This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Media Embargo Secrets Exposed: How and Why Companies Share Stock-Moving News

The simplest but perhaps most cynical explanation is that companies provide reporters with early, embargoed information because they want to manage or control the way that information is packaged into a story. In other words, companies want to be able to spin the information in a way that best suits their corporate interests.

So, when a drug company calls me to discuss the results of a pivotal phase III trial, they want to apply their positive spin to the data before they are released publicly. This is especially true if there's some wrinkle in the data that the company fears will be construed negatively.

I like to think that after more than a decade covering drugs and biotech I'm immune to these corporate spin jobs. I can't speak for the rest of media.

A less cynical explanation but also valid: Embargoed information is a courtesy to reporters who need time to report and write stories that can often be complicated to explain. This is why medical journals, for instance, give reporters a 5-7 days advance notice on newly published studies. Companies also use embargoes to ensure media coverage of good news -- I'm more likely to cover something that I receive in advance.

The Verdict on Mayer and Yahoo!

I'm not a securities lawyer but this practice doesn't violate SEC laws, in my opinion. The sharing of material information is kosher, within limits. It becomes illegal -- insider trading -- if or when someone acts on the material information by buying or selling stocks. I'm also assuming that companies provide me with embargoed access to material information only after checking with their lawyers that the practice is legal. And remember, reporters only gain access to embargoed information after pledging not to disclose until an agreed-upon time.

Is all this fair? Not really. I understand and sympathize with investors who will be angry after learning about this secret media perk. It's not fair, which is one of the reasons why I'm blowing the lid off the practice with this column. I've also taken a very public stance against unfair, selective disclosure practices, like what occurred this spring at the European Association for the Study of Liver Disease annual meeting.

I'm agnostic about media embargoes. Yes, I take advantage of them when offered but I wouldn't care one lick if they disappeared tomorrow. On balance, embargoes help a little but raise too many risks and cause too many problems, as evidenced Tuesday with the Vivus-USA Today fiasco.

So, now you know.

How do you feel about media embargoes of material information? Should this practice be banned? Is it okay as long as safeguards are in place? Share your thoughts or ask questions in the comment section below.

--Written by Adam Feuerstein in Boston.



>To contact the writer of this article, click here: Adam Feuerstein.

>To follow the writer on Twitter, go to http://twitter.com/adamfeuerstein.

>To submit a news tip, send an email to: tips@thestreet.com.

Follow TheStreet on Twitter and become a fan on Facebook.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.
3 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs