Right around 12:30 today, Google’s (GOOG) earnings showed up in the SEC’s EDGAR system. Though I write showed up, the process of how an earnings release makes its way to EDGAR is a bit more complicated than that. When I saw the 8-K and then checked Google’s investor relations site, something seemed very odd to me, which prompted me to tweet this at 12:54:
Am wondering if someone at $RRD (SEC filing agent for $GOOG) made a mistake by hitting send too early
I was the first one to call that. I followed up with more tweets explaining my reasoning based on my extensive knowledge of SEC filings. About 30 minutes later, Google issued a statement blaming RR Donnelley (RRD) for the early release. Here’s what they said, according to the WSJ:
Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorization. We have ceased trading on NASDAQ while we work to finalize the document. Once it’s finalized we will release our earnings, resume trading on NASDAQ and hold our earnings call as normal at 1:30 PM PT.
Google’s stock was halted this afternoon because of the early release. Right around 3 pm, Google officially released its earnings. Trading was set to resume around 3:20.
While I spend a lot of time reading filings, I don’t know a lot about how the filings actually make it into Edgar. But here’s what I do know: the filing agent, which in this case was RR Donnelley, almost always gets a copy of the earnings prior to it being released to the public. I’ve been told by folks who know more about this end of the business that it’s pretty common for the filing agent to have a copy of the earnings anywhere from a few hours to a day or two in advance. Think about that for a minute and why that type of system may have made sense 10 or 15 or however many years ago, but probably doesn’t make a lot of sense now when something like a news release can travel from Mountain View to Chicago (or wherever RR Donnelley processes these things) in a matter of seconds.
And it’s not just anyone who can press the send button to transmit the filing to the SEC. The filing agent typically needs someone from the company or its law firm to sign off on the release first.
Of course, there’s lots about the whole SEC filings process that dates back to much earlier days. As I began to dig into this a bit more, I saw that a number of large companies, including Southwest (LUV) and Halliburton (HAL) simply file their own earnings statements with the SEC. If Halliburton and Southwest can manage this sort of thing, wouldn’t it make sense that a company like Google, which, after all is in the technology business, could?
Both RR Donnelley and Bowne, which Donnelley bought two years ago, date back to the 1800s, when things didn’t move quite so quickly. Google has been using RR Donnelley since it filed its first S-1 in April 2004. Back then, it may have made sense to have a third-party with deep experience in SEC filings do this sort of thing for a newcomer like Google. But Google isn’t exactly a newcomer any more. And the company is significantly larger than it was in 2004.
Earnings are among the most sensitive filings that companies make, so any mistake made during the process needs to be looked at very closely. Given Google’s size, I’m hopeful that all of the relevant parties start thinking a lot more about how this type of thing happened and what can be done to prevent it from happening again anytime soon.
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