Friday, January 16, 2009

Steve Jobs Isn't Lying About His Health

Why should we believe what Apple CEO Steve Jobs says about his health? One reason I can think of is that if he lies, he and anyone else who is in on it is likely committing securities fraud.

Not so long ago Jobs tried to put an end to rampant speculation about his health. He looked pale, gaunt, and sickly; he was pulling out of public appearances. Folks were concerned. Jobs finally addressed the rumors just after the New Year, explaining in a letter to the Apple community, that doctors had identified a hormone imbalance, easily treatable, that was causing his weight loss.

Now we have a second letter from Jobs, this time to Apple's employees, announcing a leave of absence and reporting that his "health-related issues are more complex than [he] originally thought." Rumors are flying that the cancer is back, and it's not just the "Apple community" that wants to know now: what isn't Jobs telling us?
Whatever is going on, I think it's safe to say Jobs isn't lying. Or if he is, he's not getting sound legal advice. History shows that any statements Jobs (or anyone else) makes about his health are "material" information for investors. Jobs is widely and singularly credited for transforming Apple, Inc. from insular, moribund business into unlikely worldwide entertainment power. Investors identify Apple's fortunes so closely with Jobs that Apple's stock prices rise and fall on rumors about Jobs's status with the company. A blogger announces (wrongly) that Jobs suffered a heart attack, and the stock price falls 11% in ten minutes. When Jobs disclosed the nature of his illness — along with the upbeat prognosis — last week, Apple's stock surged 4% against a flagging NASDAQ index.

I'll leave alone the question whether, in a case like this, the securities laws ought to require a guy like Jobs to make regular disclosures about his health — that's a tough question that involves weighing the rights of investors against a right to privacy that is already enshrined in federal law. But a material misstatement, even if it reflects a benign motivation like "reassuring the public," is unlawful. It therefore should be pretty clear to anyone that if Jobs is talking about his health, he has an obligation under the securities laws to tell the truth. And I don't doubt that's what he's doing. (Query, though, whether the "more complicated" employees-only letter adequately discharges a duty to correct the public statements on what he "originally thought.")

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