Simultaneously they are opening up 0DTE options on certain stocks starting with large market caps but don't be surprised when this expands. Currently this was limited to large etfs like SPX. They are also extending trading hours towards 24/7 and eventually 365.
How they square increasing liquidity with delaying information is insane.
I know there is a lot of manipulation to make quarterly numbers and the tax code is convoluted but if companies reported dollars in and dollars out live to shareholders at least we would have an idea of how the company is doing in a general sense. And over time would learn the flow of the company and be able to make informed predictions on the overall health of the company. More information is usually better than less with very few exceptions.
If they want to delay the earnings call to every 6 months to talk about the business I have no problems with that.
We already have 23/6 trading with index futures. The S&P500 (ES), NASDAQ 100 (NQ), DOW (YM) will sometimes gap up or down on open just to match overnight trading.
Help me understand what you are saying here. For those that don't know this one is "a measure becomes a target, it ceases to be a good measure".
I'm not advocating for a single metric that can be gamed. A business is fundamentally about dollars in and dollars out. Maybe add receivables in there and a few other metrics from the P&L. I'm not trying to be prescriptive here on purely cash in and out.
I do think there is a low friction way that companies could report daily certain metrics that over time would give their shareholders a sense of the company's health and trajectory.
It’s a common complaint of value investors that boards (especially in this post-Sarbox world) are solely focused on quarterly earnings reports, to the detriment of long term strategy. One way to talk about the added and persistent value of some companies is to note that many of them have powerful, recalcitrant, or somehow anti-quarterly-cadence founders: buffet, zuck, you could make a list.
There are multiples examples that are easy to see once you realise presenting information has a cost.
For example having daily morning 2 hour long stand ups provide more information for everyone involved. It's also worse for productivity and work atmosphere.
Sure but I should add I'm not saying this should be done in place of current reporting. It should be done in addition to. I'm advocating for more transparency augmented with periodic storytelling. Over time that noise becomes the pulse of the company.
Wrt Shannon, the channel capacity today vastly exceeds that of 1934 when quarterly reporting became standard. Give me more data and a filter any day over a once every 6 month black box. 6 month reporting is undersampling.
This is a manipulation enabler. I’m surprised no one is mentioning this, but it’ll allow companies like SpaceX and Tesla to avoid scrutiny. The other changes the SEC and NASDAQ are rushing all have donors behind them. That’s how this openly corrupt administration works but it’s also how America has generally operated in the past, only to a smaller degree.
> it’s also how America has generally operated in the past
It's not. That's why we have the rules that they are recinding, and why the US has long had among the the most transparent, safest, and liquid markets in the world.
Saying that 'it's always been this way' is a really concerted effort to bury one's head in the sand.
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"
FOB Shipping Point (or Origin): Responsibility transfers to the buyer as soon as the goods leave the seller's premises. You book it when it leaves your loading dock.
FOB Destination: The seller retains risk and costs until the goods reach the buyer’s location.
The sale doesn't happen until the asset transfer occurs. Before that any cash you get from the sale is balanced by the liability to actually produce the good or refund the money. Or more likely you don't get any cash but can't record the bill as accounts receivable. It's not receivable until the transfer point is crossed.
If it is cash based accounting, revenue and expenses are booked when the money changes hands.
If it is accrual-based acocunting, it takes place when the event legal triggering the change of ownership of goods in the transaction takes place, which depends on the shipping terms, which could be anywhere from when it is available for the buyer’s transport agent to pick up at the seller’s facility (EXW) to when it is delivered, unloaded, and at the buyers door (DDP) or any of a variety of places in between (FOB Origin, FOB Destination, and a bunch of other potential shipping terms with their own rules on when ownership—and responsibility—transfer from seller to buyer.)
I worked at a previous listed company where a single $6MM order of hardware being pushed out a week made quarterly p&l positive. Im absolutely sure the same situation occurred every other quarter as well in some part of the business I didnt see.
this kind of deal timeline management happens at all companies. this is why contracts get structured in complicated pricing structures to make it easier for revenue recognition to occur in the quarter it’s supposed to. the timeline can move from 3 months to 6 it’s still going to be a huge focus area for a lot of
people at every company
Over the long run, companies that spend resources on this micromanagement of earnings probably are not seeing the forest for the trees. I cringe thinking about how much time and top talent at a company is spent preparing for earnings rather than spending those hours improving the business itself.
Likewise, if you know you've already got the current quarter in the bag, but the next quarter is looking soft, you tell that truck driver to slow down!
Early in my career I worked at a place where the sales people would half-joke about signing deals on December 40th -- to claim it in the previous quarter/year.
as the time period gets longer, the the more likely it is that the numbers represent the true performance of the business rather than randomness. That has to be balanced against the fact that investors get less frequent updates i.e. the information is now potentially 6 months out of date rather than 3 months at worst. But then its just a judgment call of the relative benefit of each - you could argue that with modern accounting systems, modern companies could deliver weekly or even daily earnings , which would give investors much more timely information, and the high frequency would probably mean it wouldn’t be worth making the effort for management to fudge the numbers to bring forward or delay revenue one day or one week. There would be a lot more variance in the numbers if they were daily, but thats a good thing - it would just reflect the underlying randomness, and then the investors could decide when the accumulated trend over a period of time is meaningful or not, instead of management wasting time massaging numbers into a fairy tale of steady growth.
General Electric has a history of using that exact trick... just with jet engines and power generators and medical devices that can represent much larger amounts of revenue.
I wonder if requiring it twice a month would fix both issues, since it's too frequent to plan around (versus quarterly), while frequent enough to allow transparency (versus annually).
Listing on a public exchange is not a requirement, but it is generally a boon to the public interest. The theory is that if we close the gap in regulatory burden between public companies and large private companies, then maybe we'll see more IPOs like back in the 90's, before Sarbanes-Oxley and other new laws.
Now, with an admin that's disposed to deregulation, the usual approach to closing that gap is to loosen requirements on public companies. You don't see a lot of people advocating for closing the other half of the gap, where we increase the reporting requirements on private companies. Stricter requirements there seem justified if you look with a bit of realism at how many consumer-facing funds are holding little pieces of unicorns. A lot of people have a stake in SpaceX or Stripe, one way or another. I'd like to see at least a few proposals that make it less comfortable to stay private for so long.
FWIW even if we weren't in this admin, I think it would be a harder sell to increase reporting requirements on private companies. The whole point of private capital and private companies is that LPs (edit: liquidity providers) are required to have some form of accreditation to prove that they aren't dumb money and that they have the capital to weather large drawdowns.
