Getting the most out of public company research

December 2007

IN THIS ISSUE

— Building a Profile of a Publicly Traded Company: The Basics
— Connecting the Dots to Take the Research to Another Level
— In the next issue

GREETINGS!

Welcome to our December newsletter. In this issue, we’ll look at the different types of documents filed by and about publicly traded companies within the United States, as well as the types of information each can yield to aid researchers in their efforts.

BUILDING A PROFILE OF A PUBLICLY TRADED COMPANY: THE BASICS

Each year, a publicly held company’s filings disperse a vast array of facts into the public record. The relevance of many of these facts will depend on the type of investigation you’re pursuing, so we’ll highlight a few of the more common types of investigations and the information you’re likely to encounter.
• Conflict of interest investigations. When looking at the independence of officers and directors, Form DEF14, commonly known as a proxy statement, can yield a great deal of information. Pay particular attention to related party transactions and shared outside affiliations, such as charitable organizations or other directorships.
• Asset searches. Proxy statements can detail an officer or director’s holding of company stock, options, and also disclose any loans made between officers and the company.
• Pre-investment due diligence. Analysis of a company’s annual report, both as a “glossy” annual report to shareholders and as a Form 10-K annual report, can help identify sectors where a business is strong and also discloses the risks the company feels merit attention.
• Adverse actions / bad acts. Correspondence between the company and the U.S. Securities and Exchange Commission’s enforcement division can yield a great deal of bad acts information. There are typically two types of letters, enforcement actions and “no-action” letters where the SEC decided not to sanction a firm.

CONNECTING THE DOTS TO TAKE THE RESEARCH TO ANOTHER LEVEL

Gathering facts about the company is a good first step, but it’s not the only one. Be sure to review proxy statements for turnover among officers and directors, as they may be good interview candidates as you get deeper into the investigation.

Depending on what the initial filing review yields, it may be worthwhile to examine litigation, regulatory records or other public documents that may contain additional details about the controversies that arise in the course of research. Questioning every fact and testing every theory is a lengthy but ultimately rewarding process.

IN THE NEXT ISSUE

In the next issue we’ll analyze issues raised by the SEC’s recent ruling to allow companies to keep shareholders from putting forth proposals about the makeup of a company’s board of directors.