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In the business world, material news is any type of information that is released by a business that has the potential to impact the value of the securities issued by the company, or the perceptions of investors who are currently considering the possibility of acquiring those securities. Sometimes referred to simply as materiality, material news can cover any type of announcement to the investment community or the public at large. The nature of the announcement may include events that are anticipated to increase the standing of the company and possibly generate an increase in earnings, or events that may create some concern in the investment community, leading to a decrease in earnings.
Material news is usually some event that is out of the ordinary for the business. For example, the company may be planning a one-time corporate event, such as the release of a new product. An event of this type would most likely increase interest in the business and cause the value of its securities to increase. Another possible type of material news would be the announcement of an impending stock split, an event that is of interest to current and potential investors alike. The release of confirmation that earnings for a specified period are down is an example of a material news item that is likely to cause concern, and may have an adverse effect on the value of the securities, depending on the reasons for the earnings decrease.
Highly irregular events of short duration also fall into the category of material news. Should a key officer of the business suddenly resign or be terminated from the company, this type of news would be considered extremely important and be announced immediately. Rare situations in which a business temporarily calls a trading halt to the shares currently on the open market also warrant immediate announcement to the general public. Essentially, any unusual event that is documented in a formal press release and made widely available constitutes material news.
The timing of material news releases is of critical importance. In situations where the news is expected to have a favorable effect on the value of the company’s securities, businesses will often time the release early in a trading day. This strategy makes it possible for potential investors to respond to the news by actively pursuing the acquisition of the shares. In contrast, many companies will release news that is expected to have a negative effect on security prices late on the last day of the trading week. This strategy provides time for the company to take steps to counteract the bad news to some degree before active trading begins at the beginning of the new trading week.
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