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Financial communication in difficult times

Carolin Wiken

Carolin Wiken, Partner at Paues Åberg Communications, share her advice on how to handle financial communication during the coronavirus outbreak.

The communications consultancy company Paues Åberg has lately received a lot of questions from listed life science companies and they have therefore drawn together a couple of central issues.


01. What general position should a public company have in its investor communication?

“In times of crisis and insecurity rumors and speculation arise quickly. Therefore, it is extra important to be as clear and transparent as possible about how your company will be affected in the short term. Simultaneously, a company should explain the long-standing foundations it is built upon that will be critical in returning it to a normal situation and build value moving forward.

At the same time, the European financial authority ESMA has recommended that public companies communicate all relevant information about the effects of COVID-19 on their business, in line with their obligations to MAR rules and regulations. ESMA also recommends that public companies should be open to discussing the actual and potential effects of COVID-19 on their business to the extent that it is possible. Assessments should be based on qualitative and quantitative analyses of business operations, the economic situation and economic results, and be included in 2019 annual reports if not yet completed. If not, this assessment should be reported in other ways, for example in upcoming quarterly reports.”

 

02. We don’t yet have a prognosis, but do we still have to inform the market about how the coronavirus will affect our business?

“It’s difficult to provide a general answer to this question because assessments must be done on a case by case basis. According to Nasdaq rules different factors can be weighed in the assessment: the event’s expected extent or significance in relation to the entire company’s operations, the importance of new information in relation to the factors that determine share price, or other factors that could affect the share price.

Nasdaq rules about companies’ financial position specifically say that if financial results or positions deviate from what can reasonably be expected based on what the company has previously published or communicated, information regarding that deviation can be considered insider information. In assessing whether a change in a company’s financial results or position is significant enough to be considered insider information, the company should evaluate the deviation in light of the latest financial developments, prognoses or forward-looking statements. The company’s specific operations, together with known changes in financial conditions during the remaining part of the financial period, should be taken into consideration in such an assessment. For example, financial changes could consist of seasonal variations as well as general market trends and development. Other information that should be taken into consideration can be related to external factors, such as sensitivity analyses of interest rates, currency and commodity prices. A summary of analyst expectations of the company are not critical in making the assessment.

While it is difficult to draw any general conclusions from these rules, a listed company should consider whether, in the long term, it is worth being as transparent as possible by explaining how it will be affected by recent developments, noting that it is of course hard to know what will happen in the future. This perspective builds trust and will also help avoid speculation, which always arises when there is a lack of information. Moreover, it is in line with ESMA’s guidelines.”

 

03. We have determined that one of our clinical trials will be delayed because they will be implemented in Northern Italian clinics that have been hard hit by the coronavirus. Do we need to inform the market?

“It’s difficult to provide a general answer to this question because assessments must be done on a case by case basis. According to Nasdaq rules different factors can be weighed in the assessment: the event’s expected extent or significance in relation to the entire company’s operations, the importance of new information in relation to the factors that determine share price, or other factors that could affect the share price.

While it is difficult to draw any general conclusions from these rules, a listed company should consider whether, in the long term, it is worth being as transparent as possible by explaining how it will be affected by recent developments, noting that it is of course hard to know what will happen in the future. This perspective builds trust and will also help avoid speculation, which always arises when there is a lack of information. Moreover, it is in line with ESMA’s guidelines.”

 

04. Have financial authorities provided any instructions on how public companies should be communicating about the coronavirus?

“Yes, the European financial authority ESMA has recommended that public companies communicate all relevant information about the effects of COVID-19 on their business, in line with their obligations to MAR rules and regulations. ESMA also recommends that public companies should be open to discussing the actual and potential effects of COVID-19 to the extent that it is possible. Assessments should be based on qualitative and quantitative analyses of business operations, the economic situation and economic results, and be included in 2019 annual reports if not yet completed. If not, this assessment should be reported in other ways, for example in upcoming quarterly reports.”

 

05. What are some ways to think about our annual meeting?

Here are a few measures to take:

* Recommend that the annual meeting decide that it will be possible to follow the meeting via live stream on the Internet.

* Pre-record the CEO speech and post it on your investor website after the meeting.

* Make it possible for shareholders to assign a proxy who can vote on their behalf. Companies such as Euroclear can be helpful in administering this.

* Encourage shareholders to follow the Swedish Public Health Agency’s recommendations.

* Do not provide any food or drink. If you expect a large audience to participate in person, split them up in different rooms if possible.

 

06. Is it possible to postpone the annual meeting?

“Yes, but not for too long. The annual meeting must be held in accordance with the law and it should take place at least six months after the end of the company’s financial year.”