Pre-Close Calls and Transparency
Transparency
In spring 2024, ESMA (the EU’s financial supervisory authority) issued a warning regarding so-called pre-close calls—meetings with analysts held just before companies enter the quiet period, which begins 30 days prior to an earnings release. The concern is that these calls carry an inherent risk of unintentionally disclosing insider information or company-specific data that could significantly affect the share price or financial instruments.
Throughout the year, we’ve received numerous questions about how companies should interpret and respond to ESMA’s recommendation.
What’s the challenge?
The purpose of pre-close calls is often to manage expectations for the quarter and remind analysts of current market conditions and previously communicated information. These meetings are also an effective way to offer management access and strengthen analyst relationships.
However, there is a risk that analysts may misinterpret the information—or that companies may inadvertently share material that has not yet been made public.
The challenge lies in determining what constitutes insider information. Because the information is company-specific, there is no universal rule to apply.
Naturally, companies have no interest in deliberately disclosing price-sensitive information. The aim is rather to keep analysts informed in order to avoid surprises at the earnings release—surprises that could trigger share price volatility.
The issue is that analysts act as intermediaries—information is their currency. In this context, the information becomes exclusive, as only a select group is granted access. Some analysts may receive calls before others, creating a timing advantage.
Our experience shows that the first analyst to receive a call can quickly reach out to investors or publish a memo. Meanwhile, the fourth analyst in the chain may receive no real advantage, as the information has likely already circulated. This creates imbalance.
In discussions with investors, it’s clear that they don’t always view these one-on-one analyst calls positively. Some investors hear from multiple analysts, while others hear from none, resulting in an uneven playing field. Additionally, since analysts interpret the information before passing it along, there is a risk of distortion. That said, a skilled analyst can offer valuable insight and perspective—something investors often appreciate.
What has happened since ESMA’s warning?
Pre-close calls remain common practice, but in 2024 we’ve seen companies respond to ESMA’s concerns by reevaluating their routines.
SEB and Volvo Cars are two large companies that have introduced scripts, publishing the content of analyst calls on their websites. This strengthens transparency and gives retail investors and media access to the same information ahead of the quiet period.
What does Safir recommend?
We recommend that companies stay attuned to ESMA’s stance and adopt procedures that reduce the risk of unintentionally disclosing insider information—while enhancing transparency.
Several approaches can support this:
- Host open calls where both analysts and investors are invited.
- Publish any information shared with analysts—for example, in the form of a script on the company website. Volvo Cars offers a good model, with well-structured scripts and subheadings.
- Include pre-close calls in the company’s online calendar, along with a short description of the discussion topics. Related materials can also be made public in connection with the call.
These materials might summarize key questions and topics, such as macroeconomic factors, market conditions, and the company’s messaging around revenue and profitability. SEB offers a strong example of this approach.
By taking these steps, companies can maintain strong relationships with analysts and investors—while upholding high standards of transparency and regulatory compliance.
Helena Nordman-Knutson
