Questionable Value of SGML tag value in SEC Filings

I have posted before about our decision to use the RDATE rather than the ACCEPTANCE-DATETIME value from the accession-number.txt or accession-number.hdr.sgml files.  We use the RDATE (note that RDATE is a term we assigned to the date associated with the <SEC-DOCUMENT> tag in those same files).  The difference is critical because academic researchers need to identify the best event date for event studies.  Selecting the wrong date could at best introduce excessive noise into the calculation of abnormal returns and at worst could lead to a bias in the results.

While we have the ACCEPTANCE-DATETIME stamp for all the filings we use the date that is associated with the SEC-DOCUMENT tag because it is a better measure of when the filing was actually made available through the EDGAR filing system so a user could read and then act on the information.

To illustrate this I took a screen-shot of the Latest Filings Page with 10-K filings listed at about noon on Saturday April 8.  Here is the screenshot:

Latest_10_K_4_9_2017_12_20CDT

If I had tried to collect all 10-K filings made through EDGAR at noon on 4/8/2017 the most recent filing I would be able to access would be the 10-K filed by Plastic2Oil.  According to the SEC this was accepted at 17:30 on 4/7/2017 and has a filing date of 4/7/2017.  When this filing was added to directEDGAR about 4:45 (CDT) on 4/7/2017 we assigned the RDATE value R20170407.

I checked in again Sunday 4/9/2017 about noon and the same list was available.  Then I checked midday Monday 4/10/2017 and the list had been updated to reflect all the filings that were made after the SEC cut-off (17:30 M-F excepting Federal Holidays) (as well as filings made Monday morning).  Here is the updated list:

Latest_10_K_4_10_2017_14_20CDT

   There are seven filings that were not visible or accessible to EDGAR users until probably the first push of the RSS index at about 5:00 AM on 4/10/2017.  I checked our logs and see that we pulled those particular filings at about 5:15 AM on 4/10.  They were not available for our final pull Friday at about 9:00 pm and they were not accessible during our weekly clean-up run on Saturday where we validate everything that was filed during the week.

Our competitors insist up using the ACCEPTANCE-DATETIME value as the critical event date.  That has never made sense to us because of all of the issues that can affect the length of time between when the filing is submitted (ACCEPTANCE-DATETIME) and pushed to EDGAR users (SEC-DOCUMENT) date.  In this example the lag is caused by the SEC enforcing their cut-off rule.  However, the lag can also be affected by problems with the composition or organization of the filing.  That is the registrant can submit a filing and it fail a validation test.  The SEC may allow the registrant to retain the initial ACCEPTANCE-DATETIME value since that has regulatory consequences but the filing is still not available to the public through EDGAR until sometime after the filing has been corrected.

For the 10-K filed by Robin Street Acquisition Corp from the screenshot above the header reports that it was made at 19:12 on 4/7.  We assigned it an RDATE of R20170410.

RobinAcquisition

Internally we refer to the RDATE as the Reveal Date.  We think it is a better value to use in an event study.  So then the question is how do you get the RDATE for a collection of filings?  Since it automatically included in the summary result set from a search that is not too difficult.  The following image shows the summary results file after  searching for the phrase “poison pill” in 8-K filings.

poisonPill

There is quite a bit more meta-data about each of the results but this shot lets you see that the RDATE is automatically parsed and ready (as well as the CONFORMED DATE – CDATE).

Using directEDGAR to Enhance my Teaching

I teach Intermediate I.  This is a tough class to keep students focused on the issues.  I believe one of the problems is that the students have little business experience and they have a hard time connecting most of what we are covering to real life business circumstances.  For example, last week we covered the measurement of inventories.  One important Learning Objective in this topic is for students to be able to demonstrate an understanding of what items should be included in the inventory at the end of the period.  Inventory (purchases or sales) in-transit as well as on-consignment have to be considered.  When I talk about consignment most students start tuning out because to them that doesn’t seem relevant.

I decided to check to find some concrete examples of disclosures relating to consignment issues in recent 10-K filings using the Search, Extraction & Normalization Engine.  The search illustrated below is for all documents that are 10-K filings and have some form of the word root consign.

consignment1

We require the TI-BAII calculator so all of the students are at least familiar with Texas Instruments.  Their disclosure reports that 55% of their revenue comes from sales on inventory that is held on consignment by their customers.  The nice thing about this is it provides a nice segue into a discussion about how critical integrity is to successful business relationships.

Another interesting disclosure that students could relate to was made by Sirius XM Holdings.  Here is a screen shot of their disclosure:

consignment2

Many students have satellite capable radios in their cars and like most people (including me) have probably not thought about the supply line from the auto manufacturer to Sirius and how that radio was sourced.  Again – this disclosure provides some substance for a more interesting class disclosure about what students have historically seemed to think is a real non-issue.  I could tell students were paying more attention when I related this to the problem we were working.

Finally, probably the most interesting disclosure I found about consignment sales was from Calavo Growers Inc (CIK: 1133470).  Here is their disclosure:

consignment3

This was interesting for me as I would never have imagined that kind of relationship with respect to the sale of a perishable product.  Does this mean that payment to the grower for that bag of avocados I bought at Costco was dependent on my purchase?

While our platform is designed for intense data collection for research and analysis – one of the clear side-benefits is the opportunity to bring timely disclosures to class to link the issues covered to real world business problems.