Less Reporting Buy Public Companies Finally on the Table
US President Donald Trump has decided to ask the Securities and Exchange Commission (SEC) to study allowing companies to file reports every 6 months instead of every 3 has delighted companies, and alarmed financial professionals who are used to getting detailed reports from companies every 90 days.
2X yearly reporting would mark a huge change in US disclosure requirements and put it in line with EU and UK rules.
The loss of transparency may be a blow to investors, some said, and have a knock-on impact on investment in public markets.
Some securities analysts also said reducing the number of times companies file financial reports would frustrate them.
But, in the absence of information provided by companies, the meetings analysts set up with management teams and the reports they produce could fill the void, and the expenses required for the filings would be a boon to small public companies,
Investors argue that a Key reason US stocks trade at a premium to equities elsewhere is due to greater financial reporting requirements. The US benchmark S&P 500 index is trading at 16.7X earnings estimates for the next 12 months, compared to 14X for Europe’s STOXX 600, according to Thomson Reuters Datastream.
Some investors said the standards could help companies operate better because management could avoid overly focusing on the near-term.
“There’s long been a push for less ‘short-termism’ in running publicly-traded companies,” said the chief market strategist with B. Riley FBR in New York. “Do you run a company in a more efficient manner if you’re not thinking about having to talk about your results every 90 days?”
Less reporting could also result in lower market volatility, said the vice president of trading and derivatives at Charles Schwab, because the most volatile times of the year are around Quarterly earnings periods.
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