to disclose or not to disclose — that is the question…

A good writeup on globeandmail.com about the very, very unfor­tu­nate case of AiT and Deborah Wein­stein, their law­yer. The (very) short ver­sion: AiT signs a non-binding let­ter of intent to get pur­chased by 3M. Appar­ently shortly there­after there’s a leak of the deal (which causes a runup in its share price). AiT issues a press release, say­ing its explor­ing altern­at­ives but doesn’t men­tion the deal. The deal is only dis­closed two weeks after the leak, when a defin­it­ive agree­ment is signed (i.e. the deal is bind­ing). Read more about it on the OSC site. Talk about being between a rock and a hard place. One of the part­ners of our firm is quoted on that point:

Gary Gir­van, an M&A spe­cial­ist with McCarthy Tétrault LLP, says “the stakes are very high” for dir­ect­ors to dis­close mer­ger nego­ti­ations early because civil liab­il­it­ies legis­la­tion intro­duced by Ontario last year could cost board mem­bers per­son­ally if they fail to dis­close mater­ial events in a timely fash­ion. The com­bin­a­tion of the new legis­la­tion and the AiT case puts more pres­sure on boards to reveal poten­tial deals earlier, Mr. Gir­van said, but the con­sequences can be dev­ast­at­ing for shareholders.

“The danger is that you end up with a lot of announce­ments that do not come to fruition and the stocks of the lis­ted com­pany become volat­ile. Investors will be react­ing to news about a deal that hasn’t crys­tal­lized,” he said.

The com­pany and its CEO have settled with the Ontario Secur­it­ies Com­mis­sion (the pro­vin­cial equi­val­ent here of the SEC) but Ms Wein­stein has indic­ated she will vig­or­ously defend her­self. As, I think, IMHO, she should.

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