to disclose or not to disclose – that is the question…

A good writeup on about the very, very unfortunate case of AiT and Deborah Weinstein, their lawyer. The (very) short version: AiT signs a non-binding letter of intent to get purchased by 3M. Apparently shortly thereafter there’s a leak of the deal (which causes a runup in its share price). AiT issues a press release, saying its exploring alternatives but doesn’t mention the deal. The deal is only disclosed two weeks after the leak, when a definitive agreement is signed (i.e. the deal is binding). Read more about it on the OSC site. Talk about being between a rock and a hard place. One of the partners of our firm is quoted on that point:

Gary Girvan, an M&A specialist with McCarthy Tétrault LLP, says “the stakes are very high” for directors to disclose merger negotiations early because civil liabilities legislation introduced by Ontario last year could cost board members personally if they fail to disclose material events in a timely fashion. The combination of the new legislation and the AiT case puts more pressure on boards to reveal potential deals earlier, Mr. Girvan said, but the consequences can be devastating for shareholders.

“The danger is that you end up with a lot of announcements that do not come to fruition and the stocks of the listed company become volatile. Investors will be reacting to news about a deal that hasn’t crystallized,” he said.

The company and its CEO have settled with the Ontario Securities Commission (the provincial equivalent here of the SEC) but Ms Weinstein has indicated she will vigorously defend herself. As, I think, IMHO, she should.