The problem of growing private capital markets and liquidity has been an issue for ~20 years now.
> The theory is that if we close the gap in regulatory burden between public companies and large private companies, then maybe we'll see more IPOs like back in the 90's, before Sarbanes-Oxley and other new laws.
If you want to discourage short-term thinking, make the vesting period longer on executive stock grants. Making companies' performance less transparent just opens up more opportunities for insider trading.
Could also price in negative externalities of short term trading with higher taxes for that behavior, nudging the markets to focus on value driving investments rather than speculation
Interesting timing given the SEC is also considering changes to 13F disclosure windows. Less frequent earnings could mean more information asymmetry for retail investors - institutions with proprietary data will have even more edge.
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 the whole corporate machinery that takes 3–6 weeks after quarter end to churn out reports. Of course, internally executives should be tracking performance daily, but the quarter-end panic could lessen. If you have a bad quarter, you’re not penalized as much if the surrounding months are good.
And anyway, if there is a material adverse change the companies should be expected to disclose, like they are expected now.
Ps: I posted the same on Reddit a couple of hours back. Not AI but if you do find the account don't mention them online in the same sentence.
> 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 free certs from LE (using ACME), but they were 90 days, so that made automation much more necessary.
Now with certs from public CAs having a max time of 47 days soon (not that I'm necessarily a fan) automation is all but a must.
So if you want less onerous effort on corporate reporting, your workflows and processes need to be much more automated: that's one of the reason why computers were invented after-all, to make computations faster.
And one way to force automation is to insist on more frequent reporting, not less; Barry Ritholtz:
> This is exactly backward: More frequent reporting makes the data less significant. In the real world, human behavior emphasizes what occurs less often—meaning doing something less frequently gives it an even greater significance than something that becomes routine or common.
> That is the difference between a New Year’s Eve celebration and a married couple’s weekly date night.
> Twice-a-year earnings reporting will make the event so momentous, with such focus on it, that any company that misses analysts’ forecasts will find their stock price shellacked. The twice-yearly focus on making the per-share number will become overwhelmingly intense.
Move from quarter / every-3-months to monthly reporting: companies will be forced to automate their "corporate machinery". And each report will be much less 'momentous' because the time between samples will be much less.
I up you to continuous reporting. Audit should be inherent to the system, not a process after the fact. As a public company all owners should have access to daily closed books, and all companies should be able to close their books daily in 2026.
Every six months being the cadence we learn how our companies we own are doing is absurd. It leads to really long dark periods. Also for employees it means we can only divest in a semi annual window. Our carry risk is extensive and expanding.
This is about hiding truth longer, which is the MO of this administration top to bottom.
This sounds great on paper till you realize the amount of time and effort that goes into coordinating so many humans is significant. Also quarterly reporting and TLS certs are worlds apart. There are things like SOX compliance in public companies. It is a mandatory requirement that necessitates so much ceremony surrounding how information is captured and decisions signed off. Then for the execs themselves, it is at least a week of effort easy leading up to the quarterly result call. Prepping for the investor deck, QnAs, being open to more frequent regulator scrutiny. Doing this every month would have diminishing returns for everyone involved.
Source: worked at public companies, helped executives prepare for said calls.
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.
TLS certs are a single certificate. Corporate reporting is an aggregate of different types of numbers in disparate systems summed up through divisions that might as well be different companies.
Although… if there was a software engineering union, swinging a mandate for live public financial reporting is the type of non productive work that would keep everyone in a job.
Reporting is onerous as fuck. You end up with entire bureaucracies dedicated to the theater of reporting. The tighter the turnaround the dicier it becomes because certainty that anything you are reporting is true decreases, which increases liability.
This is one of those ideas that sounds amazing to people have never operated a real business with reporting requirements. In practice it turns into a classic case of Goodhart's Law. It drives insane incentives. Reducing reporting intervals would seriously reduce overheads and inefficiency in business.
I get where you're coming from but this is a rough transition for some. Ideally we would hope that more frequent reporting would necessitate development of more seamless systems... but we ain't there yet. There's a lot of flexibility in some systems but they allow that flexibility so that it can be tightened as needed. Be careful.
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 to spin bad data on a daily basis.
This is not how corporate fraud usually happens. You don't tamper with the quarterly report, especially since it gets audited. You tamper with the input data close to the source. For example, you record revenue that hasn't happened yet or you delay the recording of losses.
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
If you have been public for >N years, and have had >X "clean" quarterly reports, no trouble with the SEC, etc, then sure, back off to 6mo (or even yearly, if your shareholders are ok with that).
But if you have an audit problem, violate SEC rules, get any kind of conviction, hell, even an inditement, then back to quarterly until you clean it up.
I have the opposite opinion. More information is always better. Absolutely the reporting requirements are onerous and there already are perverse incentives to chase things quarterly. Reducing reporting requirements is only going to make things worse though. The only solution I can imagine is to instead drop reporting requirements to instant. Make all public companies truly public. Reporting information should to be accessible via a feed 24/7. There can be no more perverse incentives if there’s no hiding. Insane and unlikely? Sure yea. But let’s not pretend that reducing information is going to help anything.
Or even start with monthly. The problem with quarterly reporting is the internal efforts to "game" the quarter. The more aggressive disclosures are, the less of a shell game people can play to "make the report come out right."
Moving it to bi-yearly does the opposite. CEOs can now do the same amount of gaming with half the effort. Or twice the gaming with the same effort.
> 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?
There's also just a mathematical way to look at volatility here, which is that if you look at (say) the average monthly result as a statistic for the reporting period, longer reporting periods have lower variance than shorter reporting periods.
It's something of a diversification benefit - when you're able to smooth over months, as long as they're not all perfectly correlated (your shock just keeps hitting over and over and you can't stop it) - your results will have lower variance once normalized for elapsed time.
What I can't speak to is whether this is a benefit to economic stability. Say an industry is shifting rapidly in a certain direction. Companies less able to adapt would be less quickly "punished" for that lack of adaptation.
The question is whether that adaptation curve is "a company may need extra time and upfront investment in transformation, but can get back on the curve, so giving them grace helps to stabilize jobs and markets..." vs. "a company that falls off the curve will continue to fall behind, so faster reporting incentivizes companies to innovate and not get into an irrecoverable state that destroys value."
And I think this question varies so widely between situations that it's difficult to standardize. Perhaps economists have looked at this more thoughtfully. Either way, this is an incredibly significant change - how so is a much more difficult question.
