Today’s Presentation
Presenter
This session will show journalists how to navigate Securities and Exchange Commission filings and conduct basic background research on corporations.
Learning Outcome: Journalists will learn how to retrieve details on revenues, contracts, employment and business ownership. —
There are approximately 15,000 U.S. public companies, but some six million firms are privately held.
Small and privately held firms employ more than half of the workforce and account for more than half of the country’s output.
This SBA list will primarily have private companies Speadsheet with PPP Recipients $150k and Above - Aug. 8 update
SEC History: Depression-era agency to police stock market. Required system of information disclosures so investors and public will understand risks. Self-policing concept backed up by civil enforcement powers.
Every publicly traded company files annual reports, proxy statements, and periodic disclosures about their finances and major business developments.
SEC Edgar Database of Corporate Filings
–“Electronic Data Gathering, Analysis, and Retrieval”
–Executive pay, summary of big lawsuits, contracts, latest business information, finances
Search for SEC Edgar Documents Here: “CNTL” + click for a New Tab
Major documents
+ Breaking corporate news, earnings (8-K)
+ Executive Pay (Form Def 14, 10-K)
+ In-Depth Profits/Losses (Form 10-Q)
+ Executive bios, photos (10-K, Def 14)
+ Lawsuit summaries (10-Q, 10-K, 8-K)
Example: INUVO, INC
+ Struggling Little Rock tech company, received $1.1 Mln PPP Loan. Details from SBA document:
+ LoanRange: $1-2 million
+ INUVO, INC
+ 500 PRESIDENT CLINTON AVE
+ LITTLE ROCK AR 72201 541810
+ JobsRetained: 61
+ DateApproved: 4/8/20
+ Lender: Relyance Bank, National Association
+ Details from:
> PPP Recipients $150k and Above, Aug. 8 update
Look Up Inuvo, Inc 10-K for 2020
Key Points from the 10-K:
+ Ticker Symbol: INUV
+ Business: The context and overview
+ Risk Factors: What Management Fears
+ Legal Proceedings: Lawsuits
+ Management Discussion and Analysis: The story
+ Selected Financial Data: Revenues, Net Income
+ Directors, Officers: Who Runs The Show
+ Executive Compensation: Paychecks for Five Top Officers
+ Beneficial Owners: Who Calls the Shots
+ Exhibits, financial statements: Details on contracts
Building the Story. Key Facts From Inuvo 10-K:
+ Inuvo is a technology company that develops and sells information technology solutions for marketing.
+ Long-standing relationships with Yahoo!, Google and Microsoft Online
+ April 30, 2020: 64 full-time employees
+ Web site address is www.inuvo.com
+ “The COVID-19 pandemic could have a material adverse impact on our business, results of operations and financial condition.”
Red Flag
1) “material adverse impact” is a major warning of a significant business risk.
More from Inuvo 10-K
+ “Beginning in late April 2020, we experienced a significant reduction in demand (marketing budgets) within the ValidClick business.”
+ “We would expect to see less advertising demand from the travel, leisure and hospitality verticals.”
+ “Our auditors have raised substantial doubts as to our ability to continue as a going concern… We have sustained recurring losses from operations and have a net capital deficiency.”
+ Reliant upon Yahoo! and Google for most of our revenue. During 2019 they accounted for 64.4%, and 14.1% of our revenues, respectively.
More Red Flags
1) auditors warning about “ability to continue as a going concern” is a major warning about future survival
2) heavy reliance on two companies for 78.5% of revenues
3) tied to travel, hospitality industry, hardest hit in Covid-19 pandemic
And Still More from Inuvo 10-K
+ March 12, 2020: Hitachi provided $5,000,000 line of credit commitment.
+ April 2020, obtained unsecured Paycheck Protection Program loan… of $1.1 million which we are using primarily for payroll costs.
+ Our net working capital was negative $7.5 million as of December 31, 2019. During March 2020 and April 2020 we raised approximately $1.5 million of working capital through the sale of our securities and in April 2020 we obtained the PPP Loan of $1.1 million.
+ For the year ended December 31, 2019, we reported a net loss of $4,488,107 and net cash used in operating activities of $5,338,383.
