The Declarer (Floyd McWilliams' Blog)

Sunday, June 06, 2004


Normally I do not criticize major media for failing to report the news from a libertarian viewpoint -- even though I myself think that minimal government policies are best. But there is no reason for reporters to treat every quirk of the American regulatory system as received gospel. Here is an article from yesterday's San Jose Mercury News:


`QUIET PERIOD' NOT SO QUIET

Salesforce.com IPO stalled

By Deborah Lohse

Mercury News

Marc Benioff's motormouth could wind up being costly to the company he co-founded, Salesforce.com.

The San Francisco software-leasing company was obliged to warn investors in its latest financial filing Friday that it could face fallout


Fallout from what? Did Mr. Benioff claim that Salesforce.com's competitors were insolvent? Did he suggest that he had pictures of the head of the SEC frolicking naked with sheep?


from a news story stemming from Benioff's interview with a reporter.

The company disclosed that Benioff, its brash and colorful chairman and chief executive, may have run afoul of securities laws by granting a lengthy interview to the New York Times for a May 9 article.


Amazing! You mean that Marc Benioff actually talked to a reporter and allowed him to publish what he said? How can this be printed in a newspaper where anyone can read it? Will no one think of the children?

Next thing you know, corporate executives will actually pay newspapers and broadcasters to carry messages on their behalf! Oh, the humanity!


At the time, Salesforce.com was gearing up to sell shares to the public for the first time in an initial public offering, or IPO. That triggers rules that put the company into a ``quiet period'' during which company insiders can tell investors only what's in the company's public filings.

But rather than keep mum -- as corporate lawyers generally demand -- Benioff spent the better part of a day with a reporter earlier this year, discussing Salesforce.com's origins and strategy.

``By being interviewed about the company while it is in registration, you are creating a grave risk that the SEC is going to interpret that you're hyping the company's stock,'' said David Berger, a lawyer with Palo Alto technology law firm Wilson Sonsini Goodrich & Rosati.


Hyping Salesforce.com's stock by discussing its origins?

If Benioff did not list his date of birth in the public filings, and is seen in public with a party hat that says BIRTHDAY BOY, can he be sanctioned?


While Salesforce.com is taking steps to appease the SEC over Benioff's gaffe, it still faces the possibility that IPO investors in the future could sue for their money back within a year after the deal, the company disclosed in its filing.

Experts say that could happen if Salesforce.com went public, and its stock fell below the IPO price within the first year. Disgruntled initial investors might sue on the grounds that the company had violated the quiet-period rules. They wouldn't need to prove damages, Grundfest said, just that the company had violated the rules. If they won, they'd be entitled to a refund on their purchase price.


And when a woman in Texas was at a furniture store and some kid ran smack into her, she sued and was awarded damages. Even though the child in question was her own.

Surely someone was willing to point out to Deborah Lohse that she would not be obligated to cover the Salem Witch Trials as if justice were being done. Right?


Salesforce.com said in its filing that if it were sued, it would ``contest vigorously'' any such claim that it violated the quiet-period rules. Jane Hynes, a Salesforce.com spokeswoman, said the company had no other comment due to the quiet period.


The Mercury News covers the business world reluctantly and contemptuously, as if it were obligated to report on cockfighting. The SEC's rules discourage corporate executives from talking to reporters. Can you imagine the howls of sanctimonious outrage that would be heard from the Mercury News if government regulations prevented politicians or people on the street from talking with the media?


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