The following post comes to us from Alexander F. Cohen, partner and co-chair of the national office of Latham & Watkins LLP. This post is based on a Latham & Watkins client alert by Mr. Cohen, Nathan Ajiashvili, Jeff G. Hammel, Steven B. Stokdyk, Kirk A. Davenport II, and Joel H. Trotter; the full publication, including footnotes and annex, is available here.
Every public company must decide whether and to what extent to give the market guidance about future operating results. Questions from the buy side will begin at the IPO road show and will likely continue on every quarterly earnings call and at investor meetings and conferences between earnings calls. The decision whether to give guidance and how much guidance to give is an intensely individual one. There is no one-size-fits-all approach in this area. The only universal truths are (1) a public company should have a policy on guidance and (2) the policy should be the subject of careful thought.
The purpose of this post is to provide an updated discussion of the issues that CEOs, CFOs and audit committee members should consider before formulating a guidance policy.