Musing on forward looking statements
Another part of annual reports which nobody ever reads is the ‘Cautionary Statement Regarding Forward-Looking Statements’. So I decided to read a few [1] and see what I could find to muse about.
The law apparently requires companies to make these cautionary statements, but there is no consensus on which law applies. The wisest don’t put any reference to the source, they just make the statement. A few try to be as complete as possible like this:
“… within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the United States Private Securities Litigation Reform Act of 1995, as amended.”
I found only one other that mentions these two sections 27A and 21E of, what they call, the ‘Exchange Act’ but without dates. They say nothing of the 1995 Reform Act above. But I found one with this act only and no reference to any other. So no consensus.
All this is very confusing for the few people like me that read these statements? But why is it important?
Many of the cautionary statements give us an English grammar lesson, listing forward looking words. Here is the shortest one I found with only four words:
“The words “believe,” “expect,” “anticipate,” “project” and similar expressions and uses of future or conditional verbs, generally identify “forward looking statements”.”
I found one that listed 23 words, as if readers didn’t know simple English and needed reminders. And the two words: ‘believe’ and ‘expect’ won the competition of the most favourite words included in every cautionary statement I read.
Finally, would you believe I found a mistake in the list of words in Sanofi’s forward looking statement. They included the word ‘plan’ twice in their long list of forward looking words. Perhaps we need the second ‘plan’ in case we missed it the first time! [2] I’m sure you don’t believe me so here it is:
“Words such as “believe”, “anticipate”, “can”, “contemplate”, “could”, “plan”, “expect”, “intend”, “is designed to”, “may”, “might”, “plan”, “potential”, “objective” “target”, “estimate”, “project”, “predict”, “forecast”, “ambition”, “guideline”, “should”, “will”, or the negative of these and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.” [2]
Can you see it?
[1] I analysed the forward looking statements from the 2021 and 2022 annual reports of eight pharmaceutical companies, four based in USA – Abbott Laboratories, Abbvie Inc, Bristol-Myers Squibb Company, Johnson and Johnson, and four based in the Europe – AstraZenica, GlaxoSmithKline, Sanofi, Novartis.
[2] Sanofi, Form 20-F, for the fiscal year ended 31st December 2022, Cautionary statement regarding forward-looking statements, page 5.