Companies hide negative news with unrelated press releases alongside SEC filings | Hacker News Reader

Companies hide negative news with unrelated press releases alongside SEC filings

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167 pointsorhmeh0989 comments

This reminds me of Footnoted*, [1] a site that surfaces useful info that companies hide in footnotes, bury on a Friday afternoon dump, etc. I think there's a weekly newsletter that comes out after the Friday news dump has been picked through.

EDIT: found the newsletter [2]

1: https://www.footnoted.com/

2: http://fnd.footnoted.com

This seems like a very good use case for GPT models: Surfacing buried information.

Or to write the press releases published along side SEC filings.

Notbsure why that actually helps, the SEC filongs are public... Justvanother case of the public and media not giving a damn about primary sources anymore.

Edit: From the article:

>> “We find it surprising this behavior is so effective,” Watkins said. “Investors should not assume press releases cover all events happening at a company at a given time.”

Apparently I am not the only one who is puzzled by thale fact the press releases actually seem to work...

I have used it for that very use case while analyzing the terms and conditions of some documents before signing. I still read them all myself as well, because I do not trust the current state of GPT to not miss anything important. But it helped me get a basic understanding and overview before I started my own analysis.

Yes. Indeed. I am working on this for investing. Where I believe the value proposition is the strongest.

I've had this thought before -- that there's lots of good ideas and insights hidden in the deluge of comments on hn, reddit etc -- and GPT might be used to find them. But I haven't figured out a good prompt yet.

This is more of a data question rather than finding a prompt.

You can approach it like that too. I was thinking more in terms of using the existing interfaces.

Sounds like most of the value in that site is locked behind a two thousand dollar a year paywall… wow.

The few articles you can see are interesting though.

All the articles seem paywalled or stubs pointing to articles on other sources. Do you have any readable examples?

The first link is the regular site, which is what I’ve looked at before. For me, much of the value is just in the headline, which flags the issue so I can investigate further if it sounds interesting.

Waiting for the Matt Levine column ‘Are Unrelated Press Releases Securities Fraud?’

In which he concludes that, yes, they are. But so is not issuing unrelated press releases when bad news strikes.

> ‘Are Unrelated Press Releases Securities Fraud?’

You jest, but they actually could be. One scenario would be for insiders to trade on the information after they released it publicly. So the temporary obfuscation might give them time to trade before the news had time to affect the stock.

Companies astroturffing bad news is the rule on every aspect of their business, not just sec fillings. An example: down here in Brazil, and pretty much in all of Latin America, CocaCola changed their formula on the classic Coke, reducing the ammount of sugar and mixing it with artificial sweeteners. They started rolling out this change mid 2021, and for someone that absolutely hates the after taste of artificial sweeteners like me, it was an obvious change. I haven't had a Coke since, to me it's dead. But anyways, if you try to find any mention about the change in the formulation of CocaCola on the brazilian version of Google, you only find articles about the new "Zero Sugar Coke" formula, and no news AT ALL about the change to the original Coke. Even in Facebook and Twitter, any search for "coke changed formula" always retrieves posts about the new formula of Coke Zero on the first results. These companies have gaslighting departments, that's part of being a corporation in 2023.

I think you mean nerfing in the first line. But I learned a new one I’m going be using all the time now - thank you https://en.m.wikipedia.org/wiki/Astroturfing

How can a lay-person investor get as-soon-as-possible access to recently filed form 8-K? What's the gate and delay time?

This is practically real time: https://www.sec.gov/cgi-bin/browse-edgar?company=&CIK=&type=...

also available as an RSS/Atom format feed: https://www.sec.gov/cgi-bin/browse-edgar?action=getcurrent&C...

There is also a paid-for service called PDS (https://www.sec.gov/oit/announcement/public-dissemination-se...) which isn't necessarily any faster but can be more reliable.

Your first two links don't push the message though, so you have to keep refreshing the site quickly.

