The Securities and Exchange Commission (SEC) is the leading financial regulator in the United States. The agency is given the mandate to ensure that the market operates in an orderly manner. It also helps to protect investors by setting rules and ensuring that they are followed by companies, insiders, exchanges, and even investors. To achieve this, the SEC mandates that all companies publish several filings periodically. In this article, we will look at some of the top SEC filings that you should use as an investor.
Form 10k, also known as the annual report, is one of my favorite SEC filings. While public companies around the world are tasked with coming up with an annual report, the 10k is excellent because of how detailed it is.
Form 10k is a comprehensive document. Indeed, some companies even publish forms that have more than 150 pages. The document is made up of four key parts. In the first part, the company talks about its business, what it does, its segments, and its strategies. Other parts of the first part are the risks it faces, ongoing legal proceedings, and main safety issues.
In the second part, the company talks about its shareholding and provides quantitative and qualitative disclosures about its operations. Other key details in this part are the company’s financial income statements and controls.
In the third part, the firm provides more details about its directors, executive compensation, accounting fees, and other governance-related issues. Finally, the company presents comprehensive exhibits and other financial statements.
The annual report is an important document for all investors for two main reasons. First, the report provides more details about the companies and how they make money.
For example, if it is your first time hearing about a company like Houlihan Lokey, its annual report will tell you more about its business. It will also give you more details about its business solutions like advisory, corporate finance, and financial restructuring. In this regard, the document is more effective than the conventional annual reports that just list the company’s performance.
Second, you could use the annual report to spot changes in a company. At times, you could spot some minute changes about a company by looking at the annual report. Finally, it gives you a clear picture of the general performance of the firm.
All companies going public using an Initial Public Offering (IPO) model are required to file a prospectus that is officially known as Form S-1. The form is similar to the annual report, but it tends to have more details.
The form starts with a summary of the business and what it does. Here, the firm describes how it makes money, the market it is involved in, and its competitive advantage. Next, the firm provides more details about the amount of money it is raising and how it intends to use the funds. In most cases, companies say that they will use the funds to fund their growth.
Other details in the document are the firm’s ownership. Here, the owners are mostly the company’s founders and the venture capital firms that have invested in the company. It is at this stage that the company will describe the classes of shares it is offering. In the recent past, many companies have given the founder a substantial say in the business by having two classes of shares.
The other important segments of Form S-1 are the shares eligible for future sale, legal matters, taxes, indebtedness, and financial results of the company.
Form S-1 is an important document that you should use when investing in a company that is about to go public. The form will give you more color about the company.
A good example of this is what happened when WeWork (The We Company) was preparing to go public. While the company was valued highly as a public company, investors started poking holes into its business dealings when it published its S1.
Form 8-K is a relatively popular form in the market. Indeed, it typically leads to significant market moves depending on what the company reports.
Form 8-K is a form that companies release to provide information about major changes in their operations. The form has to be released within four business days after the event happens.
There are several popular scenarios that mandate a company to file Form 8-K. Some of these events are when a company completes an acquisition or disposal of a business, material impairments, departure of key people like board directors and management teams, temporary suspension of trading, and notice of delisting.
This is an important form to use since it will give you more details about the company. It will also provide you more details about why the stock is either rising or falling in a session.
Unlike the first three forms, this one is filed by institutional investors and hedge funds and is filed every quarter. In the document, registered and regulated money managers list their investments. For example, a hedge fund such as Pershing Square Capital Management will publish the form to show the total list of companies it holds. In some cases, however, a fund can request confidentiality and not disclose all of these details.
This is an important SEC filing to use because it tells you whether a hedge fund, also known as smart money, is buying or selling a stock. In most cases, a company’s shares will rise or fall when a respected money manager buys a stock. The situation is mostly when an activist money manager is involved. In most cases, these activists tend to push for changes that include asset sales and higher dividends.
SEC filings are important documents that give you more details about a company. In this article, we have looked at several important SEC filings that you should focus on as an investor. Others that we have not looked at are proxy filings, registration documents, and section 16 filings.