care.

But you need to use social media and/or social networking tools, services and platforms in your public relations, marketing communications and investor relations efforts. (And that means both for your company/clients, as well as for you personally.)

We recommend you do the following:

1. Create one or more public profiles on the Internet (Facebook, LinkedIn and Plaxo are the best),
2. Begin using a microblogging service (Twitter is our tool of choice),
3. Start taking and putting digital photos in photo-sharing sites (Flickr and Photobucket work well for this), and
4. Start shooting and sharing videos in online video-sharing sites (YouTube’s the huge leader here, but there are hundreds of video-sharing sites on the Internet to choose from).

At a minimum, using social media/networking platforms, tools and services will boost your visibility on the Internet. More likely, you will also

• increase your credibility,
• sell more products and services, and/or
• land more clients and customers.

One key trick to being successful at media relations is to make sure you divide editorial contact databases into smaller segments. These can/should be based upon

• beats covered (new products, sports, health, etc.),
• title (reporter, reviewer, feature writer, etc.),
• geography (city, state, region, country),
• industry focus (personal computers, legal, athletics, women’s issues, etc.),
• media type (newspaper, online only, television, radio, etc.) or
• another focus altogether.

Such segmentation will improve your chances for publicity success when pitching targeted story ideas, distributing releases, and crafting media relations strategies.