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US SEC preparing to scrap quarterly reporting requirement

reuters.com

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Re: US SEC preparing to scrap quarterly reporting requirement

#61

Post by jordanb »

sashank_1509 wrote: post #22
paxys wrote: post #4

Earlier quoted context omitted.

Just look at the track record of SPACs for a preview of how that will turn out.

I think it’s still fine. I’ve invested a lot into some SPAC’s. I’m good on 1, break even on the other. And I’ll keep holding it, since these companies are still pre-revenue and I hope they 100X. The overall idea of SPAC’s is not bad, even if Chamath only created them to exit his sh*t investments. There are very few other ways for retail investors to invest in potential 100-1000X companies (which are generally pre-rev…

> even if Chamath only created them to exit his sh*t investments. There are very few other ways for retail investors to invest in potential 100-1000X companies

"I have this exciting bag-holding opportunity for you."

Re: US SEC preparing to scrap quarterly reporting requirement

#62

Post by runako »

kshacker wrote: post #18

This is an awesome move. They’re not saying the reports go away—just moving them to every six months. After hating how each company runs on an internal quarterly cycle, I have to welcome it despite how the change originated. Six months is still short from the perspective of perverse incentives, but if you free up one week of charade from execs every 13 weeks, maybe they can focus better. And it’s not just execs, but…

> If you have a bad quarter, you’re not penalized as much if the surrounding months are good.

GE used to smooth their earnings to accomplish exactly what you describe here. This was not good for investors, or transparency, or ultimately GE itself[1].

There's ample reason to want more frequent, not less frequent, results from companies.

> the whole corporate machinery that takes 3–6 weeks after quarter end to churn out reports

> internally executives should be tracking performance daily

Executives would also be better served by having more timely access to the same data they will eventually disclose. Why would executives want to drive blind for more of the time?

1 - https://markets.businessinsider.com/news/stocks/warren-buffe...

Re: US SEC preparing to scrap quarterly reporting requirement

#63

Post by hammock »

throw0101c wrote: post #36

This idea goes back several years, and Barry Ritholtz had thoughts on it back in 2015: > Back to quarterly earnings. Why do we even require them in the first place? The answer is that thanks to the transparency provided by regularly reported earnings and profits, investors can make informed decisions about which stocks to own or avoid. Owners of public companies have hired managers to run the businesses for them, and…

I have worked in an industry (QSR) where it is commonplace that damn near the entire company is copied on a DAILY email of system-wide sales reports, and let me tell you you, it was NOT A GOOD THING.

Re: US SEC preparing to scrap quarterly reporting requirement

#64

Post by jordanb »

jrochkind1 wrote: post #31
ashraymalhotra wrote: post #2

It would be interesting to see if reducing reporting requirements allows more startups to go public earlier in their journey, hence opening up more opportunities for public to participate in the upside!

Can you connect the dots for me, why would reduced reporting requirements allow more startups to go public earlier?

Combining this with a SPAC a startup would be able to have a six month runway as a public company before having to disclose finances. I imagine that would be attractive to some firms.

Re: US SEC preparing to scrap quarterly reporting requirement

#65

Post by RA_Fisher »

gucci-on-fleek wrote: post #10

Does anyone have any guesses about how most companies would react to this? Will most keep publishing quarterly reports, will most switch to semiannual reports, or will it be a 50/50 split? Or are the major stock exchanges likely to continue mandating quarterly reports?

I think they'll keep the status quo of quarterly, bc if any announce switching I'd expect their stock value to fall (bc in my mind the decision would transmit more bad potential than positive potential for future earnings). ie- I don't buy that quarterly reporting drives too short-term decision-making (or that it's generally too short).

Re: US SEC preparing to scrap quarterly reporting requirement

#66

Post by runako »

nickff wrote: post #60
throw0101c wrote: post #53

Earlier quoted context omitted.

