Symantec investors are suffering from silence. The market wiped $6 billion off the anti-virus software maker on Friday morning after it revealed an audit investigation and skipped its earnings Q&A entirely the previous evening. Not divulging inquiry details is understandable. Ruling all topics off limits encourages investors to indulge their worst fears.
The company has given scant details. All it will say is that a former employee raised concerns that prompted the board to launch the investigation, hire outside legal help and notify the Securities and Exchange Commission.
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On top of that, the probe is unlikely to be wrapped up soon enough to permit Symantec to file its annual 10-K regulatory filing on time.
Reading between the lines eliminates some possibilities. The audit committee’s involvement means it’s probably related neither to sexual harassment nor an IT security breach. And it wouldn’t be surprising if problems centred around LifeLock.
Symantec completed its acquisition of the identity-theft protection company which has had a history of legal troubles, whistle-blowing and run-ins with regulators just over a year ago.
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Letting fears run riot
Refusing to answer any questions at all from analysts on its earnings call lets fears run riot. Executives may not have had much time to prepare and will worry about inadvertently saying the wrong thing. That’s a fair concern, but hardly a good reason to avoid benign queries unrelated to accounting.
Moreover, CEO Greg Clark felt comfortable enough to say “we were pleased with the company’s fourth-quarter results” and issue guidance for the current quarter even though both may be subject to change because of the investigation.
Investors deleted 35% of Symantec’s market capitalisation in the first few hours of trading on Friday.
Medieval mapmakers drew monsters in unexplored areas, because the unknown was often dangerous. The market will assume the same when companies refuse to answer basic queries.
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own )