If that is a problem and it is worth it to you, you pay for PDS - https://www.sec.gov/info/edgar/pds-new-subscriber-040819.pdf

Push is expensive (in volume) so it’s not really surprising they don’t offer it for free.

Isn't it more expensive to have many people poll frequently?

The entire public sec.gov site, including filing data, is served from the Akamai CDN.

But there is also an AUP (https://www.sec.gov/os/accessing-edgar-data) which limits the number of requests per second, which in reality is quite a bit less than is documented.

Vs push where someone sets up to receive it and then… never turns it off?

Might not. Caching plus nginx would allow pretty decent performance. Not sure how expensive misses would be.

Thanks for the links.

Interestingly, I noticed Amazon's CEO of Retail, Doug Herrington, dumping sizable amounts of Amazon stock[1].

This activity is coupled with growing complaints about Amazon's quality of goods[2], delivery[3][6] and ability to return those goods[2][4][5][8][9]. Amazon is now requiring customers to file a police report in order for their credible return to be accepted[7][10][11]. Amazon is also canceling union-backed delivery contracts[12], choosing instead to offer customers $10 to pick up their packages[13].

Oh, and tons of people are reportedly canceling Prime memberships[14].

Should we consider this salient signal of a downturn for Amazon?

Your links don't reveal growing complaints, they're just complaints people posted to Reddit.

Of course there will be tons of complaints, Amazon is huge. Picking out a few of them is meaningless.

Is your Amazon shopping experience better than 10 years ago? Is product discovery easier? Are you confident that you’re getting genuine merchandise? Are delivery promises being met? Are the prices competitive with other online and offline retailers?

All of those have gotten worse for me. The fact that FakeSpot exists is telling.

I'll go ahead and answer as well since we're just talking about anecdata anyway.

> Is your Amazon shopping experience better than 10 years ago?

Depends what you mean by "shopping experience." Some aspects better, some worse. Generally if I'm looking for a specific product/serial number or something, it's perfect. If I'm searching Amazon for a type of product, it's not as good - but then again, searching via Google or DDG and going from there is generally better.

> Is product discovery easier?

It was never particularly good, it's not particularly good now, but is probably marginally better especially if you have something specific in mind, e.g. something better than going on amazon.com and typing "waffle maker" into the search.

> Are you confident that you’re getting genuine merchandise?

Yes. IME the "OMG COUNTERFEITS" stuff is pretty overblown. Amazon not commingling inventory would be a step in the right direction but logistically that's difficult and would result in even less competitive pricing.

> Are delivery promises being met?

I can remember exactly two times where something wasn't delivered as promised, and one was years and years ago (maybe more than 10). The other one was damaged in transit and automatically reordered with a later shipping date so you can't even really blame that on them.

> Are the prices competitive with other online and offline retailers?

This is my only complaint. You end up paying a bit for the convenience and shipping speed which is worth it most of the time (IMO).

"OMG, counterfeits" is not overblown. I am careful with what I buy, and I got a dodgy charger that developed a burning smell without minutes of using it. If a UK retail shop sold such an item, Trading Standards would get involved asap.

I have received other substandard items, where I was given a full refund if I took down a negative review.

Wait, are we talking about trends backed by data or anecdotes backed by Reddit and n=1 personal experiences?

I worked at Amazon from 2009-2016. For a while near the end I worked on brand management which was specifically trying to address the counterfeit problem. If you’ve used Amazon in the last 14 years, you’ve used software I’ve worked on. My n=1, but from an informed position.

It’s 2023 and I still get counterfeits.

> Is your Amazon shopping experience better than 10 years ago?

No. Actually the site is overridden with fraudulent items, and the quality is in severe decline. The print-on-demand books are poorly printed, there's no way I'm buying anything over $100, especially not electronics. I can't trust any food items. The reviews are littered with bots. Not to mention, Amazon completely ruined Whole Foods.

