News Releases:
How to Read Between the Lines

by Amanda Olson

Keeping an eye on a public company's news releases is an integral component of savvy investing. But that's often easier said than done. Given the mix of regulatory disclosures and finely crafted messaging, it can be a challenge to weed out the filler and get down to what's really being communicated.

The first step to fully absorbing a release is to read it in its entirety. A common but unwelcome practice is for the company to bury less favourable news near the bottom of a release, hoping it might be missed by the market. This satisfies securities disclosure requirements while allowing the issuer to manipulate the message to ensure positive news is more prominent than negative news. A smart investor who makes the most of public information will read through to the end, ensuring he or she has all the facts required to make an informed investment decision. Many public companies fail to recognize that it is best to provide full, plain and true disclosure and deal with issues immediately and unambiguously.

Another common shortcoming of news releases lies with vague headlines. A headline boasting of an "operational update" says nothing about the nature of the news, how it may affect the company's plans, and how that in turn may affect the strength of the investment. An operational update for an energy producer could refer to something as routine as the release of quarterly results or to something as noteworthy as the tripling of production. A strong headline is concise, specific and addresses one of the releases key messages.

On the other end of the spectrum are "busy" headlines that attempt to announce too much. For example, a company might announce the following: "Company purchases producing properties in north eastern British Columbia, closes a $21,500,000 non-brokered private placement financing, and hires new chief financial officer." A busy investor skimming headlines could miss a positive corporate development or be distracted by a negative one. To avoid busy headline syndrome, a company could consider issuing more than one news releases to simplify each message and separate positives from negatives or separate the news release from the formal regulatory disclosure. Another option is to take a step back and craft a headline that's specific about the most important message in the release while hinting at the other issues covered in the release.

Within the text of a release, it is important to look beyond the jargon to figure out the underlying messages. Technical terminology can sometimes de-emphasize or minimize the reality of a company's performance or plight, making it hard for investors to see the forest for the trees. For example, an oil and gas explorer can create information clutter by discussing its drilling and completion techniques when targeting a particular geological zone. Simply put, the company could say it is taking technical steps to aid in the production process. Failing to focus on key messages can obscure positive developments, but it can also have the effect of exaggerating negative news. After all, if the news is hidden, it must be really bad, right? A well-crafted news release clearly explains positive and negative news and helps the investor see the big picture.

Ultimately, the onus lies on investors to make sense of publicly disclosed information. Fortunately, investors have another key tool at their disposal - the contact information at the bottom of a release. If the text of the release leaves questions unanswered, the contact person or people provided can shed additional light on the company's activities. ¬Combined with presentations, corporate fact sheets and financial disclosure documents, news releases can be an invaluable tool for the educated investor.

Where to find releases:

1) More and more public companies are keeping an archive of their releases available on their websites, affording investors easy access to information.

2) The System for Electronic Document Analysis and Retrieval (SEDAR) is a filing system for all public company documents. It can be accessed at www.sedar.com. This is Canada's answer to the American EDGAR.

3) CNW Group, CCN Matthews, Stockwatch and Iradesso Communications are examples of companies that allow investors to request that news releases be e-mailed directly to their inboxes.

4) Individual company websites or third-party websites such as Stockwatch or Stockhouse include an archive of recent news items. Some third-party websites require a subscription to access all information.

5) If you're careful about the source, typing a company's name into Google can turn up fascinating news and commentary about the company. This includes news releases and articles appearing in major newspapers and other financial media.