The everchanging news cycle has been accelerated with COVID-19 and the associated onset of daily, if not hourly, updates related to this global pandemic. Feeding into the news has been a set of dynamic considerations that are also continuously changing, such as COVID-19 testing details and evolving guidelines established at levels that stem from global and national to state and local. Furthering the complexity of this situation is the uncertainty of having enough resources to treat the increasing cases of COVID-19, especially with insufficient settings for treatments and broad-based shortages of healthcare providers and equipment.
To say the least, it is difficult and daunting for companies to navigate these times, let alone consider how to effectively communicate the impact of this health crisis (see Managing the Crisis: IR Considerations for Managing your COVID-19 Response). As highlighted in last week’s blog and as part of a company’s response, management teams should reassess their guidance, determine how certain or uncertain they are on the guidance they have provided and develop a plan of communication to update the Street. In this blog, we will look at a few factors to contemplate in deciding whether to update your guidance.
Update or Suspend Guidance
One consideration is whether to update or entirely suspend guidance. A few companies have provided qualitative updates to outlook, announcing general performance effects expected to result from this pandemic, such as, changes to supply chain, impacts to global operations, delays to clinical trials or disruptions to procedures. Some have also reduced guidance, attributing the reduction to the general impact of COVID-19, or pointing to more specific areas affected.
We have also seen more companies within the healthcare sector suspend guidance, which is an understandable response. Each company’s outlook is predicated on a multitude of unpredictable factors, including broad implications of COVID-19 to the economy on a macro-level and the timing of elective procedures coming back in line on a micro-level. Investors and analysts are in the same boat during this evolving crisis, and they do not appear to expect companies to have a quantitative update to guidance readily available.
Consequently, in this period of uncertainty, companies may want to consider retracting guidance altogether rather than risk having to provide multiple revisions.
Timing Guidance Updates
There are no specific rules governing when companies need to provide updated guidance, outside of the normal cadence of earnings cycles. It may behoove some companies to take a wait-and-see approach and suspend their guidance during their next reporting of quarterly earnings, which is right around the corner for many. In other cases, and following suit with predecessors, some may consider pre-announcing updates. In fact, this past month, we saw a number of healthcare companies pre-announce their suspension of guidance. The majority of these companies provided such announcements through press releases, while others did so through 8-Ks.
As timing considerations are made, companies should keep company counsel informed and think through Reg FD obligations, any financing requirements or access needed to capital markets, and the timing of insider trading, particularly in terms of when management developed an understanding of the impact of COVID-19.
Finally, as companies work through next steps on guidance, management teams should consider all available information on the impact of COVID-19, especially since variables are changing day to day.
For more information on guidance and how best to respond amidst this evolving crisis, please contact our team today.
Ji-Yon Yi, Associate