September 6, 2017

Risk Factors: More Companies Cite Shareholder Activism

According to this Bloomberg article, a lot more companies are disclosing shareholder activism as a risk factor in their SEC filings. Apparently, 65 companies cited “shareholder activism” as a risk factor in SEC filings during the first six months of 2017, more than five times the number that cited activism during the same period three years ago.

Why is risk factor disclosure on the rise? The article suggests that companies are becoming increasingly aware of the prevalence of activism and the potential downside of being a target. The market cap of the companies including activism risk factors ranges from $45 million to $27 billion – although most are small caps & only a few are at the upper end of the market cap range.

The article identifies a number of companies that had activism risk factors in their recent 10-K filings – including:

Forest City Realty Trust (page 24)
Oxford Industries (page 35)

I did a little digging and found a handful of additional samples:

L.B. Foster (page 14, specific activist campaign)
ConAgra (page 12)
Marathon Petroleum (page 35)
Pier 1 Imports (page 14)

Risk Factors: Cyber Threats Also On the Rise  

Another Bloomberg article says that corporate risk factor disclosure about cyber threats is also growing – or maybe “exploding” is a better word:

More public companies described “cybersecurity” as a risk in their financial disclosures in the first half of 2017 than in all of 2016, suggesting that board and C-suite fears over data breaches may be escalating. A Bloomberg BNA analysis found 436 companies cited “cybersecurity” as a risk factor in their Securities and Exchange Commission periodic filings in the first six months of 2017, compared to 403 companies in 2016 and 305 companies in 2015.

There are plenty of sample cybersecurity risk factors to look at – and they run the gamut from boilerplate to highly specific disclosure.  Here are a few that I thought were fairly robust:

Procter & Gamble (page 4)
TriNet Group (page 12)
ADP (page 11)

Hail to the Chief: The “Trump Tracker” App

In addition to activism & cybersecurity, as we’ve blogged before, President Trump is turning up in a lot of “risk factors” sections of SEC filings.  In fact, the President is named so frequently in filings that “there’s an app for that” – the “Trump Tracker.”

Here’s an excerpt from this Sentieo blog introducing its Trump Tracker tool:

Today, we are excited to introduce the Trump Tracker. It’s a bot that constantly scans new public financial documents for mentions of President Trump. These documents include all SEC filings, conference call transcripts, investor presentations, press releases, and more. The bot instantly surfaces new mentions of Trump as soon as they’re published, while intelligent queries automatically sort them into topics like Obamacare, Mexico, and NAFTA.

Anyone interested in following the administration’s impact on public companies can engage with the Trump Tracker by checking the dedicated website, following the @trumptrackerbot Twitter account, or signing up for a daily email alert on the site.

John Jenkins