Is Google really afraid of rumors?…

May 16, 2011

Risk factors in SEC filings often seem like boilerplate that the attorneys throw in to cover every conceivable possibility of things that could go wrong. One of these days, we wouldn’t be surprised to find a risk factor that says something along the lines of —Our CFO may catch the flu from his Aunt Edna, which could then spread to the rest of the executive team and cause them to miss a week of work.— (Okay, that’s an exaggeration — we would be a little surprised to read that one.)

Yet in all seriousness, risk factors can often provide insight into a company — and specifically, how their top executives think, which is why we usually read them pretty carefully. And when it’s a big-name company like Google (GOOG) or Apple (AAPL), both of which tend to play things tight to the vest, we read them very carefully.

One of the disclosures that jumped out at us after reading Google’s 10-Q that was filed last week, was this interesting new risk factor in the laundry-list of risks related to the volatility of Google’s stock:

“Commentary by industry and market professionals about our products, strategies, and other matters affecting our business and results, regardless of its accuracy.”

Whoa, we thought. Were folks at Google really concerned that Internet chatter could have an impact on the company’s stock price? Given Google’s sheer size, it’s hard to imagine what kind of rumor — either negative or positive — would move the stock dramatically enough in one direction or another that it was worth including as a risk factor. But as we say all the time, there are no accidents in SEC filings, so the idea not only crossed someone’s mind at Google. It was taken seriously enough to be vetted by lawyers.

To be sure, rumors can move the market, which is why investors need to use their common sense and judgment as filters before acting on rumor and innuendo. But it’s interesting that a company like Google would include this as a risk factor, especially since: 1) investors already know that this happens from time to time, 2) it’s really not that helpful, and 3) it’s a little like warning about the flu that Aunt Edna may or may not give the CFO someday.

 

Image source: carulmare via flickr

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Posted in: Compensation, D&O Turnover, Disclosures, Risk Factors

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Companies Mentioned: Google Inc.,
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