More Red Flags
1) Right before the pandemic blew up, company went heavily in debt: $5 million loan
2) Scrambling to raise money: sold $1.5 million in stock in March-April
3) Inuvo lost $4.5 million in 2019
Takeaways:
+ Small company struggling to stay in business.
+ Rising Debt Load: Net Interest Expense
+ Expenses Rising
+ How did a struggling small company get a PPP loan?
Customized Edgar Search: “CNTL” + click for a New Tab
+ state = AR
+ Form-Type = 10-K
+ Zip = 72701
+ Background: Construct complex specific Edgar searches: https://www.sec.gov/edgar/searchedgar/edgarzones.htm
+ Background: Boolean Operators https://www.sec.gov/edgar/searchedgar/search_help.htm
This is a sample custom Edgar search by state
Another Example:
+ City = pittsburgh TYPE = 10-Q
+ All 10-Q filings from Pittsburgh-based companies
+ Regional search: By zip code with a wildcard
+ Zip = 2964*
+ Search Form-Type = D to find investment activity in your community. + Startups may sell securities to outside “accredited” investors (banks, insurance companies or sophisticated investors) through venture capital, private placements and similar arrangements.
How I found Inuvo
+ Constructed an Edgar search state = AR Form-Type = 10-K
+ Customized Edgar Search: “CNTL” + click for a New Tab
+ This provided a list of all current public companies in Arkansas
+ Pulled up SBA list, sorted by Arkansas, loans of $1 million or more
+ PPP Recipients $150k and Above, Aug. 8 update
+ Yes, there probably is a better way, but that’s what I did.
More detailed presentation
> Who Owns My Dive Bar?: “CNTL” + click for a New Tab
Staircase Method
Business Charter, Property Tax Records, Property Search, UCC Filings
First Question:
+ Where does the business intersect with government?
+ That’s where you find the paper.
+ You will need to dig in multiple places to get a complete picture.
Staircase
+ 1) Get the names
+ 2) Get the address
+ 3) Get the owners
+ Use this information to
–Get the property tax record. Find neighbors to talk to
–Get the property transaction. Find the seller to speak with
DNB
+ Useful to get correct spellings of businesses with multiple locations
+ Test: “Penguin Ed’s” - great barbecue place.
Search DNB database: “CNTL” + click for a New Tab
Other Business Search Resources:
For international company searches: “CNTL” + click for a New Tab
Charters Identify Owner and Partners
Search a business’ charter in Maryland. “CNTL” + click for a New Tab
Property Tax Records
+ MD Tax Collection Agencies “CNTL” + click for a New Tab
+ Anne Arundel County, Md. Real Estate Tax Search. “CNTL” + click for a New Tab
+ Tips on Searching: “CNTL” + click for a New Tab
Questions
+ Who’s Paying the Tax Bill? It may be someone else besides the business owner.
+ Small businesses may rent or lease their space. Check if building’s owners are different from the business owners.
Deed Search
+ Copy address from incorporation filing, search real estate transactions with the Register of Deeds.
+ Check Planning Department Records, Appraiser or Tax Assessor filings.
UCC Filings
+ Find out if a restaurant pledged the freezers and stove as collateral for a bank loan by checking Uniform Commercial Code filings. These documents, known as UCC filings, are generated when a business sells something on credit:
+ Search UCC Filings in Maryland. “CNTL” + click for a New Tab
State Occupational Licenses
+ Governmemt boards hold records of private companies.
+ A restaurant license from health department. Doctor medical license. + A good entry point to get names and business owners.
+ Search Maryland Dept of Labor Licensing and Regulation. “CNTL” + click for a New Tab
+ 23 licensing boards,commissions and programs the Division of Occupational and Professional Licensing (O&P) licenses and regulates over 210,000 individuals, corporations and partnerships.
+ Useful Public Records Portal. “CNTL” + click for a New Tab
More Questions on Staircase Method
+ How does the business operate?
+ Restaurant. How does it get the food? Where does it do the laundry? Who goes there? Is it related to other businesses, part of a chain or a group?
