Listed Companies' Announcement of new Guidance following Suspension of previous Guidance

Date 4 aug. 2020
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After the Danish Financial Supervisory Authority (the “DFSA”) on 20 March 2020 accepted that Danish listed companies suspended their guidance for 2020 as a result of the COVID-19 situation, the DFSA in August 2020 announced that the companies should now, in general, issue new guidance. In this connection, the DFSA has stated that this new guidance generally constitutes inside information, regardless of whether this is within intervals of the previously suspended guidance, and will therefore have to be published as soon as possible. However, the DFSA also acknowledges that there may be companies that cannot issue new fair guidance due to the continued uncertainties. Such companies should instead announce this to the market. The significance for Danish listed companies of the DFSA’s announcement will be described in the following.


Background
In March 2020, the DFSA announced that listed companies could extraordinarily choose to suspend their guidance for 2020 as a result of the COVID-19 situation.


In the DFSA’s view, the possible scenarios and consequences of the COVID-19 situation have now been clarified to a greater extent than in March. Given that the development for the first half of 2020 is also known, the DFSA is thus of the opinion that listed companies have the necessary basis to be able to issue new guidance and should therefore do so.


Requirements with respect to new Guidance

As a result of the COVID-19 situation, the DFSA acknowledges that the new guidance may contain wider intervals and greater uncertainties than would otherwise be the case. However, such matters must be substantiated and explained. In this connection, guidance that is not of a financial nature may also be included, such as expectations of a decrease in volume and closure of stores. When new information that may narrow these gaps or uncertainties is available, the company will need to issue new and more accurate guidance. Thus, it may be necessary for a listed company to make several announcements.


Relationship to previously announced Guidance

Regardless of whether the new guidance is within the intervals that appeared from the latest, suspended guidance, the company will still have to issue a new announcement as a result of the suspension.


Guidance and Inside Information

It is the opinion of the DFSA that a listed company's first guidance for a financial year generally creates expectations in the market to which investors react. When previous guidance has been suspended, the new guidance will replace such first guidance and thus also in general constitute inside information that is specific and price-influencing. This means that the issuer must publish new guidance as soon as possible and cannot wait for e.g. the upcoming quarterly report. A separate announcement must be made instead.


Possibility of continued Suspension of Guidance

If a listed company assesses that it does not have the necessary basis to be able to issue new guidance, the company may maintain the suspension. In that case, the company will have to issue a reasoned announcement of continued suspension.


Once the company has obtained the necessary overview of the development in its business and the financial consequences of the COVID-19 situation for the company, guidance will have to be issued. This assessment must, as a minimum, be made on an ongoing basis as the monthly results become available.


Our Assessment

A large number of uncertainties associated with the COVID-19 situation remains. The development in the first half of 2020 will thus not necessarily be a guideline with respect to the further development in the last two quarters, just as, for example, political and industry-specific conditions may contribute to this uncertainty.


It is stated in the announcement that the DFSA "expects" the companies to issue new guidance as stated, just as this "should" be published as soon as possible. However, we expect that the DFSA will be very aware of whether the listed companies act in accordance with the DFSA's announcement. Given that the DFSA has chosen to emphasize the company's obligations and the rules on inside information, we thus assess that in reality there will be a requirement for either the announcement of new guidance (starting point) or a reasoned announcement as to why new guidance cannot be provided (exception). It must be emphasized that there may still be legitimate reasons why a listed company cannot provide meaningful guidance.


 

If you have any questions or would like more information about the above, please do not hesitate to contact PartnerDan Moalem (dmo@mwblaw.dk) or Senior Associate Henning Hedegaard Thomsen (hht@mwblaw.dk).

 

The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of any reader’s use of the above as a basis for decisions or considerations.