Researchers are noticing a trend in corporate Securities and Exchange Commission (SEC) filings: Donald Trump.
According to the financial data research firm Sentieo, America’s publicly-traded companies have mentioned Trump in several hundred SEC filings since he became president. The vast majority of their concerns fall into three categories: financial regulations, energy policy and healthcare reform.
On one hand, that should not be too surprising. The SEC has long mandated that companies advise current and potential investors about risk factors, whether they are discussed in annual reports (form 10-K), quarterly updates (10-Q) or in an 8-K, which is required within four days of a “significant event” such as a change in executive leadership, bankruptcy or other factors that could have a sudden impact on a firm’s performance and, therefore, stock price.
Over the years, securities attorneys and corporate governance advisors pushed their clients to err heavily on the side of caution to reduce the risk of getting sued – which is why disclosures such as “if we are unable to effectively train and equip our sales force, our ability to successfully commercialize [enter product here],” which seem obvious for a lemonade stand, will appear throughout these filings.
But as the Wall Street Journal reported this week, so far companies mentioned Trump at three times the rate of his predecessor, Barack Obama. Considering the 44th president was often described as the most liberal politician elected to the White House in decades, and that in 2009 he made it clear health care and financial markets reform were high priorities on his agenda, the rate at which companies are mentioning Trump at the very least raises eyebrows.
Of course, another argument that could be made is that businesses crave certainty, even if they disagree with policies. When Obama was elected, he had a huge majority in the House of Representatives and 60 senators on his side. So, by most accounts, companies expected and prepared for changes such as Dodd-Frank or the Affordable Care Act. But when an administration talks about discarding policies — and no one knows what the outcome will be — then you have the emergence of a collective freak-out; and this is especially true of health care.
The WSJ’s Theo Francis, Ryan Knutson and Julia Wolfe dug deep into Sentieo’s data, and found that 237 healthcare companies mentioned Trump by name in their filings since he took office in January. In addition to discussing the risks of repealing Obama’s signature healthcare law, many of these companies also shared information on risks related to corporate tax reform.
The rate at which Trump is mentioned is more than a ten-fold increase over such disclosures made during Obama’s first 100 days in office, suggesting that many companies assumed the changes in America’s healthcare system were a fait accompli. And as healthcare companies realize that, despite the many complaints, Obamacare has actually been a profitable venture for them, they are quick to warn investors that their ledgers may not look so pretty over the next few years.
Uncertainty is also driving many of these companies’ warnings to investors. As Ireland-based anti-inflammatory drug company Horizon Pharmaceuticals told its stockholders, floated proposals such as a “border adjustment tax,” which would increase the cost of imports into the U.S., are one of many concerns that companies have about the new administration.
So while Wall Street and the stock markets together may be crowing about an era of deregulation, many individual companies are expressing concern about what is on Trump’s populist agenda. Hedge fund manager Blackstone Group, for example, warned investors that if Trump’s ideas for changing the capital gains tax laws come to fruition, the company may struggle retaining and recruiting talent.
Furthermore, the question over how much Trump can actually accomplish is worrisome to firms, including Martin Marietta Materials. Noting that its business depends on government spending, the company emphasized that Trump is keen on boosting infrastructure investment. But that depends on Congress, leading the company to conclude that “we cannot be assured, however, of the existence, amount, and timing of appropriations for spending on future projects.”
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