It's bad. As in, severely broken supply chain bad. I can't "trust" what I purchase from Amazon's website anymore.

> Is product discovery easier?

Maybe from 10 years ago, however in the last 2 years something happened with Search. It's routinely mis-categorizing items, which makes finding the item I want much harder. And it's riddled with ads and product placements (again for items that have low semantic overlap with what I am querying).

> Are you confident that you’re getting genuine merchandise?

No.

There was actually a person in a different post who commented on being one of the few persons who had a team to work on fraud detection. And when they left Amazon the project was immediately dropped. Amazon knows this is an issue. We, the consumer, are just being sold short. It's not okay.

> Are delivery promises being met?

No. In fact Doug spoke in February about improving delivery times ("last mile" as it's sometimes called)[1]. The exact opposite has happened. From the article:

'Amazon now faces a class-action lawsuit in federal court for "false advertising" and "negligent misrepresentation" over Prime's two-day shipping guarantees.'

In Doug's minor defense, the previous CEO of Consumer Goods, Dave Clark, was positively abhorrent. And Clark's actions and decisions cost Amazon huge monetary and employee losses. It doesn't justify the poor decisions made since Clark's departure (e.g., requiring customers file police reports for Amazon's wrongdoings; refusing customer refunds; banning customer accounts; knowingly selling fake goods; employing child labor).

[1]https://www.businessinsider.com/amazon-plans-for-faster-deli...

> Are the prices competitive with other online and offline retailers?

Yes, in a way that is predatory. For instance "Price Labs" is Amazon's new gimmick to overcharge some customers and under charge others, dynamically, to further eliminate 3rd party vendor competition.

In the last 1.5 - 2 yrs, it's gotten a lot worse.

> “Price Labs”

That’s interesting. When I started there in 2009, per customer dynamic pricing was a failed experiment and the people in my org treated it as a huge legal liability that was extremely taboo. At the same time, I’m not really surprised based on other MBA led initiatives that are the opposite of customer centric. I was never sure how those guys got enough purchase to get their projects done.

> Your links don't reveal growing complaints,

Actually, they do. People didn't complain about this really 2 years ago. For the past few months, its all over the place (social media: Reddit, Twitter, Tiktok, Instagram; OSHA fines; SEC anti-trust lawsuits).

> Of course there will be tons of complaints, Amazon is huge. Picking out a few of them is meaningless.

No, not really meaningless. It's indicative of the illegal practices consumers are being subjected to. This is why we have Consumer Protections.

Amazon may be huge, but it's growing hollow and financially strapped it seems.

Thanks for your hot-headed opinion. I'll file it under "flagged for lack of data."

Not sure why this is downvoted. It's facts. And, it follows the exact premise of the post, which is that

Companies (e.g., Amazon) hide negative news[1] with unrelated press[2][3] alongside SEC filings[4].

[1] See my original comment: https://news.ycombinator.com/item?id=35877291#35881269

[2] Amazon's new service lets you buy physical items in games and apps: https://news.ycombinator.com/item?id=35880117

[3] Prime Video's architectural improvements to Quality Analysis service saves $$: https://www.primevideotech.com/video-streaming/scaling-up-th...

[4] Amazon CEO of Retail is dumping stock: https://www.benzinga.com/sec/insider-trades/search/index?com...

When you notice that X person is "dumping sizable amounts of stock", and use that as your foundation for a wave of further speculation, the first thing you should consider doing is looking at the actual filing[0].

Which of course contains the pertinent information: "This transaction was effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on 11/23/2022."

So did this person "dump" stock? Sure. Did they choose to do it at this particular point in time? No, a predetermined trading plan did.

[0]https://www.sec.gov/Archives/edgar/data/1018724/000110465923...

> When you notice that X person is "dumping sizable amounts of stock", and use that as your foundation for a wave of further speculation, the first thing you should consider doing is looking at the actual filing[0].

...I did.

