Internet Tips for Business Reporting
How to Use Securities and Exchange Commission Data to Report on U.S. and Foreign Companies
This section explores reporting on companies using the Internet. It reviews the tools available to journalists to analyze company performance, including stock charts and company filings, available both on company home pages and the website of the Securities and Exchange Commission (SEC), the U.S. government agency charged with the regulation of the securities market. It also discusses how reporters from developing countries can use the financial statements of U.S. companies to research industry issues within their country.
Let’s first look at the site of the New York Stock Exchange, http://www.nyse.com. In addition to offering links to stock exchanges around the world, the New York Stock Exchange (NYSE) provides a list of non-U.S. companies that trade on its exchange.
What does this mean? Non-U.S. companies looking for foreign and American investment can raise money by selling stock in their company in the United States. But the companies’ stocks don’t usually trade on the U.S. exchanges. Instead, what is often traded is a certificate called an ADR, or American Depositary Receipt. (Foreign stock can trade directly in the U.S. without being converted to an ADR, however.)
To find out if a company in your country trades on the NYSE, click here. Once you know that the company trades on the NYSE, you can find out more about the operations of this company using financial information available in the United States. There are a few ways to do this. One of the best ways to begin is to write down the ticker of your company. A ticker is usually a three-or-four letter code, but sometimes it is just one letter, like F for Ford or T for AT&T.
Once you have the ticker of the company, you can go to a service like Yahoo Finance, or Bloomberg, or Reuters, that allows you to get detailed price information on the stock of publicly traded companies. Most newspapers and magazines have some kind of similar service on their websites. These services, however, should not be used as sole sources for an article: You must also check with the company and official documents to make sure that all information is up-to-date. But these services do offer a quick way to take a snapshot of a company.
Let’s see how this is done using Yahoo Finance, for example. To begin, put in your ticker symbol and up comes your company. Say you want to look up the Mexican television company Televisa, but you don’t know the ticker. So you want to go to “Symbol Lookup” and put in the word “Televisa.” Two choices come up -but only one of them trades on the NYSE and that’s the one with the ticker “TV” for Grupo Televisa. If you click on that symbol, you will be taken to a page where you can choose from headers such as “Chart,” “Profile,” “News,” “Historical Prices,” etc.
Let’s start with the “PROFILE.” Here you have just about everything you need to know about the company, including where its headquarters are located, the highs and lows of its stock, its latest earnings announcements, the name of its chief executives, and often even links to executive compensation. Of course, all this information must be checked for accuracy against the information offered on a particular company’s website. It’s also important to look at recent developments, or the “news” section of the website, to get an idea of what the company has been doing in recent weeks: changes in personnel, mergers or a stock split, for example.
You also want to take a look at the company’s market capitalization, or what the market thinks the company is worth. Market capitalization is calculated by multiplying the price of a stock by the number of shares outstanding, or the number of shares that are owned by investors. Say, for example, that Company B has 30 million outstanding shares, trading at $30 each. The market value or market cap of Company B would thus be $900 million. Now say that Company B reports that it has gotten rid of its chief executive and, because nervous investors begin selling shares in the company, the stock takes a dive to $15. Company B would now have half the market capitalization as before. During the dot-com boom of the late 1990s, some “new economy” companies had larger market caps than more established companies like IBM or Ford. Investors sunk millions, and sometimes billions, of dollars into high tech companies, driving up their market capitalizations and in many cases, giving a false sense of their true value. In spite of these huge market caps, many of these high tech companies had no tangible assets.
Now let’s look at the “CHART.” Here you can get a good picture of how your company’s stock has performed over the past year. (Yahoo and other services offer daily, weekly, and yearly charts, as well as some other combinations. You can also compare your company’s stock to the stock of another company in the same industry, or against a major index.) You want to pay close attention to any sudden movements. Has the stock suddenly skyrocketed? Or has it fallen into the dumps? Why? Many times the stock price can alert you to larger changes going on within the company. Have earnings been steady? Has the company just announced an unexpected loss? Does the company have any legal problems? Are they looking to merge with another company? Of course, under the rules of all stock exchanges, listed companies have to make public any price sensitive information, so the reasons for the price movement should already be in the public domain. But there are sometimes rumors or information around that has not been formally confirmed by the company.
There are many ways to delve deeper into these questions. First, it’s often good to look at the highs and lows for the past year, and to write down those two dates. What happened on these dates? There are different ways to find out. If you go to “news” (or recent developments) and look for an announcement around this time, you are bound to find something that might help you understand what happened. You might also want to do a clip search using the company’s name and the date when you see a significant change in the stock, or you can use the company’s name and any key words that relate to the situation at hand.
Individual company websites, which provide more detailed information, recent financial statements and SEC filings (usually under the heading “Investor Information”), may also offer clues. By looking at SEC filings around the date that the stock rose or fell, you can usually find out what precipitated the movement. Therefore, if the stock of the company you are following suddenly fell 50% in one month, for example, you would want to examine the company’s filings up to and following this fall. Imagine that a company disclosed that it was restating its earnings for a past year, or that management was being investigated by the SEC. These are events that have to be revealed to investors, and would appear in documents filed with the SEC.
