Teck Cominco IR strategy harkens back to Air Canada mess

On October 5, 2000, the life of an investor relations executive named Valerie Peck changed forever. Her boss at Air Canada, Bob Peterson, approved a script that she would read into the voicemails of the equity research analysts that covered the stock. The price of oil had been moving up, and Air Canada’s jet fuel bills were swamping the Q3 EPS Street forecasts. Rumour at the time was the Air Canada’s external legal counsel had approved the script prior to its use.

The Ontario Securities Commission brought Securities Act charges against Air Canada:

“(iv) Conduct contrary to the Public Interest

17. The Earnings Information, considered as a whole, was a “material fact”. The Earnings Information was not generally disclosed by Air Canada prior to the disclosure of that information by Air Canada to the Analysts. By informing the Analysts of the Earnings Information before such information was generally disclosed, as such, Air Canada acted contrary to the public interest.

18. The Earnings Information was “material information” as defined in the TSE Company Manual. In the circumstances, by selectively disclosing the Earnings Information to the Analysts and by not generally disclosing the Earnings Information, as such, in a timely manner, Air Canada failed to comply with the provisions of the TSE Company Manual, as set out above, and thereby acted contrary to the public interest.”

Less than a year later, Air Canada settled the action and agreed to pay $1 million to the Ontario and Quebec Securities Commissions (50/50) and $80,000 in costs.

Ms. Peck was a hard working, talented, nice person. She and her career were the first casualties in all of this.

From the press reports, it appears the facts behind Greg Waller’s email are different that what went on at Air Canada:

In a terse e-mail sent last week to a group of analysts, Mr. Waller issued a not so gentle reminder that metal prices have declined sharply during the quarter, while at the same time, the Canadian dollar has appreciated dramatically against the U.S. currency. Teck’s profit, Mr. Waller’s e-mail clearly suggests, will be hurt.

But, when thinking about the common sense of all of Mr. Walker’s points to the analysts, no one should forget how sensible it was for Ms. Peck to remind analysts that jet fuel prices (public info) would negatively impact Air Canada’s upcoming earnings. That cost Air Canada $1 million, some embarrasment and Ms. Peck ultimately lost a great job.

Were the regulators wrong then? Or will they also take issue with Teck?

Perhaps the facts are different enough in this situation that it isn’t so black and white. But it makes you stop and think.

MRM