> So did this person "dump" stock? Sure. Did they choose to do it at this particular point in time? No, a predetermined trading plan did.

Doug began offloading stock 11/23/2022. Doug is still selling this month. While I agree that some was predetermined, it wasn't all predetermined. And that's the point.

Precisely. If you're in an executive position at a company, you're an "insider" pretty much 100% of the time so you have no choice but to sign up for a trading plan that dumps stock on a regular basis regardless of the price.

And the reason why his sales grow is likely because his stockpile of vested equity has grown over time, so selling "10% of holding" is going to go up every year.

This statement is speculative.

It's quite interesting how quickly people rush in to defend persons in perceived power, without objectively analyzing the actual claim. Are you part of the C-suite in-group?

It's not speculative at all. It's the law for insiders.

It's actually speculative to argue he "dumping" stocks because that would be illegal.

Before you think about making something that quickly reads 8-K filings and acts upon it: don’t bother. A bunch of entities are already doing this way faster than you ever can through various methods and by the time you get the data the opportunity to act is gone.

I believe the current SOTA is to submit trades in the order of 10ms after the document is available online. In that time they downloaded the file, ran sentiment analysis on it and ran the numbers, decided which way to go and sent the trades to the market.

It's worth every penny to be first, but unless you have a lot of pennies, you won't be first.

Nasdaq closing auction ends at 4pm. Reports come out later. Participants trading on 8-K cannot trade the news immediately. Orders can be executed only on Monday during opening auction. Also, you assume their trades are enough to move the market and neutralize the opportunity, which may not be the case. Perhaps they can trade off market. I’m just saying that it may not be a done deal as you describe it, but I may be missing some aspects.

This is a very retail oriented view of the world. For the big players it’s trivial to move stock any time of day, there are various methods, they aren’t sitting around waiting for financial markets to open.

Would you care to give some examples? Anything after hours must be OTC, but traders won’t be on the floor on Saturday and Sunday. I know. I was there. So, who’s going to trade during the weekend? Trades also have to be reported within a certain time. I’m not sure about weekend reporting. It’s a genuine question. Your comments seems more a hearsay than actual experience.

Anything of relevance has significant AH volume. You’re too late by Monday morning.

Despite being a Boglehead (total-market index investor), who thinks that's the best tablescraps I can get, when I can't be in the club of the people who're making the real money from the systems...

I have idly wondered whether there's an viable opportunity to exploit retail investors who're being manipulated/misled (by, e.g., MSM financial 'news', stock-picker personalities, bloggers, WSB, etc.).

Then I realize I was considering actively profiting off the misery of other retail investors, and decide to just stick to my index funds.

> I have idly wondered whether there's an viable opportunity to exploit retail investors who're being manipulated/misled (by, e.g., MSM financial 'news', stock-picker personalities, bloggers, WSB, etc.).

Generally, this idea doesn't work because "manipulated"/misled retail investors will still be right 50% of the time. Being bad at trading gets you zero EV, not negative.

But if you look closely, those retail investors pay fees and spread, and if you find a way to collect those, you have a strategy. Usually, spread protects the security seller against adverse selection and market movements. But if you sell to someone who certainly doesn't know more than you do, you can just collect the spread without taking any of the risks. This is why payment-for-order-flow is viable, and why retail traders get lower fees on platforms like Robinhood than professional traders on platforms like IBKR Pro.

Whatever you do, you're probably not going to find a better strategy than the multi-billion dollar hedge funds trying to do the exact same thing but with a team of 200, and you'd just end up as one of those "retail investors" you'd try to exploit. Boglehead is the smart choice.

> Being bad at trading gets you zero EV, not negative.

I’d have to think a bit more to be sure, but my first instinct is that “bad at trading” would be negative EV given the presence of firms who are good at it. If you enter a trade in the “wrong direction”, you’re much more likely to get a fill than if you are in the right direction. Other errors include letting losers run (hoping to “get out even”) and cutting winners short (banking a minuscule win when a large win was coming).

