Wednesday, July 23, 2008

Did Schering-Plough comply with the terms of the NYSE Listed Company Manual when it released SEAS?


UPDATED 08.24.08 @ 2 PM EDT: The Case FOR NYSE Trading Halts -- Schering's SEAS Announcement: a Textbook Example. Obviously, I continue to be troubled by Schering's Monday NYSE trading rip-tide. Do go see why.

Earlier, PharmaLive pointed to, and linked this post! Cool! -- Thanks!

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I broadly hinted at my concern about this, early on Monday morning, but I wonder whether Schering made the required "pre-event" phone call to the NYSE Department of Stock List, to solicit the opinion of the Listed Company Representative assigned to Schering -- about whether the timing of the SEAS study release (from Europe) was appropriate -- and was the best way to handle news of such gravity.

I really wonder, given the wrenching volitility the stock suffered before -- and after -- the 1 PM EDT (Mid-Trading-Day) web-cast. That was evening in Europe, by the way. What was the magic about that time? I do wonder.

Let's read from the NYSE Listed Company Manual -- these are the standards that govern NYSE-listed public companies -- like Schering-Plough (and Merck):

202.06 Procedure for Public Release of Information. . . .

. . . .(B) Telephone Alert to the Exchange

When the announcement of news of a material event or a statement dealing with a rumor which calls for immediate release is made shortly before the opening or during market hours (presently 9:30 A.M. to 5:00 P.M., New York time)*, it is recommended that the company's Exchange representative be notified by telephone at least ten minutes prior to release of the announcement to the news media. If the Exchange receives such notification in time, it will be in a position to consider whether, in the opinion of the Exchange, trading in the security should be temporarily halted. A delay in trading after the appearance of the news on the Dow Jones, Reuters or Bloomberg news wires provides a period of calm for public evaluation of the announcement. The halt also allows customers to revise the terms of limit orders on the specialist's book in view of the news announcement. Even if limit orders are not canceled or changed during the halt, the fact that trading is halted results in the reopening being considered a new opening, thereby enabling limit orders to participate at the new opening price regardless of the previously entered limit. A longer delay in trading may be necessary if there is an unusual influx of orders. The Exchange attempts to keep such interruptions in the continuous auction market to a minimum. However, where events transpire during market hours, the overall importance of fairness to all those participating in the market demands that these procedures be followed.

* Effective June 13, 1991 the New York Stock Exchange off-hours trading sessions became operational. The facility offers the opportunity to trade at NYSE closing prices after the NYSE's 4:00 P.M. close until 5:00 P.M.

(C) Release to Newspapers and News Wire Services

News which ought to be the subject of immediate publicity must be released by the fastest available means. The fastest available means may vary in individual cases and according to the time of day. Ordinarily, this requires a release to the public press by telephone, facsimile, or hand delivery, or some combination of such methods. Transmittal of such a release to the press solely by mail is not considered satisfactory. Similarly, release of such news exclusively to local press would not be sufficient for adequate and prompt disclosure to the investing public. . . .

It seemed rather strange to me, back then (and more so, now, that I have gone back to refresh my memory of the NYSE Listed Company Manual's terms), that the SEAS study presenters -- in Europe -- waited until something like 7 PM (local time in Europe) to conduct the web-cast. Why was that time chosen? Was the NYSE pre-notified?

Did Schering actually believe the results would be "immaterial", and thus did not call the NYSE -- to pre-notify, under Section 202.06(B)? That approach would have been "at variance" with the pro-offered reason for moving the time of the Q2 Earnings Conference Calls. Did Schering think it material, or not so? I do wonder.

Certainly, the SEAS release web-cast could have also been held prior to market open on Monday -- say 11 AM, local Europe time, and still have held both the Merck and Schering conference calls at the originally-scheduled time -- avoiding perhaps a half-day of market turmoil.

3 comments:

Anonymous said...

Would you remind me which thread of yours deals with Hassan being both on the SP board and on the pension committee? There was quite a good discussion around why representing both groups is a clear conflict of interest. I would like to read that again.

Condor said...

First -- I am not certain that CEO Fred Hassan is on the Schering pension plan's investment or administrative committees (likewise, for the Schering stock-based plan committees).

I am certain that several Schering officers are.

That said, I think you mean this one, that holds the original "germ" of the idea -- which I later fleshed-out, with lots of links to other musings, here.

That last one links, inside the post, most of my other thoughts on the subject.

Finally -- I did write quite a bit about conflicts of interests, generally, in my review of the amended shareholders' derivative suit captioned Cain v. Hassan, et al.. . . . Do take a look there, as well (and follow the linked posts, too -- for a more complete picture).

I am admittedly flattered by your interest, Anonymous.

Do stop back by.

Cheers!

Condor said...

Also, a new post is up -- on the above topic -- the policies underlying the NYSE Trading Halt provisions.