Investor Relations: Forward-Looking Statements (#58)

In this podcast episode, we discuss the background for investor lawsuits against companies, and how the use of forward-looking statements and cautionary statements are designed to avoid those lawsuits. Key points made in the episode are:

  • There used to be many lawsuits from investors when a company’s stock price dropped, so companies tended to avoid making any public statements that could worsen their legal outcomes.

  • Under the 1995 Private Securities Litigation Reform Act’s safe harbor clause, companies can issue forward-looking statements, as long as they are identified as such, and are accompanied by cautionary statements. These cautionary statements can refer to a complete set of identified risks, such as a firm might identify in its annual Form 10-K.

  • Forward looking statements include financial projections, plans, statements about future performance, and discussions of the underlying factors associated with those projections, plans, and/or statements.

  • The cautionary statements may be bigger than the rest of a press release.

  • You should clear all public releases with the company legal staff, to avoid shareholder lawsuits.

Related Courses

Investor Relations Guidebook
Public Company Accounting and Finance