Bad News Bearers Who Lucked Out Twice
Information Resources, the market-data company, has an information problem--the insider kind. Company officials sold IRI stock before IRI announced bum earnings, slamming the share price. Worse, critics say, this happened twice--in 1989 and 1993. A trial nears an end in a shareholder suit stemming from '89; a suit for '93 was recently filed.
The company argues in both cases that officials had no idea of impending bad news and sold to diversify their holdings--and that IRI, in a seesaw battle with rival A.C. Nielsen, is a volatile stock. The officials, also defendants in the suits, won't comment, says IRI.
Then-Chairman John Malec told institutional investors on Feb. 14, 1989, that earnings per share for the year would be 50 cents to 55 cents, the 1989 suit says. Around then, he sold IRI shares worth $2.2 million; along with two other insiders' sales, that's a total of $3.5 million. (IRI says the Malec story isn't in context: Malec volunteered no figures but, in reply to a question, said he was "comfortable" with 50 cents to 55 cents.) In April, 1989, IRI announced a quarterly loss due to several troubled operations. The stock sank $2 per share, to 11.
In 1993, from May through December, the new suit says, 16 officers or directors sold shares for $14.8 million--with Chairman Gian Fulgoni accounting for $835,000. All that time, the suit says, IRI gave rosy assessments to analysts. But on Feb. 4 and Apr. 5, 1994, IRI said tough competition had lopped earnings to half of analysts' forecasts for the two preceding quarters. The stock, now at 15, has lost almost two-thirds of its value since early February.