Working the refs!
The rules (all 24 pages of them!) on when you need to file an 8-K are pretty clear: you need to file within 4 business days of a significant event. Many times that’s often interpreted as a “material event” as in materially important to the company. But that’s actually a much narrower definition and the two are not always the same thing.
A new contract might be significant, but not necessarily material, for example. Top executive departures, say the CEO or CFO, are probably both. (Not legal advice! to paraphrase Matt Levine 😉).
I thought about this last Friday when I was doing my regular trawl through late Friday 8-Ks. There was this 8-K from SciPlay Inc. (SCPL) noting that the CFO had stepped down a week earlier. By filing after 4 pm on a Friday four business days after the CFO suddenly left, SciPlay followed the SEC’s rules on disclosure. Because Monday was a federal holiday, the company was able to wait until late on Friday to disclose this information to its investors.
As I started to dig in, though, I realized that there was more to this story. The CFO, Jim Bombassei, had only joined the company on Dec. 1, which the company had trumpeted in this press release. Needless to say, the Feb. 24 filing didn’t note that he had only been CFO for 2 1/2 months before his “departure”.
And that’s another thing about 8-K rules: they only require the company to give the bare basics, instead of any perspective. Think about this for a sec: if a CFO steps down after only 2 1/2 months and his departure is announced nearly a week after the fact, it is definitely different than when a CFO announces their retirement a year down the road. But the rules allow companies to disclose both the same exact way!
A version of this post originally went out to subscribers of my Friday Night Dump newsletter, a subscription-only product that highlights 6-10 filings made after 4 pm on Fridays, when companies tend to bury their most negative information. You can learn more about subscribing here.