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Take Two Interactive and other companies taking risks, playing favorites with disclosures?

|Includes:Take-Two Interactive Software, Inc. (TTWO)

A very interesting article published by Market Rap was forwarded to me by Bruce Carton on Twitter.

The story is that Dow Jones says it received Take Two Interactive's (NASDAQ: TTWO) Sept. 1 earnings release under embargo ahead of its general release via Business Wire. This allowed Dow Jones to write an analysis of the results that was released within 48 seconds of the news crossing Business Wire, and before the company's release showed up on most places on the web. (It typically takes a minute to seven minutes for news releases to be widely distributed on the web).

Even more interesting to me is what Dow Jones told Market Rap:

“We, like other newswire organizations, are often able to issue analysis articles very quickly because companies provide releases under embargo slightly before the releases are broadly distributed.  The embargo prohibits us from distributing a release or related article before an agreed upon time.  In the case of Take-Two’s earnings, the embargo was until the company issued the release over Business Wire.”

This suggests that giving earnings releases in advance to proprietary wires like Dow Jones, Thomson Reuters and Bloomberg is common practice. Frankly, this is the first I've heard of this practice and if it is widespread it needs to stop.

While there's nothing I know of that prohibits this practice, it's incredibly risky. What if one of the newswires inadvertently publishes their story before your news release crosses the wire? The practice also opens up more opportunities for insider trading, and hacking.

However, there's another issue here. How do you choose which news services get your embargoed release and which don't? Indeed, what is a news service today? Isn't Market Rap a news service? What about Business Insider? Or SeekingAlpha? Or StockTwits?

It's getting harder these days to tell the difference between mainstream financial media and alternative financial media. Indeed, you could say there's a full-scale war afoot between the traditional financial newswires and the new entrants.

I don't think it's smart strategy for a company to be seen to take sides in this war, which is what Take Two Interactive seems to have done and is now getting bad publicity for.

Bottomline: Companies should treat everyone the same. And they need to make sure their IR firms and PR newswire services is doing the same.

Stocks: TTWO