Hard disagree. These are public markets we are talking about, which give companies access to financing from mom and pop investors. No one is forcing these companies to be public, they chose to be public because they wanted access to the liquidity provided by public markets. That liquidity is coming from folks retirement savings.
I was following a company that did an ATM offering in January. By June, less than six months later, they had entered Chapter 11. Things can move fast in the business world. A financing deal falling through at the wrong time can be the difference between business as usual and bankruptcy.
This change would largely benefit insiders and deep pocketed investors/funds that can afford bespoke data sources to fill in the gaps. And it feels like just another attempt by Wall street to force mom and pop investors into the role of dumb exit liquidity.
> After hating how each company runs on an internal quarterly cycle
In 25 years of working professionally I've never felt this or heard this even once.
> execs every 13 weeks, maybe they can focus better.
I don't care about the struggles of executives. I'm entirely unconvinced that an additional two weeks a year will afford them enough "focus" to make any appreciable difference.
> that takes 3–6 weeks after quarter end to churn out reports.
We run a sales heavy organization. No one "churns" out reports and hasn't for decades. The biggest struggle is getting engineering to finalize their existing capital project reports. Everything else is automated to such an extent that I can't even fathom this scenario still existing.
this is an incompetent, corrupt change that will be reversed when Trump leaves office in 2029. Companies should likely not change their quarterly reporting since it will only be temporary.
There is no law regarding how and when (non-exec) employees can sell company stock. The SEC only restricts insider trading, and some companies voluntarily enforce blackout periods to reduce the chance of insider trading. Plenty of public companies (e.g. Microsoft) let employees trade whenever they want.
I think the effect is actually backwards: there may only be 2 windows instead of 4 but the total amount of time window per year should theoretically go up significantly. The 2 removed reports should make both of those quarters less subject to insider trading and therefore more tradeable.
In companies I've been in, insider trading windows close because there's been a certain amount of time since the last report. So less frequent reports = more time for insider to know things that aren't public yet = more time unable to trade, not less.
however the bigger issue here - is this is a ruse - there is a reason quarterly reporting brought transparency to companies - now they can easily hide nasty things.
you as an employee with stock options - yeah those are close to worthless since the price hit you can take can vary a lot.
For 6 months instead of 3. One could argue the need to show quarterly growth forces companies to do nastier things. Long term thinking is definitely needed these days when all companies are only focusing on short term gains.
Before 1970, the reporting was twice a year and in the first half of the twentieth century it was once a year.
Would that necessarily be a bad thing? I remember how that would drive short-termism on the part of regular employees. Since stock comp was a major part of many companies' salaries, people would hope for a bump in the earnings report. We complain about short-termism in the markets, but you can't say one thing and then do something else.
It would be bad in that it makes employees' stock less liquid. Stock-based compensation is a huge part of many employees' comp packages.
I think a small subset of people might adopt a short-term approach to equity ownership. I think a much larger subset would simply be selling to access the money they rightfully earned or to diversify their holdings instead of having the bulk of their stock portfolio in a single company.
What if someone froze half of your paycheck and said you can't touch it except for the two months out of the year that they say you can?
Isn't the quarterly report one of the specific things that AI was sold as making much easier to compile and distribute? I have a strong concern about this happening under the current admin.
The SEC is not the only one who gets a say. Their are rules that SEC does not require that have been required for certain exchanges or indices. For example, no dual class shareholders or certain board compositione have been required for listing.
Let's have an exchange or heck , even an ETF require quarterly reporting. I would invest in that and I am sure many wouldn't. It will trade at a premium or it won't.
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 they want to see with some consistency how healthy the companies that they own actually are. If there are issues with how the business is being managed by the hired corporate executives, the owners want to know sooner rather than later -- and to have a chance to make course corrections. Quarterly numbers allow that to happen.
And in 2018 he suggested going in the opposite direction—more frequent—to even daily reporting:
> This is exactly backward: More frequent reporting makes the data less significant. In the real world, human behavior emphasizes what occurs less often—meaning doing something less frequently gives it an even greater significance than something that becomes routine or common.
> That is the difference between a New Year’s Eve celebration and a married couple’s weekly date night.
> Twice-a-year earnings reporting will make the event so momentous, with such focus on it, that any company that misses analysts’ forecasts will find their stock price shellacked. The twice-yearly focus on making the per-share number will become overwhelmingly intense.
> This is counterproductive.
> My proposal: Report earnings monthly, with the goal of eventually moving to a near real-time, daily, fundamental update. Technology is improving to the point where business intelligence software and big data analyses will make this automated. Indeed, some companies already do much of this internally.
> Once financial reporting becomes daily, the short-term earnings obsession will all but disappear. In its place will be a focus on broader profit trends and deeper analytics.
[…]
> The bottom line is so obvious: To make quarterly earnings less important, we should be exploring ways to report results more often, not less.
Exactly! Continuous reporting reduces the stupid gaming of quarterly results. Weekly would be best as anything longer still gives sales teams enough time to rig the game as they do currently. I'd also get rid of fixed year ends for tax purposes and replace them with continuous trailing 12-month assessments.
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.
And yet, some very, very good public company CEOs like Buffet have carved out worlds where they report thinly and publicly claim they do not manage to quarterly earnings.
What company doesn’t produce monthly financial statements, let alone quarterly. I could understand this for small caps.
I also don’t see how less granularity in financials is a good thing, yes if you have bad quarter that bad (but at least you can make it up the next quarter vs a bad six months likely introduces more volatility (I think?). Also I think one of the biggest complaint is “short termism” in markets, but I hardly think that will make much of a difference.
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!
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-revenue). Of course the flip side, is that most SPAC’s might close down and cause you to lose money. That is the decision for the investor to make, risky opportunities are fine! Sadly chamaths shitty tactics to close out his investments have tainted a completely fine idea.
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.
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.
ultimately supply and demand should result in less demand for the stock of companies that do not provide adequate transparency about results.
Supporters of the idea would likely say: "But considering that stock price crashes result in government bailouts, why bother reporting bad news since it just panics everyone and necessitates a bailout that shouldn't have been necessary."
I hear there's no legislation called "Protecting Unified Monetary Products & Distributing Usury Monetary Profits."
In this new legislation, some stocks will not be associated with any corporations. There will be no reporting requirements. The stock will move as the market dictates.
And people who have more money than you can buy access to trade it seconds faster than you can.
Good luck everyone! I hope the PUMP & DUMP bill works out!
At least what I saw, which might be inaccurate, is that in countries with 6 month mandatory reporting, most companies still choose to report quarterly or investors start to get nervous.
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).
