Business journalist Francine McKenna wishes that more of her industry colleagues would attempt to verify claims of revenue and net income by private companies before printing them.
McKenna writes, “Maybe some journalists are intoxicated by access to the non-public numbers some would pay a lot to know for sure. Maybe it’s just too hard. Worst case scenario journalists can be used as cogs in the equity market pump and dump machine.
“Summary level revenue and profitability numbers for public companies, those listed on U.S. stock exchanges, are easily verified. Go to the SEC filings —10-K annual reports, 10-Q quarterly filings, 14A annual proxies, 8-K filings of other legally required to be reported events — to see if what an executive says matches what he or she told regulators and markets in the filed financial statements. Even earnings calls and earnings releases should match what’s eventually filed or executives must later must explain why not.
“Readers may think that online or in print, whether in a magazine or a newspaper, writers have to check the truthfulness of what politicians and business executives say before they print it. More and more they don’t. Intensely partisan rhetoric during the last election cycle led to complaints on both sides that major media allowed politicians and their operatives to make claims about each other in debates, in print and online that weren’t true. Lies took on a life of their own. ‘Unspilling the milk’ was almost impossible. A cottage industry of political fact-checkers —FactCheck.org, Politifact, and media-watching bloggers and journalists — scoured public statements and news and magazine articles for blatant, and not-so-blatant, examples of lies and fibs that slipped into campaign season reports.
“There’s no such service dedicated to checking non-public and pre-IPO financial puffery and blustering. The hype before the Facebook IPO is an example of unverified financial information gone wild. When the New York Times broke the story of Goldman Sachs’ investment in Facebook on January 2, 2011 it was obvious a certain segment of the investing population willingly ignored the lack of audited, verifiable, complete financial information when offered a ‘hot and exclusive’ opportunity. The media was more than willing to repeat unaudited, unverified, and often incomplete information in its stories, true or not. Reuters eventually reported that disclosures provided to Goldman Sachs’ chickens, I mean clients, intended to entice them to make a $1 million minimum investment, weren’t even audited results.”
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