+ Supply chain vendors
+ Sources of revenue
+ Clients
+ Competitors
American City Business Journals. “CNTL” + click for a New Tab
+ Magazines, websites 43 major metro areas, really follow local business.
+ Search for local businesses here
+ Business listings. Biggest Real Estate Developers, etc. Context.
The PPP data has NAICS codes which allow you to examine how money flows into a particular industry in your community. Drill down by industry group: Search North American Industry Classification System (NAICS) “CNTL” + click for a New Tab NAICS is federal standard for classifying businesses, organizing U.S. economic data
Investopedia
http://www.investopedia.com/
Writing About Profits, Losses: AP Stylebook
http://bit.ly/ZCusUs
Stock Prices
https://www.google.com/finance
What Is A Stock, Bond, Option, Etc
https://www.finra.org/investors/learn-to-invest/types-investments
Paychecks: Salaries by Occupation
http://www.bls.gov/oes/tables.htm
Story Ideas, Business Reporter Training, Financials, Research
http://businessjournalism.org/
NYT Markets – Business News Portal http://www.nytimes.com/ref/business/business-navigator.html
Census Bureau County Business Patterns Database
https://www.census.gov/programs-surveys/cbp.html
Footnoted
A website that tracks SEC filings and highlights buried nuggets of corporate news.
http://www.footnoted.com/
SEC Action Lookup
This site allows you to find enforcement cases against individuals. Test it out: type in “Holmes”
https://www.sec.gov/litigations/sec-action-look-up
SEC Investment Adviser Search
This search will help you find broker and brokerage firm information.
http://www.adviserinfo.sec.gov/(S(xoygtkq4eoo1pgvlygb3x5n2))/IAPD/Content/Search/iapd_Search.aspx
BrokerCheck
See if a stock broker or Wall Street firm has been slapped with a regulatory penalty or fine. Data is collected by the Financial Industry Regulatory Authority, or FINRA, a securities industry self-policing organization.
http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/
North American Securities Administrators Association
A portal for securities regulators for all 50 states. Some state regulators are quite aggressive and unearth frauds well ahead of the SEC. Worth making contact with your state’s regulator.
http://www.nasaa.org/regulatory-activity/enforcement-legal-activity/enforcement-directory/
Public Access to Court Electronic Records (PACER)
This is the go-to website for federal court filings. It charges a small fee but it allows you to read tens of thousands of civil, criminal, bankruptcy and appellate court filings.
https://www.pacer.gov/
OpenSecrets.org
This is a go-to site to trace political contributions and lobbying activity at the federal level.
https://www.opensecrets.org/donor-lookup/advanced
FollowtheMoney.org
A guide to political contributions in state elections.
https://www.followthemoney.org/
Search Engines for People, Businesses
A variety of websites for finding U.S. people, addresses, phone numbers and other relevant information. Pro tip: first run a search on yourself to test the accuracy of these websites.
Nuwber
https://nuwber.com/
Pipl
http://www.pipl.com/
Investigative Reporters and Editors (IRE)
The Investigative Reporters and Editors site provides a deep archive of data and story tip sheets that can save hours of time as you refine your reporting.
http://www.ire.org/
Wayback Machine
If a company or person pulls down a website, you might be able to find a cached version here. A useful tool to check the before and after on a company’s website if they tried to scrub it.
http://www.archive.org/web/web.php
Guidestar
This site provides tax returns of non-profit organizations, known as a Form 990, that reveal financials and players at charities, public hospitals and other entities.
http://www2.guidestar.org/AdvancedSearch.aspx
FRED - Economic Data
Make quick charts from employment and other economic data to provide context for stories. An easy-to-use site run by the Federal Reserve Bank of St. Louis.
https://fred.stlouisfed.org/
Society for Advancing Business Editing and Writing
This group, known as Sabew, provides training and resources for its members ranging from shooting mobile video to digging into health care data.
https://sabew.org/resources/teletraining-archive/
Corporate Research Project
This site unearths critical information about corporate welfare, employment discrimination and similar topics. It is produced by the Washington, D.C.-based Good Jobs First, which describes itself as a national policy resource center for grassroots groups and public officials.
https://www.corp-research.org/
Questions?
+ Rob Wells: rswells@uark.edu or @rwells1961