> And it’s not just execs, but the whole corporate machinery that takes 3–6 weeks after quarter end to churn out reports. Release early, release often. If you want corporate machinery to run more smoothly with less effort, force it to operate more frequently not less: when TLS certs had 2-3 year lifespans there was all sorts of manual methods that people forgot how to do; then it was maximum one year. We then got fre…

The problem with reporting often is that the reports must each be audited (which is time-intensive and expensive), and any errors subject the companies to class-action lawsuits (which only ever benefit the lawyers, but that is a separate matter). I would also prefer more frequent reports, but only if they were less burdensome and risky.

Longer periods between audited (aka "accurate") results will lead to compounding errors. Fewer people at the company will have a clear idea of how the company is doing. Audits are like CI for finances.

Re: US SEC preparing to scrap quarterly reporting requirement

#67

Post by skissane »

brendanyounger wrote: post #42
kshacker wrote: post #18

This is an awesome move. They’re not saying the reports go away—just moving them to every six months. After hating how each company runs on an internal quarterly cycle, I have to welcome it despite how the change originated. Six months is still short from the perspective of perverse incentives, but if you free up one week of charade from execs every 13 weeks, maybe they can focus better. And it’s not just execs, but…

What will actually happen is that frauds and poorly run companies will opt for the 6 month schedule while well run ones will keep the 3 month. To your point that "executives should be tracking performance daily", there's an argument that all that data should be publicly released daily. It would make it nearly impossible to hide mismanagement and actually remove most of the human overhead since it would be impossible…

Releasing data at regular intervals gives people time to review the data, identify mistakes and rectify them. Releasing financial data daily, you are much more likely to release incorrect info and then have to go back and correct it.

For certain types of firms, daily revenue figures are likely to reveal individual deals. Many B2B firms have a modest number of high value deals, a daily data feed might show $0 revenue one day $1.374 million the next, which is more likely a single deal of that size than two or more smaller deals-and that would reveal a lot to competitors-especially if those competitors are in other jurisdictions which haven’t mandated this form of extreme transparency

Re: US SEC preparing to scrap quarterly reporting requirement

#68

Post by cj »

jrochkind1 wrote: post #31
ashraymalhotra wrote: post #2

It would be interesting to see if reducing reporting requirements allows more startups to go public earlier in their journey, hence opening up more opportunities for public to participate in the upside!

Can you connect the dots for me, why would reduced reporting requirements allow more startups to go public earlier?

Some people argue that the requirements placed on public companies (like mandatory quarterly reporting) add operational overhead that might cause a company to postpone an IPO until they're larger or more established.

In practice, companies like Stripe, OpenAI, etc have stayed private because they've been able to access the cash they need at valuations they're happy with and because no one wants to open their books unless they have to. They aren't staying private because being a public company is hard.

Re: US SEC preparing to scrap quarterly reporting requirement

#69

Post by alexpotato »

One of my favorite stories about logistics and quarterly earnings deadlines (from when I worked at a pharmaceutical company:

"In our business, a truckload of various drugs can easily reach $10-$15 million. Now, if that truck arrives at the depot at 11:59pm March 31st then it's first quarter earnings. If it arrives at 12:01am April 1st then it's second quarter earnings.

$15 million is a BIG shortfall, even for us, so you better believe those truck drivers will roll the stop signs, blow red lights etc to make sure that truck arrives before 11:59pm"

Re: US SEC preparing to scrap quarterly reporting requirement

#70

Post by jordanb »

hammock wrote: post #63
throw0101c wrote: post #36

This idea goes back several years, and Barry Ritholtz had thoughts on it back in 2015: > Back to quarterly earnings. Why do we even require them in the first place? The answer is that thanks to the transparency provided by regularly reported earnings and profits, investors can make informed decisions about which stocks to own or avoid. Owners of public companies have hired managers to run the businesses for them, and…

I have worked in an industry (QSR) where it is commonplace that damn near the entire company is copied on a DAILY email of system-wide sales reports, and let me tell you you, it was NOT A GOOD THING.

I assume you mean that employees had daily goals? This is both not unusual and unrelated to investor reporting requirements.
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