The Value-Add for Prospect Research in SEC Filings

When I am doing prospect research, I always breathe a sigh of relief when an individual I am researching is a member of a public company. Maybe I am just a geek, but I embrace SEC filings, since they provide hard numbers I can plug into a capacity formula. But besides the ever-so-useful sections on executive compensation, beneficial ownership, and options exercise schedules, SEC filings provide so much more, and often there is no math.

Professional Biographies – the bios in proxy filings are so nice and compact, they’re just asking to be copied into a professional note in the database, and they often have an age and a photo. And unlike a LinkedIn bio, these are on a government filing.

Relationships – we are still in the bio section, but now we are looking at the other executives and directors, to see who has served alongside our prospect for the longest or the closest. And we don’t need to stop there, since our prospect’s bio likely lists both previous employers, alma maters, and other organizations, for-profit or nonprofit, for which our prospect serves as a director. All of those will provide sources to scour for relationships and door-openers.

Director Compensation – sometimes the compensation packages for independent directors can be substantial, in the six-figures, and supplement any other salary information you may have found for your prospect.

Footnotes – a veritable goldmine, the footnotes in the compensation, ownership and other tables, and on Form 4 filings, can reveal hidden nuggets. Many times they reference trusts, and will specify whether our prospect has a controlling interest in the trust or not. Sometimes these trusts are for spouses, children or other family members, which provides us additional insight into how our prospect manages wealth. Other footnotes may reference employment agreements, signing and/or retention bonuses, and incentive plans.

Corporate Events – if a merger, acquisition or divestiture has occurred in the time frame a proxy filing describes, that filing will discuss it. Understanding the acquisitions which a company has undertaken can sometimes help us understand the financial and employment packages it has created for the executives who came along with those acquisitions, and the relationships our prospect may have with the company and the other principals.

Stock Holdings – if you read through your prospect’s historic Form 4 filings, you can see who consistently sells the stock they receive or exercises options only to turn around and sell them, who redeems options but holds onto the stock, and who rarely or never exercises options. These behaviors can all be part of the wealth puzzle. And, if there is a Form 4 filing more recent than the last proxy filing, it will provide a more up-to-date report of the prospect’s current stock position(s).

So try not to sweat the math or the fine print, because if you do dig into SEC filings, finding several new and intriguing threads to pull could be the ultimate reward.

One thought on “The Value-Add for Prospect Research in SEC Filings

  1. A very nice summary Sarah – thanks! Sometimes we prospect research pros get caught up in the details, but just reading through a proxy statement gives most of us all we need to go on to get a major gift for our organizations. Fear of numbers and legalese need not keep anyone from opening a proxy statement!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s