PDF Title | : | Streetsmart Guide to Valuing a Stock |
Author | : | Gary Gray, Patrick J. Cusatis, and J. Randall Woolridge |
Language | : | English |
Publisher | : | McGraw Hill |
Format | : | |
Total Page | : | 289 Pages |
PDF Size | : | 3.01 MB |
PDF Link | : | Read and Download |
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“To overcome the inequity of selective disclosure, the SEC issued Regulation FD. Under this regulation, whenever an issuer discloses material nonpublic information to any other person, the issuer must simultaneously or promptly make public disclosure of that same information.
If a company falls short of its quarterly earnings estimates, even by the smallest amount, the drop in stock price could be significant. Consequently, many companies had become adept at handling market expectations.
Prior to Regulation FD, the company could give guidance to certain favored equity analysts, who would then influence Wall Street estimates of the company’s earnings and revenues, either up or down. Companies also aggressively managed their earnings so that they would always just meet or slightly exceed expectations, often by a penny per share.
Companies established rainy-day reserves for deferred revenue that could be tapped if necessary to meet earnings expectations. Microsoft has been accused of setting up such reserves, and financial companies such as commercial and investment banks and insurance companies have also been known to overfund reserves for future revenues and profits.”
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