One of my stocks missed the deadline to file its quarterly financial statements. What happens next?

By Ayton MacEachern AAA
A:

The date and time that a company releases its earnings is very important because investors looking to buy or sell the particular security are counting on the information to help make a decision. When the earnings are released, the price of the security is almost always affected if it differs from the expected amount; this is often known as a surprise.

When an earnings deadline is missed, serious problems can occur in the stock market, as investors begin to worry about what might have caused the company to miss the deadline. Even if the reason is completely innocent, the notion that something MUST be wrong will always be in the back of investors' minds. Missing deadlines will almost always have a negative effect on the price of the stock, and volatility will surely increase.

However, stock exchanges have rules in place to protect investors from this volatility. For example, Nasdaq stock market rules say that missing a deadline could result in the market immediately suspending trading and delisting the company's common stock. This rarely happens, as companies are usually able to request an extension to get the financial statements released prior to being delisted.

If the company you own shares in has just missed its earnings deadline, it may not be reason to panic and dump the lot right away, but it should be a signal to watch it closely. You do not want to be left holding the bag if it turns out that the financial statements were delayed for a disastrous reason, such as accounting fraud.

Learn more about this in Strategies For Quarterly Earnings Season and The Flow Of Company Information.

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