Steve Jobs Illness and the SEC

[drewster]

Did apple have a duty to disclose Steve Jobs health?

http://blogs.wsj.com/law/2009/06/25/the-steve-jobssec-question-take-ii-did-apple-say-enough/

 

[joro]

I have seen similar articles a few times about Apple’s disclosure and I do think it will be interesting to see what the SEC concludes now that they’ve opened an investigation. It all comes down to what they define “material” to be because traditionally medical information was off limits but in the case of Apple and Steve Job’s iconic figure at the company, many investors are screaming that the lack of disclosure was indeed “material” to the stock.

 

[patrick0brien]

No, Apple did not.

The investors have made Steve Jobs' status "Material" in their own minds, then are projecting that onto him. They do not have the right to do this, and suffer from their own projection.

It is in the same vein to inventing a rumor, then when that rumor does not come true, punish Apple for it - forgetting they made it up in the first place.

 

[pooryou]

If SJ wasn't a 'celebrity' this would be a non-story.

 

[LethalWolfe]

Considering Jobs is widely regarded as the personification of Apple, the savior of the company, and the genius behind numerous game changing technologies I think a reasonable argument can be made that Jobs ability to head the company is of more material value than that of a regular CEO. I mean, can anyone here honestly say that if headlines of "Steve Jobs diagnosed with rare, usually fatal cancer" or "Steve Jobs in dire need of new liver" hit the press that Apple's stock wouldn't start dropping like a rock? While I don't think medial status should be readily available info but Jobs has a unique position w/Apple. Steve Jobs being tied so closely to Apple can be a blessing and curse for both Steve and Apple.


Lethal

 

[patrick0brien]

-LethalWolfe

Very true. However, it is still not a material fact, and covered by the way the law is written.

Scary thought: if it were legally a material fact, where would the line be drawn for everybody else?

 

[LethalWolfe]

patrick0brien,

Do you have a link to the law itself? All I'm going by is what the article stated which was, "...they are required to disclose “material” information, which is defined as what a reasonable investor would need to know to make an informed decision on buying or selling stock." Maybe I don't qualify as a "reasonable investor" because I follow Apple so close, but w/o Jobs there's no iMac, no iPod, no iTMS, no iPhone, no Apple Stores, etc. and, honestly, probably no Apple if he didn't come back. That's a lot to take into consideration when contemplating Apple stock.

I agree that it's a slippery slope and I agree that it's right that private medical info isn't required to be divulged, but given the severity of Jobs' illness and the massive role he plays at Apple (which is easily outside the norm of a typical CEO) I can understand the SEC wanting to take a closer look.


Lethal

 

[drewster]

-LethalWolfe

Very true. However, it is still not a material fact, and covered by the way the law is written.

Scary thought: if it were legally a material fact, where would the line be drawn for everybody else?

I think most other companies with less 'celebrities' at the C level would be quite transparent about it, the culture of secrets at Apple seems to keep jobs quite secret.

But consider if say Microsoft, Dell or IBM were to somehow lure Jobs over - the gain in their stock would probably be 10% plus on the day.

Perhaps going forward, Jobs health will be listed a material risk in their filings, this I think would provide answers for these types of concerns.

 

[applebum]

I keep seeing everyone discussing how much should have been revealed and if Apple will get in trouble for covering up Jobs' illness. Yet I am not so sure anything was covered up. In another thread on this, someone had posted a link that suggests that Apple/Jobs had revealed that a liver transplant was a possibility. Bloomberg ran an article back in January that was discussing Jobs position on Disney's board of directors. Here is a quote from the article:

Jobs, 53, said on Jan. 14 he was taking a leave because his health issues were “more complex” than first thought.

The Apple co-founder was reported today to be considering a liver transplant as a result of complications after treatment for pancreatic cancer in 2004, according to people who are monitoring his illness.

That article is from Jan. 16th. Now if Bloomberg knew this, I would imagine that other media did as well. So, if you are an investor that truly believes that the CEO's health is a key point in your decision making, shouldn't you have been aware that a liver transplant was a possibility? The fact that he had one shouldn't be a surprise.

Personally, I believe enough info was given. It was stated that a liver transplant was a possibility. While on a leave of absence, SJ decided to go through with the transplant. Leadership was in place, everyone knew who was running the company at the time, I don't think Apple had any need to disclose that SJ had gotten the transplant. In fact, as Lethal Wolfe mentioned, the stock would have dropped had they stated it. Investors should be glad the way it was handled - the stock stayed high, and by the time it was announced, the transplant was done, SJ had a good prognosis, and he was still on track to come back to work - which he did in the stated time frame. Minimal losses on the stock = good for investors.

Here is the link to the article mentioned above:

http://www.bloomberg.com/apps/news?pid=20601087&sid=a0hznzrahd7Y

 

[patrick0brien]

Do you have a link to the law itself? All I'm going by is what the article stated which was, "...they are required to disclose “material” information, which is defined as what a reasonable investor would need to know to make an informed decision on buying or selling stock."

Hmmm. Well, I think you hit the issue at the hear there. I don't think the law defines the details of what "material" facts really are. In Steve's case, he is indeed perceived to be the core of Apple - even during his 12-year absence from '85 to '97, so in this case, more so than your average Founder/CEO, his heath can be equated to the company. I do applaud the evidence he sees that and has been making moves to put Cook, and others into the light to remove his perceived criticality.

I do have to say, like it or hate it, this was handled the best I could think of, let his leutenants run the show, [t]then[/t] drop the news, that way it landed as a dull thud versus the cataclysmic thunderclap it would have been in January/February (or whenever the diagnosis was made).

That's all we need is a jump in the "Apple Death-Knell Counter"

I think most other companies with less 'celebrities' at the C level would be quite transparent about it, the culture of secrets at Apple seems to keep jobs quite secret.

Very true. Where does one draw the line between doctor-patient confidentiality and what the investor would like to know.

It occurs to me that we have no idea, and probably never will, know when the diagnosis was made, when he went onto the list, etc. These are doctors, so it's a little weird.

 

[LethalWolfe]

That article is from Jan. 16th. Now if Bloomberg knew this, I would imagine that other media did as well. So, if you are an investor that truly believes that the CEO's health is a key point in your decision making, shouldn't you have been aware that a liver transplant was a possibility? The fact that he had one shouldn't be a surprise.

Interesting, I wonder how that slipped by the media at large as well as Apple-centric websites. Maybe I just missed it, but I don't think that even made it onto Macrumors at the time.


Lethal

 

[MTI]

The SEC may also be asked to look into whether Apple's voluntary disclosure of "hormonal imbalance" was misleading to investors.