Most large companies will continue quarterly reporting because institutional investors will not accept anything else. For a company with market cap of $500m spending $1-2m yearly on quarterly audits is non-trivial. For a company that’s $5b and up that’s not much at all.
This is also not a done deal and large pension funds will oppose this hard during the public comment portion of this process.
If some random company known to be the biggest money furnace that ever existed decides to do an initial Public offering, and continues to be the biggest money furnace that ever existed with no hopes of revenue...would that hypothetical company prefer to report the damages earlier than later?
Nobody knows about most companies, but either a big big public company will benefit from this, or a soon to be public company will benefit from this.
> The U.S. Securities and Exchange Commission is preparing a proposal to scrap the requirement for companies to report their earnings every quarter and giving them the option to share results twice a year
So, at least twice a year would still be mandatory until this change.
Less accounting accountability -> Greater liability
Other international markets under consideration for investment are expected to retain their sub-annual reporting requirements.
Does this policy provide for allowing firms to optionally continue to disclose their financial status to all investors quarterly using the existing guidelines for scheduled disclosure?
Firms could instead instruct their CAO Chief Accounting Officer to continue to prepare quarterly reports and work on being able to prepare automated monthly reports.
Markets with a no-fee CBDC have the advantage on transactional accountability. If all transactions were in CBDCs, the treasury report for quarterly or monthly statements of accounting accountability would be easy.
Investors have for quite awhile operated with legally mandatory quarterly accounting reports and explanations of the nature of the costs and returns.
You
do the now-annual earnings report webcast
Sort of like when you put off working on a paper until the last minute
> Beginning in 2007, UK public companies were required to issue quarterly, rather than semiannual, financial reports. But the UK removed this quarterly reporting requirement in 2014. We studied the effects of these regulatory changes on UK public companies and found that the frequency of financial reports had no material impact on levels of corporate investment. However, mandatory quarterly reporting was associated with an increase in analyst coverage and an improvement in the accuracy of analyst earnings forecasts.
... has argued the change in requirements would discourage shortsightedness from public companies while cutting costs. Skeptics, however, caution delaying disclosures could reduce transparency and heighten market volatility.
It's a conundrum, for sure. But as much as it pains me to agree with Donald Trump on anything, I think this may be the right thing to do. Something that could help reduce the short-term thinking that is so prevalent in American business today sounds like a win to me. But I won't deny that there are tradeoffs.
Congratulations to the CEOs of fraudulent companies.
> Trump, who first floated the idea in his first term as president, has argued the change in requirements would discourage shortsightedness from public companies while cutting costs.
Having less information does not change one's time horizon. It just means large investors paying for proprietary data will have more edge.
While this will hopefully stop incentivizing companies to focus on super short term results its also going to increase the amount of financial reporting fraud because the remaining reports will become even more important.
If you have earnings too frequently, it encourages companies to become hyper focused on earnings and make less long term investments. But if there is too much gap in between earnings, there is potential for grifting. What to do?
So either big companies would lobby against their interest, or SEC would do something independently.
Honestly I cannot decide which one is more absurd.
Simultaneously they are opening up 0DTE options on certain stocks starting with large market caps but don't be surprised when this expands. Currently this was limited to large etfs like SPX. They are also extending trading hours towards 24/7 and eventually 365.
How they square increasing liquidity with delaying information is insane.
I know there is a lot of manipulation to make quarterly numbers and the tax code is convoluted but if companies reported dollars in and dollars out live to shareholders at least we would have an idea of how the company is doing in a general sense. And over time would learn the flow of the company and be able to make informed predictions on the overall health of the company. More information is usually better than less with very few exceptions.
If they want to delay the earnings call to every 6 months to talk about the business I have no problems with that.
24/7 trading sounds like a nightmare. “Your retirement savings crashed 30% because there wasn’t enough liquidity to cover a 3am panic over non-news”.
The beauty of it, though, is that it would recover almost immediately as systems arbitrage an obviously stupid situation.
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We already have 23/6 trading with index futures. The S&P500 (ES), NASDAQ 100 (NQ), DOW (YM) will sometimes gap up or down on open just to match overnight trading.
but you just don't sell and wait until the liquidity comes in and prices return to normal at 9am, no?
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There's already a huge futures market Liquidity will just migrate.
Honestly, stocks should trade for three hours a day. 24/7 trading sounds like a win for exchange operators and a loss for anyone else.
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> if companies reported dollars in and dollars out live to shareholders at least we would have an idea of how the company is doing in a general sense.
Goodhart's law is knocking on your door right now.
Help me understand what you are saying here. For those that don't know this one is "a measure becomes a target, it ceases to be a good measure".
I'm not advocating for a single metric that can be gamed. A business is fundamentally about dollars in and dollars out. Maybe add receivables in there and a few other metrics from the P&L. I'm not trying to be prescriptive here on purely cash in and out.
I do think there is a low friction way that companies could report daily certain metrics that over time would give their shareholders a sense of the company's health and trajectory.
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SPY is an ETF and SPX is an index. The distinction is material.
/ES does not trade between 5pm and 6pm ET. SPX options aren't marked until 8:15 PM ET.
It's more plausible that large caps see MWF, then MTWHF possibly.
Good additional info. I used a shortcut I figured most people would understand without getting into the weeds.
Can you enumerate some examples of when it having less information is better than having more?
It’s a common complaint of value investors that boards (especially in this post-Sarbox world) are solely focused on quarterly earnings reports, to the detriment of long term strategy. One way to talk about the added and persistent value of some companies is to note that many of them have powerful, recalcitrant, or somehow anti-quarterly-cadence founders: buffet, zuck, you could make a list.
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When your decisions are driven by fear, anxiety and FOMO, knowing less can lead to fewer irrational reactions.
That’s why people hide information from bad bosses.
For the company it doesnt work well, you’re leaking too much info to competitors
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There are multiples examples that are easy to see once you realise presenting information has a cost.
For example having daily morning 2 hour long stand ups provide more information for everyone involved. It's also worse for productivity and work atmosphere.
Maybe just allow "insider trading".
Homework - What does Shannon Information Theory say about too much info beyond channel capacity?
Sure but I should add I'm not saying this should be done in place of current reporting. It should be done in addition to. I'm advocating for more transparency augmented with periodic storytelling. Over time that noise becomes the pulse of the company.
Wrt Shannon, the channel capacity today vastly exceeds that of 1934 when quarterly reporting became standard. Give me more data and a filter any day over a once every 6 month black box. 6 month reporting is undersampling.
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I give up, what does it say?
