The Whisper Number

http://www.futureofcapitalism.com/2010/04/the-whisper-number

From a New York Times article on Google's earnings announcement yesterday:

The company topped published forecasts on Thursday, reporting that its net income in the first quarter jumped more than 37 percent from the recession-mired quarter a year ago. Sales grew 23 percent from the period a year earlier.

But the stock was down nearly 5 percent in after-hours trading because the results were lower than the "whisper number" of analysts, the unpublished estimate that some analysts give clients....

On average, Wall Street analysts surveyed by Thomson Reuters expected Google to report profit, excluding items like the cost of stock options, of $6.60 a share and net revenue of $4.95 billion. The per-share whisper number was about 15 cents higher, according to whispernumber.com.

When even the New York Tmes, in a routine earnings article, is linking to a paid Web site offering information about "the unpublished estimate that some analysts give clients," estimates that are different from the estimates published by Thomson Reuters, it's enough to cause the anti-fraud antennae of even a skeptic of regulation such as myself to quiver. Of course, it's the Securities and Exchange Commission's regulation of this kind of information that gives the whispers whatever value they have in the first place. I guess you can argue that anyone who buys or sells a stock based on a "whisper number" doesn't deserve to be protected from their own silliness, but the whole thing runs counter to the ideas of transparency and equal information that undergird the rules. Who is doing the whispering and what are they giving in exchange for getting the whispers? The whole subject is ripe for investigation.

Update: The founder of the Whisper number site has a comment below addressing some of these issues. It is worth reading.

Disclosure: Long Google. I used the whisper-number-related selloff this morning to buy some more.

by Ira Stoll  |  Apr 16, 2010 at 10:54 am Related Topics:  Banking, Capital Markets Regulation, Google, SEC receive the latest by email: subscribe to the free futureofcapitalism.com mailing list