Companies hide negative news with unrelated press releases alongside SEC filings

https://news.nd.edu/news/companies-hide-negative-news-by-issuing-unrelated-press-releases-alongside-sec-filings-study-shows/

by orhmeh09 • 3 years ago

167 89 3 years ago

news.nd.edu

dpflan• 3 years ago

How can a lay-person investor get as-soon-as-possible access to recently filed form 8-K? What's the gate and delay time?

rekttrader• 3 years ago

Generally 24-48 hours depending on when Edgar updates. You can also download the daily filings directly from the sec.... it’s what Bloomberg does.

pc862• 3 years ago

This is objectively wrong.

siftrics• 3 years ago

All 8-Ks are available to the public on the SEC's EDGAR wesbite. As far as I know, 8-Ks are posted there on the day of filing. That could be wrong and there may be a quicker way to get them.

rmah• 3 years ago

There's no delay, they're available immediately to everyone on the SEC EDGAR site (https://www.sec.gov/edgar).

breput3• 3 years ago

This is practically real time: https://www.sec.gov/cgi-bin/browse-edgar?company=&CIK=&type=...

also available as an RSS/Atom format feed: https://www.sec.gov/cgi-bin/browse-edgar?action=getcurrent&C...

There is also a paid-for service called PDS (https://www.sec.gov/oit/announcement/public-dissemination-se...) which isn't necessarily any faster but can be more reliable.

est31• 3 years ago

Your first two links don't push the message though, so you have to keep refreshing the site quickly.

scrum-treats6• 3 years ago

Thanks for the links.

Interestingly, I noticed Amazon's CEO of Retail, Doug Herrington, dumping sizable amounts of Amazon stock[1].

This activity is coupled with growing complaints about Amazon's quality of goods[2], delivery[3][6] and ability to return those goods[2][4][5][8][9]. Amazon is now requiring customers to file a police report in order for their credible return to be accepted[7][10][11]. Amazon is also canceling union-backed delivery contracts[12], choosing instead to offer customers $10 to pick up their packages[13].

Oh, and tons of people are reportedly canceling Prime memberships[14].

Should we consider this salient signal of a downturn for Amazon?

xwdv2• 3 years ago

Before you think about making something that quickly reads 8-K filings and acts upon it: don’t bother. A bunch of entities are already doing this way faster than you ever can through various methods and by the time you get the data the opportunity to act is gone.

317070• 3 years ago

I believe the current SOTA is to submit trades in the order of 10ms after the document is available online. In that time they downloaded the file, ran sentiment analysis on it and ran the numbers, decided which way to go and sent the trades to the market.

It's worth every penny to be first, but unless you have a lot of pennies, you won't be first.

neilv• 3 years ago

Despite being a Boglehead (total-market index investor), who thinks that's the best tablescraps I can get, when I can't be in the club of the people who're making the real money from the systems...

I have idly wondered whether there's an viable opportunity to exploit retail investors who're being manipulated/misled (by, e.g., MSM financial 'news', stock-picker personalities, bloggers, WSB, etc.).

Then I realize I was considering actively profiting off the misery of other retail investors, and decide to just stick to my index funds.

nevermindiguess2• 3 years ago

Nasdaq closing auction ends at 4pm. Reports come out later. Participants trading on 8-K cannot trade the news immediately. Orders can be executed only on Monday during opening auction. Also, you assume their trades are enough to move the market and neutralize the opportunity, which may not be the case. Perhaps they can trade off market. I’m just saying that it may not be a done deal as you describe it, but I may be missing some aspects.

quickthrowman2• 3 years ago

SEC’s EDGAR database has the filings available to everyone the moment they’re released. It will take you 5-10x longer to press F5 than it takes a bank/hedge fund to have a bot ingest the news and trade off of the new information. Even if you could ingest the information instantly, your orders will be slower than the people who are co-located within the same data center as the exchange, or the folks who set up private microwave relay networks between Chicago and NYC.

anigbrowl2• 3 years ago

The very fact that people go to such lengths to rig trading systems in their favor suggests they're not worth retaining in their current form.

