Tuesday, April 15, 2008

State Street Slider

State Street (STT) announced record profits beating the street estimates. The triumphant press release issued through Business Wire came out around 7:14 AM April 15. Pre-market trading bounced the stock up some 2% on the exceptionally good news which the market is in short supply of. In case you do not know there has been much bad news within the financial sector. Conference call set for a few hours later.

The early news reports carry versions of the press release outlining the really good news. Then the bomb shell drops. Something called conduits did not work out and the losses are in the billions. Good enough to mention in the conference call but not important enough for the press release.

On the conference call and certainly in the press release they went to great pains to explain how good everything else is going. On the face of it the other businesses seem to be doing very well. State Street is doing poorly due to mark to market issues on many CDO type instruments. Liquidity or lack thereof has driven valuations down. Management on the conference call was adamant that they not expect to a loss on maturity of the instruments.

Here is the issue. The press release will survive as a regulatory filing and certainly is compliant with Reg FD and other disclosure requirements. The conference call while public at this point will not resonate in the same manner with the investor. Not all investors will take an hour to listen to it. How long will the conference call stay up on the website? Will they be able to access hard copy transcripts? The value of the conference call is frequently found in the Q&A following as management provides more color and expands on previous comments.

Management has positioned the news so that it was dealt with in a Q&A fashion and not through direct quotable management statements with full responsibility.