4.8 MATERIALITY IS NEAR
The main question regarding the value that a particular piece of news brings to the stock price should be around the materiality of the information contained in the news. If the news is fresh, preferably delivered in real time as soon as the material information is made available to the public, the impact on the stock price should be very visible.
The determination of “materiality” of the news story or whether there is material information within the story that has not been disclosed publicly before is not an easy task.
The SEC guidance regarding material information is that:
“… the following items are some types of information or events that should be reviewed carefully to determine whether they are material: (1) earnings information; (2) mergers, acquisitions, tender offers, joint ventures, or changes in assets; (3) new products or discoveries, or developments regarding customers or suppliers (e.g., the acquisition or loss of a contract); (4) changes in control or in management; (5) change in auditors or auditor notification that the issuer may no longer rely on an auditor's audit report; (6) events regarding the issuer's securities—e.g., defaults on senior securities, calls of securities for redemption, repurchase plans, stock splits or changes in dividends, changes to the rights of security holders, public or private sales of additional securities; and (7) bankruptcies or receiverships.”
While regulated news carries a preponderance of material information, ...
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