hbcondo714• 3 years ago

There are over 30 different types[1] of 8Ks and receiving notifications on all of them will inundate your inbox. It's a shameless plug but my freemium 'lay-person investor' site[2] will allow you to filter and select which 8Ks to view and receive notifications on. For example, you can receive an email every time a company files an event about a Bankruptcy / Receivership: https://last10k.com/stock-screeners/bankruptcy-receivership

[1] https://www.sec.gov/answers/form8k.htm

[2] https://last10k.com

oxfordmale2• 3 years ago

OpenAI is going to make a difference here. These filings are often challenging to read for a lay man. However, ChatGPT should be able to have a decent go at mood analysis. Until companies start rewriting their articles to be OpenAI "proof"

alfalfasprout• 3 years ago

there are already several companies that offer machine readable digests. Not sure you want an LLM to do this b/c the risk of it hallucinating is terrifying.

hef198983• 3 years ago

Actually, those SEC filings are not that jard to read. I had a collegue who used ChatGPT to summarize those for him. Since even SEC filings contain letters to shareholders, all they got was a ChatGPT version of that, missing all the relevant and important stuff about risks and such. Also, what is not written in those filings is at at least as important as what is written, ChatGPT utterly fails here.

tlrobinson• 3 years ago

If I had a little more time I’d make a Twitter bot that used an LLM to extract unrelated / negative news from SEC filings and post it.

nico3• 3 years ago

Will at any point we be able to build a system that won’t be gamed?

ie. A system whose incentives are perfectly aligned with its operators and users incentives?

boringg2• 3 years ago

Never. We are humans - humans are by our very nature dynamic.

nico3• 3 years ago

You mean we have to always oppose someone else’s incentives?

Or we always have to see someone else’s incentives as an opposition to ours?

What does dynamic nature imply?

Can’t a system be dynamic?

advisedwang• 3 years ago

In system/process design, you generally need feedback in a system to operate optimally. Rather than try and create a system that can be set up and left alone - which will eventually get gamed or otherwise become unfit over time - we should aim to have feedback to continuously adjust and improve our systems.

For the highest level functions of our society, this feedback is humans and politics. We need a politics that allows issues in the financial system (and all other societal systems) to be assessed and changed over time, responsive to the needs of the people.

gsatic• 3 years ago

For that the requirements are well known - infinite resources, infinite knowledge, infinite time. See Theory of Bounded Rationality.

HWR_14• 3 years ago

What kind of system are you asking for? Entire national economic system? News? Stock Market?

anigbrowl2• 3 years ago

No, but we can make decisions about what sort of losses/abuses we consider tolerable. A simple way to approach this is to just change the calculus of what sentencing terms different sorts of crime should attract. Right now you can operate a bank, rip people off or launder dirty money wholesale, and face only mild criminal liability.

Consider Wachovia Bank, for example, which was found to be laundering cartel drug money at scale. They had to pay a fat fine and the company was force-sold to Wells Fargo amid the financial crisis, but as far as I'm aware nobody spent a day in prison.

https://en.wikipedia.org/wiki/Wachovia

actionfromafar• 3 years ago

And Boris Johnson makes model buses out of old cardboard and paint. Right...

bagels• 3 years ago

Was that part of the study? Seems like an unrelated piece of trivial.

AndrewDucker• 3 years ago

https://www.scotsman.com/news/opinion/columnists/sinister-th...

kikokikokiko• 3 years ago

Companies astroturffing bad news is the rule on every aspect of their business, not just sec fillings. An example: down here in Brazil, and pretty much in all of Latin America, CocaCola changed their formula on the classic Coke, reducing the ammount of sugar and mixing it with artificial sweeteners. They started rolling out this change mid 2021, and for someone that absolutely hates the after taste of artificial sweeteners like me, it was an obvious change. I haven't had a Coke since, to me it's dead. But anyways, if you try to find any mention about the change in the formulation of CocaCola on the brazilian version of Google, you only find articles about the new "Zero Sugar Coke" formula, and no news AT ALL about the change to the original Coke. Even in Facebook and Twitter, any search for "coke changed formula" always retrieves posts about the new formula of Coke Zero on the first results. These companies have gaslighting departments, that's part of being a corporation in 2023.

gooseyman• 3 years ago

I think you mean nerfing in the first line. But I learned a new one I’m going be using all the time now - thank you https://en.m.wikipedia.org/wiki/Astroturfing

gnicholas2• 3 years ago

This reminds me of Footnoted*, [1] a site that surfaces useful info that companies hide in footnotes, bury on a Friday afternoon dump, etc. I think there's a weekly newsletter that comes out after the Friday news dump has been picked through.

