If there's one corporate practice I dislike it is companies that hide bad news inside other announcements.
And it seems the market possibly shares my view with Sirtex Medical (ASX: SRX) shares slammed down more than 5% in lunchtime trading.
In an announcement released after market close yesterday, titled "Sirtex declares a Dividend of 12 cents per share", hidden in the third of four paragraphs, Sirtex stated "In the period preceding the release of the results of our SIRFLOX study Sirtex will continue to grow, although as in the past there will be some fluctuation in the percentage growth rate of dose sales quarter on quarter. This was the case in the first quarter when we experienced subdued dose sales growth."
In other words the company has seen slower growth in dose sales during the three months from July to September. Results of the first quarter sales will be announced in the first week of October, as per usual company practice.
We like management to be up front with shareholders, and while the positive is that the company has noted slowing sales growth before its official report, hiding the bad news in an announcement on its dividend is a black mark against Sirtex. Investors are not that stupid and we don't like being taken for fools (note the lower case 'f').
It also calls into question whether the company is following its corporate disclosure requirements. If the company was aware of slow growth in sales – a potentially material announcement – before yesterday, then the company should have made a separate announcement to the market.
But it seems corporates find it hard to learn from the examples set by their peers, and the mistakes of others. In a separate issue, Newcrest Mining (ASX: NCM) is under investigation by the corporate watchdog, the Australian Securities and Investment Commission (ASIC) for potentially advising some analysts of a fall in production forecasts prior to the news being made public.
Foolish takeaway
The first quarter dose sales numbers are unlikely to have a significant effect on the company's long-term growth prospects. Losing the confidence of investors and the market could have a much more profound effect, so it's in the interests of companies to keep investors properly informed.
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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.