This is a manipulation enabler. I’m surprised no one is mentioning this, but it’ll allow companies like SpaceX and Tesla to avoid scrutiny. The other changes the SEC and NASDAQ are rushing all have donors behind them. That’s how this openly corrupt administration works but it’s also how America has generally operated in the past, only to a smaller degree.
> it’s also how America has generally operated in the past
It's not. That's why we have the rules that they are recinding, and why the US has long had among the the most transparent, safest, and liquid markets in the world.
Saying that 'it's always been this way' is a really concerted effort to bury one's head in the sand.
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No legitimate business needs to settle trades more than once a day.
When you wonder how much damage one person can do in 4 years...
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"
That doesn't make any sense because the revenue is already booked for the sale which has nothing to do with when the delivery truck actually arrives.
It's got to be one of these:
FOB Shipping Point (or Origin): Responsibility transfers to the buyer as soon as the goods leave the seller's premises. You book it when it leaves your loading dock.
FOB Destination: The seller retains risk and costs until the goods reach the buyer’s location.
The sale doesn't happen until the asset transfer occurs. Before that any cash you get from the sale is balanced by the liability to actually produce the good or refund the money. Or more likely you don't get any cash but can't record the bill as accounts receivable. It's not receivable until the transfer point is crossed.
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If it is cash based accounting, revenue and expenses are booked when the money changes hands.
If it is accrual-based acocunting, it takes place when the event legal triggering the change of ownership of goods in the transaction takes place, which depends on the shipping terms, which could be anywhere from when it is available for the buyer’s transport agent to pick up at the seller’s facility (EXW) to when it is delivered, unloaded, and at the buyers door (DDP) or any of a variety of places in between (FOB Origin, FOB Destination, and a bunch of other potential shipping terms with their own rules on when ownership—and responsibility—transfer from seller to buyer.)
Accounts receivable, revenue, and cash are related, but separate, accounting items.
Cash vs Accrual
Ya but op's anecdote is cute and funny.
I worked at a previous listed company where a single $6MM order of hardware being pushed out a week made quarterly p&l positive. Im absolutely sure the same situation occurred every other quarter as well in some part of the business I didnt see.
this kind of deal timeline management happens at all companies. this is why contracts get structured in complicated pricing structures to make it easier for revenue recognition to occur in the quarter it’s supposed to. the timeline can move from 3 months to 6 it’s still going to be a huge focus area for a lot of people at every company
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Over the long run, companies that spend resources on this micromanagement of earnings probably are not seeing the forest for the trees. I cringe thinking about how much time and top talent at a company is spent preparing for earnings rather than spending those hours improving the business itself.
Likewise, if you know you've already got the current quarter in the bag, but the next quarter is looking soft, you tell that truck driver to slow down!
Early in my career I worked at a place where the sales people would half-joke about signing deals on December 40th -- to claim it in the previous quarter/year.
Okay, what's that to say it won't be the same but even worse on a 6mo reporting schedule?
as the time period gets longer, the the more likely it is that the numbers represent the true performance of the business rather than randomness. That has to be balanced against the fact that investors get less frequent updates i.e. the information is now potentially 6 months out of date rather than 3 months at worst. But then its just a judgment call of the relative benefit of each - you could argue that with modern accounting systems, modern companies could deliver weekly or even daily earnings , which would give investors much more timely information, and the high frequency would probably mean it wouldn’t be worth making the effort for management to fudge the numbers to bring forward or delay revenue one day or one week. There would be a lot more variance in the numbers if they were daily, but thats a good thing - it would just reflect the underlying randomness, and then the investors could decide when the accumulated trend over a period of time is meaningful or not, instead of management wasting time massaging numbers into a fairy tale of steady growth.
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General Electric has a history of using that exact trick... just with jet engines and power generators and medical devices that can represent much larger amounts of revenue.
Not just - Welch pioneered using GE Capital to “smooth” earnings - lots of judgment calls in those finance companies in the early 90s.
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"We risk everyones lives in order to have a barely just-in-time warehouse on shipments in the low 8 figures."
Cool.
What company is this?
This seems like bad news for regular investors, and good news for insiders.
Reporting is burdensome, sure, but being listed on public exchanges is not a requirement.
Makes companies short-sighted though. I wouldn't say that's necessarily good for regular investors.
I wonder if requiring it twice a month would fix both issues, since it's too frequent to plan around (versus quarterly), while frequent enough to allow transparency (versus annually).
Listing on a public exchange is not a requirement, but it is generally a boon to the public interest. The theory is that if we close the gap in regulatory burden between public companies and large private companies, then maybe we'll see more IPOs like back in the 90's, before Sarbanes-Oxley and other new laws.
Now, with an admin that's disposed to deregulation, the usual approach to closing that gap is to loosen requirements on public companies. You don't see a lot of people advocating for closing the other half of the gap, where we increase the reporting requirements on private companies. Stricter requirements there seem justified if you look with a bit of realism at how many consumer-facing funds are holding little pieces of unicorns. A lot of people have a stake in SpaceX or Stripe, one way or another. I'd like to see at least a few proposals that make it less comfortable to stay private for so long.
FWIW even if we weren't in this admin, I think it would be a harder sell to increase reporting requirements on private companies. The whole point of private capital and private companies is that LPs (edit: liquidity providers) are required to have some form of accreditation to prove that they aren't dumb money and that they have the capital to weather large drawdowns.
The problem of growing private capital markets and liquidity has been an issue for ~20 years now.
> The theory is that if we close the gap in regulatory burden between public companies and large private companies, then maybe we'll see more IPOs like back in the 90's, before Sarbanes-Oxley and other new laws.
And maybe more Enrons?
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It seems like people in power in the US are competing to make as much damage as possible to systems that brought them so much wealth.
They are the winners. They want to stay the winners. So they are incentivized make sure that nobody else can climb up to challenge them.
Something is coming so it's all smash and grab.
It's almost as if they aren't considering the best interests of the public or the government/economy that they are dismantling.
Why yes, I love having less information to critical financial decisions on.
I wonder who this benefits, the people with non public information, or the every day person?
If you want to discourage short-term thinking, make the vesting period longer on executive stock grants. Making companies' performance less transparent just opens up more opportunities for insider trading.
Agree and make it two years for long term capital gains.
Could also price in negative externalities of short term trading with higher taxes for that behavior, nudging the markets to focus on value driving investments rather than speculation
Like short term vs long term capital gains tax rates?
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> If you want to discourage short-term thinking, make the vesting period longer on executive stock
It’s 3 to 4 years on average. This isn’t relevant to quarterly filing requirements.
