On Tuesday, both Wells Fargo and JP Morgan Chase reported earnings, which attracted plenty of coverage, including this Wall Street Journal story, whose headline declared that Wells Fargo was “Now No.1 Bank Profit Maker” beating JP Morgan, which had held that spot since 2010.
But as we skimmed through Wells Fargo’s press release and then quickly compared it to the one that JP Morgan put out, we noticed another place where Wells Fargo clearly bested JP Morgan: the length of its forward-looking statement. Weighing in at over 1,100 words, it’s nearly six times the size of the one included in JP Morgan’s 4th quarter release.
For those not as familiar with forward-looking statements, they are the seemingly routine boilerplate that companies use to describe some of the assumptions that they make in coming up with those numbers that everyone pays such close attention to. They’re often in very tiny print, written by some junior associate fresh out of law school and to make matters even worse, italicized, practically daring someone to actually read them! Here’s a snip from Wells Fargo’s release:
Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements.
Snore city, right? But we’ve been paying closer attention to forward-looking statements for awhile now, ever since we noticed companies trotting out new disclosures and even risk factors buried in the italicized boilerplate. Over the summer, we even put out this Pro report which looked at some of the more unusual disclosures we were noticing.
At the same time, we’ve also noticed a substantial increase in the amount of words many companies — but not all — seem to be devoting to their forward-looking statements. And since we believe there are few accidents in SEC filings, we started paying closer attention to what was actually being said in them. Up until this year, for example, Wells Fargo’s forward-looking statements were running around 800 words. It was only last summer that the company decided to expand this disclosure by more than one-third.
Last week, the Journal also ran this story, warning that corporate attorneys were “on guard for new legal pitfalls”. While the story didn’t specifically mention forward-looking statements, it’s safe to assume that they’re likely to grow as a result.
So let’s have a little fun with this: if you come across a particularly amusing disclosure in the forward-looking statements for a company that you follow, I hope you’ll consider sharing it with other footnoted readers. Send me your best pick. I’ll crown a winner in early February and in exchange, give you a free month of access to footnotedPro.