(Bloomberg) -- Around 10:20 a.m. one morning last month, shares of Continental AG dropped almost 5%. There had been no statement from the company, no...
-- Around 10:20 a.m. one morning last month, shares of Continental AG dropped almost 5%. There had been no statement from the company, no important industry news. But most traders knew. It was that time again.Executives at the tire maker had been speaking to analysts on what is known as a pre-close call. These private chats, held with a select few to help them prepare for upcoming results, are particularly widespread in Germany and elsewhere in Europe.
Long-running frustration about pre-close calls is bubbling up again in an environment that has market participants on edge amid economic weakness, election uncertainty and Middle East tensions. Thinner trading volumes overall in Europe over the past two years are also not helping, ensuring bigger movements when someone does trade a stock.
But Piebe Teeboom, FIA secretary general, says the rules around any such conversations need to be tightened. In addition to disclosure restrictions, companies shouldn’t try to influence the estimates of selected analysts so they can then beat the consensus on earnings day. The path from the conversation to the share-price reaction isn’t always the same, but there’s a rough route, according to traders.
VW said the calls are an “established format” to provide “all market participants simultaneously with relevant public information.” It said it doesn’t comment on specific share price movements. Beyond the controversy, the other issue for many is that the calls add to an exhausting schedule of earnings and pre-releases.
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