Let Stockholders Know What They're Buying

The recent fracas between Dell Computer Corp. and Kidder, Peabody & Co. has a moral: Important changes in the way a company does business need to be disclosed to investors as swiftly as possible. In the case of Dell, an ill-fated flier in the foreign-currency market by the Austin (Tex.) computer company became known only after a footnote to the company's second-quarter report acknowledged $38 million in unrealized currency losses.

In other words, for some time, investors purchasing the stock of the high-flying computer company were unwittingly investing in a company trading foreign-currency options far more aggressively than they had reason to suspect. The company has reported that in its fiscal year ended Feb. 2, 1992, it sold currency options worth $435 million--better than double the $200 million it recorded in international sales that year.

At this writing, it isn't certain exactly how long Dell's aggressive activities lasted. But that's not the point that concerns us. What we have here is a disclosure issue. Under current law, management has too much latitude in deciding what must be disclosed and when. We believe that such a change in the company's operations was material--that is, it would make a difference to investors. Shareholders should have been told immediately about the decision. Though current law doesn't always require immediate disclosure--i.e., in contemplated mergers or acquisitions--it should in an instance so material as this. Investors who want a piece of a currency play can invest in a bank or other investment institution. In this case--without disclosure--they got a piece of a currency play while thinking that they were investing in a computer company.

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