EDIT: found the newsletter [2]

1: https://www.footnoted.com/

2: http://fnd.footnoted.com

rendaw• 3 years ago

All the articles seem paywalled or stubs pointing to articles on other sources. Do you have any readable examples?

gnicholas2• 3 years ago

The first link is the regular site, which is what I’ve looked at before. For me, much of the value is just in the headline, which flags the issue so I can investigate further if it sounds interesting.

scrollaway• 3 years ago

This seems like a very good use case for GPT models: Surfacing buried information.

eshack94• 3 years ago

I have used it for that very use case while analyzing the terms and conditions of some documents before signing. I still read them all myself as well, because I do not trust the current state of GPT to not miss anything important. But it helped me get a basic understanding and overview before I started my own analysis.

hef198983• 3 years ago

Or to write the press releases published along side SEC filings.

Notbsure why that actually helps, the SEC filongs are public... Justvanother case of the public and media not giving a damn about primary sources anymore.

Edit: From the article:

> “We find it surprising this behavior is so effective,” Watkins said. “Investors should not assume press releases cover all events happening at a company at a given time.”

Apparently I am not the only one who is puzzled by thale fact the press releases actually seem to work...

gniv3• 3 years ago

I've had this thought before -- that there's lots of good ideas and insights hidden in the deluge of comments on hn, reddit etc -- and GPT might be used to find them. But I haven't figured out a good prompt yet.

jsemrau2• 3 years ago

Yes. Indeed. I am working on this for investing. Where I believe the value proposition is the strongest.

jesterman• 3 years ago

Sounds like most of the value in that site is locked behind a two thousand dollar a year paywall… wow.

The few articles you can see are interesting though.

javajosh• 3 years ago

File this under one of those rulesets that needs updating since "behavioral norms" is no longer really a thing in the world.

vitorsr• 3 years ago

Waiting for the Matt Levine column ‘Are Unrelated Press Releases Securities Fraud?’

brookst3• 3 years ago

In which he concludes that, yes, they are. But so is not issuing unrelated press releases when bad news strikes.

gniv3• 3 years ago

‘Are Unrelated Press Releases Securities Fraud?’

You jest, but they actually could be. One scenario would be for insiders to trade on the information after they released it publicly. So the temporary obfuscation might give them time to trade before the news had time to affect the stock.

langsoul-com• 3 years ago

Australian politicians do the same. Important or bad news gets released before a holiday, when people are not paying attention.

c0m• 3 years ago

All politicians and companies do this type of thing. Here's [1] a particularly egregious example from 9/11, where a UK government advisor sent out a memo at advising "It's now a very good day to get out anything we want to bury".

Judging from the tone, the writer was elated. She sent the email shortly after the second plane hit.

https://www.theguardian.com/politics/2001/oct/09/uk.past

wly_cdgr• 3 years ago

Wow, really?

p0w3n3d• 3 years ago

Isn't this called damage control and is the most widely used pattern in politics too?

defrost• 3 years ago

The Commonwealth (Australia | UK at least) terminology of recent years is to call this Throwing a dead cat on the table a technique perfected by some Australian|New Zealand marketing consultants that turned to politics and advised both the AU and UK Governments.

Boris Johnson (former UK PM) perfected the technique .. no matter how bad an actual real news worthy political event might be .. no paper pays attention if you announce something totally bonkers and ridiculous at the same time.

Good Grief! Did you see that!! He threw a dead cat on the table!!!

denton-scratch• 3 years ago

That was my reaction. "Wow - companies engage in public relations? I'd never have guessed."

Companies hide negative news with unrelated press releases alongside SEC filings

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