Quiet Period and Disclosure

Floyd Norris brings up an interesting issue in today’s NY Times.

He points out that companies that are going public are allowed to go on an extended “road show” promoting the deal to large investors but are also required to stop talking to the press. This is called the “quiet period”.

The quiet period is designed to stop companies from using the media to “condition the market” for the offering. But Floyd asks, “isn’t that what the road show does?”

I am not opposed to road shows. They are a useful way for companies to disclose information that investors need to determine if they want to buy stock.

I also am not opposed to the idea that companies shouldn’t be allowed to hype their offering in the press.

But I agree with Floyd that the quiet period can work against disclosure when it stops the business press from being able to properly cover an IPO that is coming to market soon. Floyd asks “why should it be OK for Salesforce.com’s CEO Mark Benioff to talk to big investors when he can’t talk to the readers of the NY Times?”

Good question Floyd.