Harder to attract talent though (not saying you’re wrong)
The problem isn't the executives, it's the boards.
But board members are largely just a proxy for the large shareholders anyway. E.g., short-term investment strategies are not going away.
Working C-levels would almost always much rather take the longer view against the wishes of their boards.
Interesting timing given the SEC is also considering changes to 13F disclosure windows. Less frequent earnings could mean more information asymmetry for retail investors - institutions with proprietary data will have even more edge.
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 the whole corporate machinery that takes 3–6 weeks after quarter end to churn out reports. Of course, internally executives should be tracking performance daily, but the quarter-end panic could lessen. If you have a bad quarter, you’re not penalized as much if the surrounding months are good.
And anyway, if there is a material adverse change the companies should be expected to disclose, like they are expected now.
Ps: I posted the same on Reddit a couple of hours back. Not AI but if you do find the account don't mention them online in the same sentence.
> 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 free certs from LE (using ACME), but they were 90 days, so that made automation much more necessary.
Now with certs from public CAs having a max time of 47 days soon (not that I'm necessarily a fan) automation is all but a must.
So if you want less onerous effort on corporate reporting, your workflows and processes need to be much more automated: that's one of the reason why computers were invented after-all, to make computations faster.
And one way to force automation is to insist on more frequent reporting, not less; Barry Ritholtz:
> This is exactly backward: More frequent reporting makes the data less significant. In the real world, human behavior emphasizes what occurs less often—meaning doing something less frequently gives it an even greater significance than something that becomes routine or common.
> That is the difference between a New Year’s Eve celebration and a married couple’s weekly date night.
> Twice-a-year earnings reporting will make the event so momentous, with such focus on it, that any company that misses analysts’ forecasts will find their stock price shellacked. The twice-yearly focus on making the per-share number will become overwhelmingly intense.
* https://www.fa-mag.com/news/reporting-profits-daily-would-en...
Move from quarter / every-3-months to monthly reporting: companies will be forced to automate their "corporate machinery". And each report will be much less 'momentous' because the time between samples will be much less.
I up you to continuous reporting. Audit should be inherent to the system, not a process after the fact. As a public company all owners should have access to daily closed books, and all companies should be able to close their books daily in 2026.
Every six months being the cadence we learn how our companies we own are doing is absurd. It leads to really long dark periods. Also for employees it means we can only divest in a semi annual window. Our carry risk is extensive and expanding.
This is about hiding truth longer, which is the MO of this administration top to bottom.
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This sounds great on paper till you realize the amount of time and effort that goes into coordinating so many humans is significant. Also quarterly reporting and TLS certs are worlds apart. There are things like SOX compliance in public companies. It is a mandatory requirement that necessitates so much ceremony surrounding how information is captured and decisions signed off. Then for the execs themselves, it is at least a week of effort easy leading up to the quarterly result call. Prepping for the investor deck, QnAs, being open to more frequent regulator scrutiny. Doing this every month would have diminishing returns for everyone involved.
Source: worked at public companies, helped executives prepare for said calls.
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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.
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TLS certs are a single certificate. Corporate reporting is an aggregate of different types of numbers in disparate systems summed up through divisions that might as well be different companies.
Although… if there was a software engineering union, swinging a mandate for live public financial reporting is the type of non productive work that would keep everyone in a job.
Reporting is onerous as fuck. You end up with entire bureaucracies dedicated to the theater of reporting. The tighter the turnaround the dicier it becomes because certainty that anything you are reporting is true decreases, which increases liability.
This is one of those ideas that sounds amazing to people have never operated a real business with reporting requirements. In practice it turns into a classic case of Goodhart's Law. It drives insane incentives. Reducing reporting intervals would seriously reduce overheads and inefficiency in business.
This is 100% a good change.
> Release early, release often
Release unrequired. This is the purpose of an 8-K. We don’t need every public firm to constantly release quarterly.
These rules arose in 1970. Granting more flexibility, now, makes sense. (Post SOX, earnings require senior management.)
https://www.acquisition.gov/gsam/552.216-75
I get where you're coming from but this is a rough transition for some. Ideally we would hope that more frequent reporting would necessitate development of more seamless systems... but we ain't there yet. There's a lot of flexibility in some systems but they allow that flexibility so that it can be tightened as needed. Be careful.
…huh?
What does any of this have to do with too-soon reports poorly representing positive trends that can’t be tracked in 1-3 month timelines?
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 to spin bad data on a daily basis.
This is not how corporate fraud usually happens. You don't tamper with the quarterly report, especially since it gets audited. You tamper with the input data close to the source. For example, you record revenue that hasn't happened yet or you delay the recording of losses.
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
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IMO, it would be ok if it was not unconditional.
If you have been public for >N years, and have had >X "clean" quarterly reports, no trouble with the SEC, etc, then sure, back off to 6mo (or even yearly, if your shareholders are ok with that).
But if you have an audit problem, violate SEC rules, get any kind of conviction, hell, even an inditement, then back to quarterly until you clean it up.
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I have the opposite opinion. More information is always better. Absolutely the reporting requirements are onerous and there already are perverse incentives to chase things quarterly. Reducing reporting requirements is only going to make things worse though. The only solution I can imagine is to instead drop reporting requirements to instant. Make all public companies truly public. Reporting information should to be accessible via a feed 24/7. There can be no more perverse incentives if there’s no hiding. Insane and unlikely? Sure yea. But let’s not pretend that reducing information is going to help anything.
Or even start with monthly. The problem with quarterly reporting is the internal efforts to "game" the quarter. The more aggressive disclosures are, the less of a shell game people can play to "make the report come out right."
Moving it to bi-yearly does the opposite. CEOs can now do the same amount of gaming with half the effort. Or twice the gaming with the same effort.
Should be obvious who this change is for.
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And now I know why surgeons spend more time filling out paperwork than treating patients.
Now I know why I have to stand for 15 minutes at the hotel reception desk to check in to my already paid room, while the receptionist is typing away.
Now I know why projects which should take one week to complete instead take 5 years.
> 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...
There's also just a mathematical way to look at volatility here, which is that if you look at (say) the average monthly result as a statistic for the reporting period, longer reporting periods have lower variance than shorter reporting periods.
It's something of a diversification benefit - when you're able to smooth over months, as long as they're not all perfectly correlated (your shock just keeps hitting over and over and you can't stop it) - your results will have lower variance once normalized for elapsed time.
What I can't speak to is whether this is a benefit to economic stability. Say an industry is shifting rapidly in a certain direction. Companies less able to adapt would be less quickly "punished" for that lack of adaptation.
