WHAT IS THE DIFFERENCE BETWEEN WITHDRAWING AND SUSPENDING GUIDANCE?

Based on regulatory filings, media reports and legal commentary since February, there does not appear to be a material distinction between the use of “withdraw” or “suspend”, as regards cautioning the investment community not to rely on previously published performance guidance.

Beginning in February, followed by a surge at the end of March and a continuing trend of changes to guidance surfacing each week, the management of most listed companies are pulling back on outlook or guidance they had previously provided.  While their comments are dominated by the word “withdraw”, our review of filings and press releases reveals the use of several words to describe the concept of “don’t rely on our previous guidance”.  For example, Enersys, a Pennsylvania-based energy solutions company headlined a March 24th press release with: “Enersys Announces Suspension of Fourth Quarter Fiscal 2020 Guidance”. And in the first sentence of the first paragraph, the release stated that the company “announced today that it is withdrawing guidance”.

In the investor relations world, the choice of a word, along with the tone and body language of management, convey a lot of meaning.  Is there a meaningful difference between “suspend” and “withdraw” and does one entail more, or less risk for management?  According to the Merriam-Webster dictionary, the definition of “suspend” is to defer to a later time or to stop temporarily, while the definition of “withdraw” is to take back or away.  Thus, an audience could infer that the use of “withdraw” means guidance may or may not be provided in the future and, if it is, may or may not provide the same metrics, while “suspend” may imply a greater commitment to bring back guidance and in a similar form.

What are the securities lawyers saying?  Not much, apparently. Because there is no legal obligation to provide guidance and no specific precedence, as a legal matter, attorneys are not necessarily making a distinction between these two words once the decision to address guidance is made, and are largely leaving the chosen language and intended meaning of either word to the investor relations teams of companies.

So, to suspend or withdraw guidance?  It seems that it’s up to individual teams and, in several cases, both words are used interchangeably within the same press release or filing.  We are advising companies to use the word with “withdraw” to provide management teams with the most flexibility for future decision-making around the provision of guidance.

 

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