Stock Effect of Filing a Form 8-K

If something important happens to a publicly traded company, it's normally required to file Form 8-K to notify the public and the Securities and Exchange Commission about the event. There are a wide variety of events that can trigger the need for an 8-K filing, and they often affect the price of the company's stock.

Tip

Form 8-K is used to update investors and the SEC about a significant event affecting a company. The stock price of the company is often affected by 8-K triggering events, but whether the price goes up or down depends on whether the form contains good or bad news.

Form 8-K Triggering Events

Certain types of events trigger an obligation for a company to file Form 8-K with the SEC within four business days. There are a wide variety of events that can result in an 8-K being filed, including a company entering or leaving a significant contract, acquiring or getting rid of significant assets, entering receivership or bankruptcy and having a mine shut down for safety reasons. Major layoffs or closures of a corporate facility are also usually disclosed by an 8-K filing.

Other events include changes in corporate control or governance, including directors joining or leaving the corporate board, changes in the company bylaws and amendments to the corporate board of ethics. Some events relate to the company's stock, such as if the company receives notice that it is being delisted, or removed from an exchange like the New York Stock Exchange or the Nasdaq, or if it is moving from one exchange to another. Mergers and acquisitions also generally trigger the requirement to file an 8-K with the SEC.

When a company or its managers disclose information about how the business is doing, such as to the media, there is also a requirement triggered to file an 8-K so that the public at large can be clearly informed about the news. This is governed by what's called Regulation Fair Disclosure, or Reg FD, an SEC rule. News reported in a Form 8-K filing may also be disclosed elsewhere, such as a corporate merger reported in the media or a bankruptcy made known through a bankruptcy court filing.

How to Find 8-K Filings

If you're investing in a company's stock or corporate bonds, it's often important to keep up with its Form 8-K filings so that you don't miss any news that might cause you to buy or sell the securities. The filings are generally available through the SEC's website, and they're also commonly posted to corporate investor relations home pages. Some stock brokerage and financial news and information sites can also provide you with a feed of corporate filings, including 8-K filings, for companies you're investing in or otherwise interested in.

While not every 8-K filing announcing a change in board seats or other mundane business will necessarily be of interest, it's still worth keeping an eye out for any 8-K filings in case they are relevant to your valuation of the company's stock. You can also watch the financial news for reports of significant news about a company, including anything disclosed in a Form 8-K filing.

Form 8-K Effects on Stock

Filing a Form 8-K will often impact a company's stock. Which way the stock moves will depend on the nature of the news being disclosed.

If it's good news, like the company completing a merger, taking on an illustrious new board member or selling a valuable piece of no-longer-needed real estate, the price will likely go up as investors cheer the news. If the form contains bad news, like a bankruptcy, unexpected defeat in court or the departure of a well-liked executive or board member, the stock will often go down.

Naturally, less significant news will have less of a significant impact on stock prices. As an investor, you can make your own decisions about whether the stock price shift is justified after a Form 8-K filing and decide whether to buy, sell or hold the company stock.

Other SEC Filing Types

Form 8-K isn't the only form that companies commonly file with the SEC. Most companies file regular annual reports, using SEC Form 10-K, and quarterly reports, using SEC Form 10-Q.

These regular reports come out on a set schedule and contain information about the business and the company's financials including assets, liabilities and cash flow. They also generally outline risk factors that might cause trouble for the company in the future and provide the company's own explanation for why the business is doing well or poorly and how it's likely to do in the future.

They're a good source of information for investors who want to dive into the nuts and bolts of a company's business and how it's performing. It can also be helpful to compare the results of multiple companies in the same industry by looking at their annual or quarterly report when you're deciding how to invest.

Investor Conference Calls

When these reports are issued, it typically results in a movement of the stock price up or down depending on whether the results were better or worse than investors expected. Reports may be accompanied by conference calls or webcast sessions where investors and reporters can hear from the corporate officers about the company's performance and potentially ask questions. These are often covered widely by the media, especially for big or culturally significant companies.

You can keep track of when annual and quarterly reports are due for companies you've invested in or are otherwise interested in, then obtain them as they come out from the company's website or the SEC's online system. It's useful to read news reports or analyst commentary to find interesting parts in the reports and put them in context.

Annual Shareholder Meetings

Most publicly traded companies also hold annual shareholder meetings where they present information to both shareholders and the public and elect corporate directors. If you are a shareholder in a company, you can contact the company for information about where and when the meeting is being held and how you can participate. Some of the information presented may have already been made public through Form 8-K or other SEC filings.

If you don't attend in person, you can often give your proxy, or right to vote on your behalf, to the corporate directors or someone else. Different factions might solicit your proxy as a shareholder if there is a contentious vote expected. Do your research and decide what group makes the best argument if you wish to assign your proxy.

You can usually access minutes, transcripts or even video recordings of annual shareholder meetings online if you're not able to attend them in person.

Failure to File Form 8-K

If a company is required to file a Form 8-K after an event and it doesn't do so, it can face penalties from the SEC. These can be monetary penalties or even the delisting of the company's stock. As a result, many companies err on the side of caution when it comes to filing Form 8-K.

Companies that don't disclose information to shareholders can also face allegations of securities fraud or lawsuits from investors saying they were misled into buying or holding the company stock.

Video of the Day

About the Author

Steven Melendez is an independent journalist with a background in technology and business. He has written for a variety of business publications including Fast Company, the Wall Street Journal, Innovation Leader and Ad Age. He was awarded the Knight Foundation scholarship to Northwestern University's Medill School of Journalism.


Zacks Investment Research

is an A+ Rated BBB

Accredited Business.