Every company – domestic or foreign – that wants to trade its stock (or in the case of some foreign companies, ADRs) on the U.S. stock exchange must periodically file financial statements with the Securities and Exchange Commission (SEC), the regulatory body that oversees the securities markets in the U.S.. Much of this information is available electronically on the SEC site. However, it is important to remember that until November 2002, foreign firms were not required to submit these documents electronically. (The electronic filing rule for foreign companies went into effect in November 2002; although it was announced six months earlier to give companies time to adjust). Therefore, while you will find electronic documents for U.S. firms prior to November 2002 on the SEC website, there is no guarantee that you will find electronic documents for foreign firms prior to November of 2002.
Just because you can’t find information on your company at the SEC or at other financial document services like FreeEdgar, (registration required), or TenK Wizard, (subscription only), doesn’t mean that the company hasn’t filed information with the SEC. It is possible that this information exists in paper form at the SEC. This is indicated on the website, with a corresponding code number. You can usually request a copy of the paper document from the company, and also from the SEC, but at a cost.
BUT REMEMBER: If the company that you are doing research on does not trade on a U.S. exchange, you are not going to be able to find information about it on the SEC website. In that case, you are going to want to go to the regulatory body of the country in which your particular company’s stock trades. So for example, if you are looking into a company that lists on the London Stock Exchange, you should go to the London Stock Exchange site, or, if it is a regulatory matter, to the United Kingdom’s Financial Services Authority. If you want information on a Spanish company but that company does not trade on the NYSE, you should go to the Comisión Nacional del Mercado de Valores (CNMV), or Spain’s National Stock Market Commission, to examine what documents are available there. The CNMV’s website gives financial information on Spanish companies but until recently, this information tended to be more limited than what was available for companies listed in the United States.
What kind of information can you find in SEC documents?
- Background on the industry
- Political and economic environment of a country in which a company does business
- Background on privatizations of state-owned assets, if applicable
- Information on how certain stock exchanges work
- Company and industry risks
- Company concerns, as well as information on lawsuits
- Organization of the company, description of business units, names and locations of subsidiaries
- Details on sales, investments, and international operations
- Biographies of executives and board members
- Information on executive compensation (primarily for U.S. companies)
SEC documents are good for a number of reasons, even if you do not find all that much information about a specific company from your country. You can almost always find information about your country in the annual reports of American companies doing business there. For example, if a large multinational has closed a plant in your country, this information would probably appear in the annual report. You can also look at American companies’ SEC filings to see if they offer information about their competitors – usually under “risks,” or “competitors” in the registration statement. In this way you can get a better idea of the issues that are pertinent to the sector.
BUT REMEMBER: The information found in these documents is information provided by the company to the SEC. It is written from the vantage point of the company and has usually tended to present the company in as favorable of a light as possible. The SEC conducts reviews of company filings periodically, and checks the language in these documents to make sure that it does not paint the company in an overly positive light. However, the SEC does not have the resources to review all of the documents that companies file. It is important to realize that the SEC does not guarantee the accuracy of any document filed, even the ones it does review. It does ask people/companies to correct mistakes if it finds them, and it can sue these parties if it finds out that they have somehow manipulated figures or other information contained in the filings. But the SEC does not have any control over what is filed.
For this reason, SEC documents provide a good starting point from which to conduct a more thorough analysis of a company, through interviews with industry analysts, competitors, clients, accountants and company staff.
What kind of documents does a company file and what do they mean?
Foreign companies may choose to file documents designed specifically for foreign companies, rather than those used by U.S. companies. If a foreign company chooses to file the foreign-only documents, in most cases, it will not have to report as much information as U.S. companies. For example, foreign companies can choose to turn in a Form 20-F annually, which is somewhat different from the annual report or10-K that U.S. companies have to file. Some of the items that firms have to disclose in the Form 20-F are only required if they have to make a similar disclosure in their home country.
For example, individual executive compensation only has to be disclosed if the regulatory body in the home country requires that it be disclosed. If not, then only the total amount that the company pays out in executive compensation has to be disclosed. This means that while in the United States you will find the individual salaries of the most important executives of a company, until recently at least, it was impossible to find these individual figures for executives in SEC documents filed by Spanish companies. This is because in Spain individual executive compensation is not detailed in reports filed with that country’s Comisión Nacional de Mercado de Valores (CNMV), the country’s regulatory body. (This is slowly changing and should be checked on a case-by-case basis.)
For detailed salary and compensation information for executives of a U.S. company, it is necessary to consult that company’s proxy statement, which is the document mailed to shareholders before a shareholders’ meeting. (This form is also known as a DEF 14A.) The proxy statement also contains information about any other kind of financial compensation that executives may have secured as part of their employment contract, as well as notice of any lawsuits that have been filed against the company. Foreign firms do not file proxy statements but sometimes you can find similar information within a firm’s registration statements, or forms F-1, F-2, F-3 and F-4 for foreign companies. (Registration statements for U.S. companies are identified by the forms S-1, S-2, S-3, and S-4. For a description of each form and how it differs from other forms of the same class, please consult the SEC website.)
Foreign companies filing documents with the SEC don't have to turn in quarterly reports or 10-Qs like their U.S. counterparts do, unless they are so required by the rules in their home country. Foreign companies do have to file reports of significant events on forms 6-K. U.S. companies file these same reports, only they are known as 8-Ks.