I feel pretty sure that overall poor traders lose money rather than break even.

> If you enter a trade in the “wrong direction”, you’re much more likely to get a fill than if you are in the right direction.

Takers (ie. most retail investors) always fill. Makers create an order book, defining a buy (say $101) and a sell price (say $99), along with a spread in-between ($101-$99 = $2). If you buy a stock at a price the maker offered, you will be guaranteed to get it; the maker has no say in that transaction (they can't reject it anymore after the taker accepted).

If you do the math carefully, you'll see that both strategies "letting losers run" and "cutting winners short" fascinatingly have a neutral EV (ignoring fees and spread). You just take a lot of unnecessary risk/variance, but it all averages to zero. (Even the strategy "I just go all-in until I am bankrupt" has a zero EV after any finite number of iterations, because the exponentially unlikely chance of you winning every single time comes with exponential payoff.)

The fundamental principle behind this is that takers buy at market prices (ignoring fees and spread), and that those market prices are in an equilibrium. If it were possible to easily lose money by buying at market prices, then billion-dollar hedge funds would've already shifted the market prices by simply doing the reverse, before the retail trader would have any chance to trade on it.

I'm a retail investor. I think I've entered fewer than 2% of my orders as market orders. I rarely want to take a price and give up the full spread. I doubt I'm alone.

If you're a maker (which is not necessarily the case with limit orders), then there is a slight potential for adverse selection, but that's exactly what the spread compensates you for. If you don't want that, I'd recommend sticking to being a taker and paying the spread, for example using market or IOC limit orders.

Even if we stipulate that “bad” trading is limited to directional bets on the price movement of a security, and as such is definitionally a 50/50 proposition (at least in the very short term - in the long run, every issuer is going to zero), I still think that bad trading has to be negative EV. In the olden days (of five years ago), those bad traders paid transaction expenses. Now they’re just getting adversely selected against.

And there are all kinds of objectively worse trades than 50/50 price bets - leveraged ETFs, short-dated options, buying stock issuances as a company free falls into bankruptcy - these are definitely not positive EV trades.

The Inverse Cramer ETF (SJIM) would be right up your alley.

If there's a viable opportunity, it's already being done.

There's no delay, they're available immediately to everyone on the SEC EDGAR site (https://www.sec.gov/edgar).

SEC’s EDGAR database has the filings available to everyone the moment they’re released. It will take you 5-10x longer to press F5 than it takes a bank/hedge fund to have a bot ingest the news and trade off of the new information. Even if you could ingest the information instantly, your orders will be slower than the people who are co-located within the same data center as the exchange, or the folks who set up private microwave relay networks between Chicago and NYC.

The very fact that people go to such lengths to rig trading systems in their favor suggests they're not worth retaining in their current form.

You could make the argument it benefits anyone who sells equities, right now SPY has a penny wide bid/ask spread. One basis point is an extremely tight spread on an instrument that costs $413/unit. Pre-2001 the minimum tick size was $0.0625, and pre-1997 it was $0.125, I’ll take $0.01 spreads any day.

Like Robinhood and all those other "free" trading plattforms?

There are over 30 different types[1] of 8Ks and receiving notifications on all of them will inundate your inbox. It's a shameless plug but my freemium 'lay-person investor' site[2] will allow you to filter and select which 8Ks to view and receive notifications on. For example, you can receive an email every time a company files an event about a Bankruptcy / Receivership: https://last10k.com/stock-screeners/bankruptcy-receivership

[1] https://www.sec.gov/answers/form8k.htm

[2] https://last10k.com

OpenAI is going to make a difference here. These filings are often challenging to read for a lay man. However, ChatGPT should be able to have a decent go at mood analysis. Until companies start rewriting their articles to be OpenAI "proof"

Actually, those SEC filings are not that jard to read. I had a collegue who used ChatGPT to summarize those for him. Since even SEC filings contain letters to shareholders, all they got was a ChatGPT version of that, missing all the relevant and important stuff about risks and such. Also, what is not written in those filings is at at least as important as what is written, ChatGPT utterly fails here.

there are already several companies that offer machine readable digests. Not sure you want an LLM to do this b/c the risk of it hallucinating is terrifying.

