Why Is Penumbra Playing Hide and Seek with Information?

There’s often a fine line between strategy and transparency at a public company. But I’ll let you in on a secret. You’ll never go wrong erring on the side of transparency. Case in point, Penumbra’s Thunderbolt delay.

Penumbra is a public company that makes medical devices to treat vascular conditions such as stroke and aneurysm. The company’s investors have been on cloud nine over the anticipated launch of Penumbra’s Thunderbolt device, a differentiated innovation for removing blood clots from the brain.

In recent months investors have begun to ponder the timing of that product launch because the clinical trial has been a tad behind schedule. But it wasn’t until the Q&A portion of Penumbra’s second-quarter earnings call last week that the company shed light on the situation – and only after Bill Plovanic, a longtime analyst at Canaccord Genuity, specifically asked for an update.

And it should be noted that Jason Mills, Penumbra’s EVP of strategy, worked closely with Plovanic at Canaccord for years. I’m not saying the question was staged, but it’s an awfully big coincidence.

CEO Adam Elsesser said Thunderbolt could be delayed by 12 months due to trial enrollment challenges. While a slight shift in timing was anticipated, the extent of the delay was out of the blue. Penumbra’s stock price dropped almost 10% as investors absorbed the news, despite a strong earnings report for the quarter and an increase to the company’s revenue forecast for the year.

Elsesser said the company will formally update investors on the Thunderbolt launch once details are finalized with FDA. The company reiterated that point to me Friday when I reached out to ask why the update only came up during the Q&A, rather than being included in the script—a question they dodged, by the way. I can't help but wonder: If Plovanic hadn’t asked, would that information not have been shared with investors until later, and would the company’s share price not have reflected the news? It was almost as if the company had strategically decided not to bring it up unless directly asked.

Don’t get me wrong, Penumbra’s Thunderbolt delay is disappointing, but weatherable. It’s the don’t-ask-don’t-tell approach that is unsettling, especially given my previous praises of Elsesser’s leadership style.

I get that the company is still hammering out the details with FDA, but if there was enough information to have a ready-made response to the question, there was enough information to mention it in the script. That’s literally what that portion of the earnings call is for.

The Securities and Exchange Commission is strict on disclosure for a reason. It has been argued that a lack of transparency in public companies could have been the linchpin of the stock market crash of 1929 and the subsequent Great Depression.

Today, significant corporate events generally must be disclosed within four business days, according to SEC regulation. This levels the playing field for investors. If key developments are withheld from the general investing community, insiders can take advantage for personal gain. Even if you ignore the potential for insider trading, lack of transparency can quickly erode stakeholder trust.

Penumbra is walking a thin line between strategic maneuvering and lack of transparency. It's a bad look, especially when their analyst buddy is the one asking the right question at the right time.