A Review of COVID-19 Related Disclosure by the Top Industry Filers with the SEC
For most management teams, the first quarter earnings disclosure period will be amongst the most challenging ever faced. The earnings period has begun this week with the big banks in the U.S. reporting first. March retail sales numbers reported yesterday were down by 8.7%, the most ever since the US government started tracking the data, foretelling what will be in store when retailers begin to report their Q1 results. For most, the first quarter will be the beginning of a reversal of what may have been positive trends reported for the fourth quarter for 2019 only a few months ago. And, as the impact of the Coronavirus crisis has only affected the final weeks of Q1, the second quarter results will be more telling in terms of impact to earnings. Knowing what has been disclosed by your peers can help you prepare for what investors expect to hear about in more detail during the Q1 earnings period. InspIR is also sending out a checklist to prepare for Q1 earnings.
Leading up to discussions around Q1 reporting, InspIR has analyzed 277 global 6Ks and 8Ks filed with the U.S. SEC between February 20, 2020 and April 1, 2020 relating to the impact of COVID 19. This is a sample representing the share by industry of the 1,340 filings made during the same period where COVID 19 was addressed in the body of the release.
Here is what we found:
There was a spike in filings between March 17 and March 24, just prior to the close of the first quarter.
Metals and Minerals led with the number of filings and was then followed by electronics and the retail industries with the greatest number of regulatory filings.
Microcap companies made the greatest number of filings, followed by mid and small cap companies, equally represented during the period.
By topic, the most number of filings included information on cost reduction and suspension of operations, the cash position and withdrawal or suspension of guidance. Many filings included several of the topics.
Most frequent topics disclosed by sector:
Metals/Minerals: 39% reported the suspension of operations, with 25% reporting on cost reductions and 18% reinforcing their cash position.
Electronics: 24% reported on cost reduction, with 20% reinforcing their cash position and 20% announcing suspension in operations.
Retail: 95% announced the suspension of operations, almost 70% cost reductions, over 50% withdrew guidance and 50% provided notification of the draw down of credit facilities.
Biotech: Over 70% reported on activities related to COVID 19 related advancements, followed by approximately 14% disclosing cost reduction initiatives and 9% suspending operation.
Pharma: Like biotech and healthcare, over 72% of filings announced initiatives around COVID related products or vaccines, with 17% reporting on cost reduction plans.
Healthcare: Almost 76% reported on COVID related medical products and services advancements, with less than 10% announcing suspension of operations and reinforcing the cash position.
Technology: Over 31% withdrew or suspended guidance. 25% reported on cost reductions and 19% or cash position.
Real Estate: 57% of the disclosures included the withdrawal of guidance, almost 60% reported on cost reduction initiatives and nearly 60% notified the market of the drawdown of credit facilities.
Travel: 75% reported suspension in operations, with 25% reporting on cost reduction, the withdrawal of guidance, the drawdown of credit facilities and reinforcing their cash position.
Industrials: 55% withdrew guidance, 45% announced cost reductions and 36% disclosed reductions in CAPEX.
Following the top 10 — Finance (cash position, cutting/cancelling dividend); Banking (suspension of share purchase program, cash position and cutting/cancelling dividend); Food (suspension in operations, cost reduction, withdrawal of guidance); Oil and Gas (cost reduction, reduction in CAPEX, cash position) and; Commercial Services (withdrawal of guidance, suspension in operation, cost reduction).