Using hallucinations as evidence that LLM’s can’t be useful for summarizing today is like saying airplanes can’t be used for intercontinental travel in 1980.

All 8-Ks are available to the public on the SEC's EDGAR wesbite. As far as I know, 8-Ks are posted there on the day of filing. That could be wrong and there may be a quicker way to get them.

Generally 24-48 hours depending on when Edgar updates. You can also download the daily filings directly from the sec.... it’s what Bloomberg does.

This is objectively wrong.

Australian politicians do the same. Important or bad news gets released before a holiday, when people are not paying attention.

All politicians and companies do this type of thing. Here's [1] a particularly egregious example from 9/11, where a UK government advisor sent out a memo at advising "It's now a very good day to get out anything we want to bury".

Judging from the tone, the writer was elated. She sent the email shortly after the second plane hit.

https://www.theguardian.com/politics/2001/oct/09/uk.past

File this under one of those rulesets that needs updating since "behavioral norms" is no longer really a thing in the world.

Isn't this called damage control and is the most widely used pattern in politics too?

The Commonwealth (Australia | UK at least) terminology of recent years is to call this Throwing a dead cat on the table a technique perfected by some Australian|New Zealand marketing consultants that turned to politics and advised both the AU and UK Governments.

Boris Johnson (former UK PM) perfected the technique .. no matter how bad an actual real news worthy political event might be .. no paper pays attention if you announce something totally bonkers and ridiculous at the same time.

Good Grief! Did you see that!! He threw a dead cat on the table!!!

That was my reaction. "Wow - companies engage in public relations? I'd never have guessed."

And Boris Johnson makes model buses out of old cardboard and paint. Right...

Was that part of the study? Seems like an unrelated piece of trivial.

https://www.scotsman.com/news/opinion/columnists/sinister-th...

Wow, really?

If I had a little more time I’d make a Twitter bot that used an LLM to extract unrelated / negative news from SEC filings and post it.

Will at any point we be able to build a system that won’t be gamed?

ie. A system whose incentives are perfectly aligned with its operators and users incentives?

In system/process design, you generally need feedback in a system to operate optimally. Rather than try and create a system that can be set up and left alone - which will eventually get gamed or otherwise become unfit over time - we should aim to have feedback to continuously adjust and improve our systems.

For the highest level functions of our society, this feedback is humans and politics. We need a politics that allows issues in the financial system (and all other societal systems) to be assessed and changed over time, responsive to the needs of the people.

Never. We are humans - humans are by our very nature dynamic.

You mean we have to always oppose someone else’s incentives?

Or we always have to see someone else’s incentives as an opposition to ours?

What does dynamic nature imply?

Can’t a system be dynamic?

No as humans we will always game a system to maximize their individual incentives.

Systems can be dynamic but humans are more creative dynamic than systems can be designed. That is and will always be true.

An absolute truth

No, but we can make decisions about what sort of losses/abuses we consider tolerable. A simple way to approach this is to just change the calculus of what sentencing terms different sorts of crime should attract. Right now you can operate a bank, rip people off or launder dirty money wholesale, and face only mild criminal liability.

Consider Wachovia Bank, for example, which was found to be laundering cartel drug money at scale. They had to pay a fat fine and the company was force-sold to Wells Fargo amid the financial crisis, but as far as I'm aware nobody spent a day in prison.

https://en.wikipedia.org/wiki/Wachovia

For that the requirements are well known - infinite resources, infinite knowledge, infinite time. See Theory of Bounded Rationality.

What kind of system are you asking for? Entire national economic system? News? Stock Market?

Reply on news.ycombinator.com