The question is whether that adaptation curve is "a company may need extra time and upfront investment in transformation, but can get back on the curve, so giving them grace helps to stabilize jobs and markets..." vs. "a company that falls off the curve will continue to fall behind, so faster reporting incentivizes companies to innovate and not get into an irrecoverable state that destroys value."
And I think this question varies so widely between situations that it's difficult to standardize. Perhaps economists have looked at this more thoughtfully. Either way, this is an incredibly significant change - how so is a much more difficult question.
I see how it helps you and the company. What about investors who you borrowed money from.
Arguably better for everyone. Too much focus on short-term profits can harm long-term growth.
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I can't help but think of friends of mine that always complained about their quarterly OKR reports.
Hard disagree. These are public markets we are talking about, which give companies access to financing from mom and pop investors. No one is forcing these companies to be public, they chose to be public because they wanted access to the liquidity provided by public markets. That liquidity is coming from folks retirement savings.
I was following a company that did an ATM offering in January. By June, less than six months later, they had entered Chapter 11. Things can move fast in the business world. A financing deal falling through at the wrong time can be the difference between business as usual and bankruptcy.
This change would largely benefit insiders and deep pocketed investors/funds that can afford bespoke data sources to fill in the gaps. And it feels like just another attempt by Wall street to force mom and pop investors into the role of dumb exit liquidity.
> After hating how each company runs on an internal quarterly cycle
In 25 years of working professionally I've never felt this or heard this even once.
> execs every 13 weeks, maybe they can focus better.
I don't care about the struggles of executives. I'm entirely unconvinced that an additional two weeks a year will afford them enough "focus" to make any appreciable difference.
> that takes 3–6 weeks after quarter end to churn out reports.
We run a sales heavy organization. No one "churns" out reports and hasn't for decades. The biggest struggle is getting engineering to finalize their existing capital project reports. Everything else is automated to such an extent that I can't even fathom this scenario still existing.
this is an incompetent, corrupt change that will be reversed when Trump leaves office in 2029. Companies should likely not change their quarterly reporting since it will only be temporary.
This means that employees would only be able to sell their stock 2 windows a year where they currently can sell 4 windows a year, correct?
There is no law regarding how and when (non-exec) employees can sell company stock. The SEC only restricts insider trading, and some companies voluntarily enforce blackout periods to reduce the chance of insider trading. Plenty of public companies (e.g. Microsoft) let employees trade whenever they want.
I think the effect is actually backwards: there may only be 2 windows instead of 4 but the total amount of time window per year should theoretically go up significantly. The 2 removed reports should make both of those quarters less subject to insider trading and therefore more tradeable.
In companies I've been in, insider trading windows close because there's been a certain amount of time since the last report. So less frequent reports = more time for insider to know things that aren't public yet = more time unable to trade, not less.
That depends on your company, not the SEC. I work for a publicly traded company and have very few blackouts, mostly around earnings, for selling.
in the UK this is kinda the policy.
however the bigger issue here - is this is a ruse - there is a reason quarterly reporting brought transparency to companies - now they can easily hide nasty things.
you as an employee with stock options - yeah those are close to worthless since the price hit you can take can vary a lot.
> now they can easily hide nasty things.
For 6 months instead of 3. One could argue the need to show quarterly growth forces companies to do nastier things. Long term thinking is definitely needed these days when all companies are only focusing on short term gains.
Before 1970, the reporting was twice a year and in the first half of the twentieth century it was once a year.
Much larger windows though no? Blackout periods are prior to reporting dates.
Rather, trading periods are for a limited time after reports are released. Before employees accrue too much non public information.
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10b5-1 plans would presumably still be a thing if you wanted to sell more often.
Would that necessarily be a bad thing? I remember how that would drive short-termism on the part of regular employees. Since stock comp was a major part of many companies' salaries, people would hope for a bump in the earnings report. We complain about short-termism in the markets, but you can't say one thing and then do something else.
It would be bad in that it makes employees' stock less liquid. Stock-based compensation is a huge part of many employees' comp packages.
I think a small subset of people might adopt a short-term approach to equity ownership. I think a much larger subset would simply be selling to access the money they rightfully earned or to diversify their holdings instead of having the bulk of their stock portfolio in a single company.
What if someone froze half of your paycheck and said you can't touch it except for the two months out of the year that they say you can?
Isn't the quarterly report one of the specific things that AI was sold as making much easier to compile and distribute? I have a strong concern about this happening under the current admin.
The SEC is not the only one who gets a say. Their are rules that SEC does not require that have been required for certain exchanges or indices. For example, no dual class shareholders or certain board compositione have been required for listing.
Let's have an exchange or heck , even an ETF require quarterly reporting. I would invest in that and I am sure many wouldn't. It will trade at a premium or it won't.
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 they want to see with some consistency how healthy the companies that they own actually are. If there are issues with how the business is being managed by the hired corporate executives, the owners want to know sooner rather than later -- and to have a chance to make course corrections. Quarterly numbers allow that to happen.
* https://web.archive.org/web/20151008083649/http://www.bloomb...
* Via: https://ritholtz.com/2015/08/worst-idea-ever/
And in 2018 he suggested going in the opposite direction—more frequent—to even daily reporting:
> This is exactly backward: More frequent reporting makes the data less significant. In the real world, human behavior emphasizes what occurs less often—meaning doing something less frequently gives it an even greater significance than something that becomes routine or common.
> That is the difference between a New Year’s Eve celebration and a married couple’s weekly date night.
> Twice-a-year earnings reporting will make the event so momentous, with such focus on it, that any company that misses analysts’ forecasts will find their stock price shellacked. The twice-yearly focus on making the per-share number will become overwhelmingly intense.
> This is counterproductive.
> My proposal: Report earnings monthly, with the goal of eventually moving to a near real-time, daily, fundamental update. Technology is improving to the point where business intelligence software and big data analyses will make this automated. Indeed, some companies already do much of this internally.
> Once financial reporting becomes daily, the short-term earnings obsession will all but disappear. In its place will be a focus on broader profit trends and deeper analytics.
[…]
> The bottom line is so obvious: To make quarterly earnings less important, we should be exploring ways to report results more often, not less.
* https://www.fa-mag.com/news/reporting-profits-daily-would-en...
Exactly! Continuous reporting reduces the stupid gaming of quarterly results. Weekly would be best as anything longer still gives sales teams enough time to rig the game as they do currently. I'd also get rid of fixed year ends for tax purposes and replace them with continuous trailing 12-month assessments.
