Post mortem…

Yesterday, a reader sent me a short note to ask whether there was anything in Mercury Interactive’s (MERQE) SEC filings that would have predicted the stock falling nearly 30% yesterday. After all, the problem had to do with the way the company handled its stock options accounting and there’s plenty of information about options accounting in the average K, Q or proxy.

So I did a quick skim of Mercury’s filings between 1996 and 2002 — the problem years that Mercury identified in the 8-K it filed yesterday — and have to say nothing really jumped out at me. There was a mention of an “informal inquiry” — including three times in three separate 8-Ks filed in October — but informal inquiries can often mean nothing and it certainly shouldn’t be the only reason to dump a stock. About the only thing that did jump out at me — and this is scary simple — is that the company filed 6 8Ks in October, compared with only one last October and zero in September. But again, making investment decisions based on a large number of 8Ks filed also seems a bit rash.

What’s even scarier is that Mercury’s new CEO, Anthony Zingale, told the WSJ (no link, subscription required) that he thought 30 or 40 other companies had received inquiries similar to the one that Mercury received. Since we don’t know which companies those are — the Journal story lists Brocade Communications (BRCDE) and Nyfix (NYFX) — investors are left trying to guess how many of these grenades are in their portfolios.

This makes for lots of murkiness — something Jack Ciesielski noted on his excellent blog might be one way to pronounce Mercury’s ticker. But one thing’s clear. Investors can’t rely on stock analysts to straighten it out for them. Earlier today, Citigroup lowered its rating of Mercury. Thanks for the heads up, guys! Now that’s advice certainly worth paying for.