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Comment by ad8e | Hacker News Reader

  We are perhaps the only public company that shares financial results internally in the weeks before the quarter is closed. We announce these numbers at a quarterly business review meeting with our top seven hundred or so managers. The financial world sees this as reckless. But the information has never been leaked. When it does one day leak (I imagine it will), we won’t overreact. We’ll just deal with that one case and continue with transparency.

The CEO of Netflix says this in Ch 5 of his book No Rules Rules. The leak is a predictable result and will happen again. He believes the tradeoff in openness is worth it. If this $3 million is the only incident, maybe he is right.

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IMO it’d be great if going public meant that you had to publish open, online, real(ish)-time dashboards of your company’s core metrics. Like if it’s a metric in every quarterly report, it goes in the public dashboard, and has to be no more than X stale (1 hour? 1 day? Something like that).

Many public companies already have something like this internally, it’s just really locked down. Open it up and most insider trading goes away.

I'm no financial expert, but it seems this would uber-stabilize the stock since algorithms (ingesting via scraping or human data entry) would trade near-perfectly based on the statistics, leaving little speculation for retail investors/other impulse trades.

Until there is a “fluke” in the data. A bug, or an exceptional change. Things that would normally be corrected in the manual GAAP process before reporting.

But now all the algorithms crash or bubble the stock price and a lot of people loose money.

I’d love to see such (near-)realtime metrics though

No, because even assuming an efficient market, future earnings are still uncertain, people will have different opinions about them, and that's most of the ballgame.

That assumes that everyone, and every algo would take those metrics and translate and interpret them into a consistent share price. The value of any company, is only loosely linked to it's performance at any given point in time, and is highly dependent on assumptions (eg. rev. vs. cost growth) over time. This would reduce the information disparity between insiders and the market, there's still plenty of room for speculation.

There's a lot of work that goes into verifying the numbers before they're reported, and you really can't do that on an hourly basis, and a daily basis would really be pushing it.

Generally Accepted Accounting Principles aren't always entirely straightforward to apply; you can't just look at the bank balance every day, and internal dashboards don't have the same rigor that reported data must have.

Yep, and if you issue the wrong number, your company is legally obligated to issue a correction, done in an 8-K usually I believe. And this is very much frowned upon by investors (not the correction, but making the mistake in the first place).

How does investors dissatisfaction with a company making such mistake manifest itself? I assume they won't divest just for the sake of punishing the board.

Future investors would avoid the company?

Quite a few of board members are the investors, if I understand it correctly. As for how their dissatisfaction could manifest, they could vote the CEO out and put someone else in that position who will revert that level openness instantly.

They may not simply for punishment but because they lost trust in the company's ability to accurately report financials (depends on discrepancy in financials, # of misreports, etc)

Besides, it would allow competitors to do a lot of spying: When did you sign some contract (with hour precision), is the customer base weakening. It’s not only the same data being published, it’s n million times the same data with all its variations. If I were Amazon, I would spend a lot of money convincing the competitors’ employees that openness is essential.

Yeah, they’d have to be quite tentative numbers, not held to the same level of scrutiny as quarterly report numbers. I actually used to be a data engineer, working on internal BI stuff, and worked a tonne with our finance team automating all sorts of their previously manual work. A massive amount of it was automate-able - humans had to make decisions about how we’d recognize/classify different types of revenue, but once those decisions were made, automating their application wasn’t hard.

It’d be a lot of work, but I certainly think doable for most businesses.

This seems like it could make public companies even more short-term focused. Execs would be wondering on an hourly basis what stockholders, etc. are thinking about metric fluctuations.

Great idea. Although it is probably unrealistic for accounting data (profits, losses, cost of sale, etc), other types of data are indeed likely already present in internal systems with at least daily resolution: number of live accounts to show signups and closures, median watch time, total number of hotel bookings made, mining ore yield, vehicle occupancy and miles run for logistic companies, number of cars serviced, etc.

SEC could make a list of required realtime reporting metrics by industry and mandate this information to be published with delay no more than X days.

this would disincentivize going public even more. There should be (reasonable) limits to regulatory burdens.

Honestly it seems like a win-win. Anyone trading on the information is likely to be caught and I doubt they want someone in a position of power who would commit that sort of crime.

As far as I can tell the company isn’t legally or financially liable so I don’t see a downside?

Aren't Netflix essentially enabling market manipulation (which insider trading technically could be a part of) which surely must violate some sort of legal codes (maybe even for the directors of the company! I.e. in Australia we have laws around "Director Duties" where as a director can be held liable for all kinds of behaviour when it reaches a certain scale incl. honesty, debt, insider trading etc.)

I don't think this was a leak from the QBR. The QBR goes into a lot more detail around finances etc. Sounded like this case the person was just trading off of subscriber data, which has other sources besides the QBR.

Is this the chaos monkey equivalent of their financials?

They are not the company that does it. My company does it but they the trading tool they provide you for multiple weeks around the event.

> The financial world sees this as reckless.

And why should we care what some old farts at Wall Street think? They can run their company however they see fit.

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