Imo, this makes much more sense...
But this is Trump's SEC.. so expect backwards progress like with everything else.
Would this benefit the big companies lobbying? No? Well, then it makes negative sense.
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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And yet, some very, very good public company CEOs like Buffet have carved out worlds where they report thinly and publicly claim they do not manage to quarterly earnings.
What company doesn’t produce monthly financial statements, let alone quarterly. I could understand this for small caps.
I also don’t see how less granularity in financials is a good thing, yes if you have bad quarter that bad (but at least you can make it up the next quarter vs a bad six months likely introduces more volatility (I think?). Also I think one of the biggest complaint is “short termism” in markets, but I hardly think that will make much of a difference.
> don’t see how less granularity in financials is a good thing
Transaction costs. Preparing this transparency costs money and attention.
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!
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-revenue). Of course the flip side, is that most SPAC’s might close down and cause you to lose money. That is the decision for the investor to make, risky opportunities are fine! Sadly chamaths shitty tactics to close out his investments have tainted a completely fine idea.
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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.
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.
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But mostly downside
ultimately supply and demand should result in less demand for the stock of companies that do not provide adequate transparency about results.
Supporters of the idea would likely say: "But considering that stock price crashes result in government bailouts, why bother reporting bad news since it just panics everyone and necessitates a bailout that shouldn't have been necessary."
I hear there's no legislation called "Protecting Unified Monetary Products & Distributing Usury Monetary Profits."
In this new legislation, some stocks will not be associated with any corporations. There will be no reporting requirements. The stock will move as the market dictates.
And people who have more money than you can buy access to trade it seconds faster than you can.
Good luck everyone! I hope the PUMP & DUMP bill works out!
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The norm in other countries is 6 months. That's enough time to get the mid-year numbers to be reviewed by an auditor.
I don't think malice of the decision.
At least what I saw, which might be inaccurate, is that in countries with 6 month mandatory reporting, most companies still choose to report quarterly or investors start to get nervous.
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I don't understand arguments like this.
Universal healthcare? Democratic rule of law? Affordable living wage?
Nah, I'll bang the drum of international equality for corporate malfeasance.
And allow more insider trading.
The timing with all the AI IPOs that _really really need_ to happen this year or else is very sus
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).
Most large companies will continue quarterly reporting because institutional investors will not accept anything else. For a company with market cap of $500m spending $1-2m yearly on quarterly audits is non-trivial. For a company that’s $5b and up that’s not much at all.
This is also not a done deal and large pension funds will oppose this hard during the public comment portion of this process.
If some random company known to be the biggest money furnace that ever existed decides to do an initial Public offering, and continues to be the biggest money furnace that ever existed with no hopes of revenue...would that hypothetical company prefer to report the damages earlier than later?
Nobody knows about most companies, but either a big big public company will benefit from this, or a soon to be public company will benefit from this.
Oh things must be about to get bad
> The U.S. Securities and Exchange Commission is preparing a proposal to scrap the requirement for companies to report their earnings every quarter and giving them the option to share results twice a year
So, at least twice a year would still be mandatory until this change.
That's disrespectful to investors.
Persons affected by the market deserve quarterly earnings reports; which should be trivial given sufficient accounting systems.
Less accounting accountability -> Greater liability
Other international markets under consideration for investment are expected to retain their sub-annual reporting requirements.
Does this policy provide for allowing firms to optionally continue to disclose their financial status to all investors quarterly using the existing guidelines for scheduled disclosure?
Firms could instead instruct their CAO Chief Accounting Officer to continue to prepare quarterly reports and work on being able to prepare automated monthly reports.
Markets with a no-fee CBDC have the advantage on transactional accountability. If all transactions were in CBDCs, the treasury report for quarterly or monthly statements of accounting accountability would be easy.
Investors have for quite awhile operated with legally mandatory quarterly accounting reports and explanations of the nature of the costs and returns.
You do the now-annual earnings report webcast
Sort of like when you put off working on a paper until the last minute
Twice a year is the current requirement in the UK and still provides a regular cadence.
European companies report every 6 months and it doesn't seem to do any harm
The UK went back and forth on it:
> Beginning in 2007, UK public companies were required to issue quarterly, rather than semiannual, financial reports. But the UK removed this quarterly reporting requirement in 2014. We studied the effects of these regulatory changes on UK public companies and found that the frequency of financial reports had no material impact on levels of corporate investment. However, mandatory quarterly reporting was associated with an increase in analyst coverage and an improvement in the accuracy of analyst earnings forecasts.
* https://rpc.cfainstitute.org/research/foundation/2017/impact...
So it seems that if you want more accurate analysis for investors (and current stock holders), more frequent is better.
This is a really key point - it’s already working fine elsewhere.
so all EDGAR APIs need to be updated to support either 10-Q or 10-H per firm?
Lol. This is the correct take.
... has argued the change in requirements would discourage shortsightedness from public companies while cutting costs. Skeptics, however, caution delaying disclosures could reduce transparency and heighten market volatility.
It's a conundrum, for sure. But as much as it pains me to agree with Donald Trump on anything, I think this may be the right thing to do. Something that could help reduce the short-term thinking that is so prevalent in American business today sounds like a win to me. But I won't deny that there are tradeoffs.
Congratulations to the CEOs of fraudulent companies.
> Trump, who first floated the idea in his first term as president, has argued the change in requirements would discourage shortsightedness from public companies while cutting costs.
Having less information does not change one's time horizon. It just means large investors paying for proprietary data will have more edge.
While this will hopefully stop incentivizing companies to focus on super short term results its also going to increase the amount of financial reporting fraud because the remaining reports will become even more important.
This certainly has nothing to do with money furnace AI companies incoming IPO and iminent private credit crash.
I could give the benefit of the doubt to any other administration doing it.
This one? I really have a hard time thinking it's nothing else then another grifting scheme.
Sadly same.
That was easy.
If you have earnings too frequently, it encourages companies to become hyper focused on earnings and make less long term investments. But if there is too much gap in between earnings, there is potential for grifting. What to do?
Encourage more smaller privately owned companies rather than massive megacorps.
They all grow by acquisitions, if you want smaller privately owned companies then you also need a strong anti-trust body.
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So either big companies would lobby against their interest, or SEC would do something independently. Honestly I cannot decide which one is more absurd.
Quarterly reporting didn't seem to hurt Amazon.
Report very frequently, then use a moving-window average for any sharp questions of tax and legislation?
I highly doubt semi-annual reporting will shift the focus from the short term profits at all costs thinking that prevails today.
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