At The Money: Finding the Hidden Alpha in SEC filings with Michelle Leder of Footnoted (December 3, 2025)
Is there Alpha to be found hidden in SEC filings? Management does seem to hide lots of bad news by just barely complying with the law. Recent indicators are this is getting worse…
Full transcript below.
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About this week’s guest: Michelle Leder is a researcher covering Corporate SEC-filings; she founded the research service “Footnoted” focusing on uncovering material information hidden in corporate SEC filings.
For more info, see:
Footnoted *
Book: “Fine Print, Uncovering A Company’s True Value.”
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TRANSCRIPT:
Intro: “Honesty is such a lonely word, Everyone is so untrue
Honesty is hardly ever heard, And mostly what I need from you”
Have you ever wondered what management buries in their SEC filings. Do they faithfully follow their obligations to their shareholders, or do they see how much they could get away with either not disclosing or hiding?
To help us unpack all of this and what it might mean for your portfolio, let’s speak to Michelle Leder. She is an SEC-filings wonk and specialist; she founded the research Service footnoted, focusing on uncovering material information hidden in corporate SEC filings. She’s also the author of the book, financial “Fine Print, Uncovering A Company’s True Value.”
So Michelle, let, let’s just start out with a basic definition.
What is disclosure? What are the rules that the SEC requires all companies to provide to their in investors?
Michelle Leder: Believe it or not, a lot of the main rules or the framework, if you will, it dates back to 1933. Think about that for a minute. That’s the basic framework, if you will. Like the foundation of the house is dates back to 20, 1933, which is kind of amazing.
It’s 92 years ago. Think about how much has changed in the markets. There’s the, the internet, for example, and you don’t have to call your broker and say, buy me some pork bellies or whatever. It, it’s really kind of amazing that the, the primary framework dates back over 90 years. Um, of course it’s been updated, over the years, but, this is sort of the, the foundation of the house.
This is what. Companies go back to companies and their attorneys go back to time and time again. They’ll talk about the 1933 act, which of course came after 1929 and the Great Depression.
Barry Ritholtz: So let, and that was what? Started the SEC, so let’s talk a little bit about the various filings. Most of us are familiar with the quarterlies, the 10 Qs, but there are also eight Ks and 10 Ks and merger proxies.
Tell us the broad documents that every company is either required to file with the SEC or when a specific event happens is triggered and then has to do a filing.
Michelle Leder: At a bare minimum, publicly traded companies have to file three 10 Qs a year. That’s the quarterly report and one 10 K, and that’s the annual report.
And then 8Ks are filed on an as needed basis, and those are often thought of as material events, but it’s also earnings releases or a press release. A lot of people think that press releases are equivalent to 8Ks, and that’s actually not true. Companies will often put out a press release and maybe they’ll attach it to an 8K, maybe they won’t, but there’s a difference between them. Companies will often disclose something. In an AK that they never intend to put a press release out on.
Barry Ritholtz: To that point, I love this quote of yours. “Companies know they have to disclose bad news, but they also know they don’t have to post it on a billboard.”
Explain what, what, what other obligations, what do they have to say and when?
Michelle Leder: In general, if something is the, the, the definition is basically something that a reasonable investor would want to know, and that’s what triggers an eight k. A lot of people think that, that, the shorthand is like something material, but materiality is in the eye of be of the beholder.
Something that might be material to me may not be material to you. And there’s a lot of judgment calls. There’s no real like tests. I mean, of course, like. If the CEO resigns and he, absconds with like, $500 million, that’s a pretty easy test.
But you don’t see a lot of those, right?
There’s something a lot less, significant. And then there’s a discussion of like, well, do we need to disclose this, do we not? And I’ve seen it, quite frankly, all over the map. I mean, I’ve seen companies, for example, the most minor enforcement thing that a company can do is get a comment letter from the SEC.
And that’s basically like. Hey, we noticed this thing. Can you explain it a little bit more? And then the more serious thing is a wells notice. And I’ve seen companies like, for example, which is, pretty serious. It’s, it’s, it involves, uh, providing much more detailed information. Attorneys are involved, blah, blah, blah.
And I’ve seen some companies not disclose a wells notice, and I’ve seen some companies disclose a comment letter. So it really can be all over the map. That’s what makes it a little bit confusing and a little bit, hard to figure out. You can’t always say, if this happens, we have to disclose.
Sometimes there’s a lot of wiggle room in there
Barry Ritholtz: For people who are just curious. The comment letters tend to be pretty minor, a wells notice. Typically gets sent to a firm when the SEC has concluded an investigation and is planning on bringing an enforcement action.
I would imagine that’s fairly material all the time. Am I wrong?
Michelle Leder: You would think, but I’ve seen companies wait instead of like, instead of putting out an 8k that they’ve received a Wells notice, they’ll say that they, uh, they’ll wait until the queue to disclose that. And, of course the Q is all focused on the earnings. So it’s like, buried in there somewhere, usually in their legal disclosure or maybe a risk factor,
Other tricky things that companies will do, all of a sudden, I’ve seen this over and over again, like instead of a subpoena. They’ll say subpoenas, they’ll suddenly make something plural. They won’t put out a press release and say, oh, hey, by the way, we got another subpoena. And companies play these kind of tricks. I mean, they do subtle changes andit’s really up to you as the investor to catch ’em.
Barry Ritholtz: So what are some of the more common tricks you see that management uses to technically comply with the law and disclose material bad news to investors while at the same time trying to minimize attention to that?
Michelle Leder: Probably the number one thing, um, I see is like companies waiting until late on a Friday or the Wednesday before Thanksgiving with some reason they can choose when they wanna disclose. The rule is actually you have to disclose within four business days.
But of course with holidays and, and other things that can often be, stretched, it’s not as if like, the CFO suddenly resigns and you’ve gotta disclose at that minute. I’ve seen companies wait four days to disclose that, and that’s following the letter of the law.
Now, I would think that if the CFO suddenly resigns from the company as an investor, you wanna know about that right away.
Barry Ritholtz: So the Friday night data dump. After four o’clock, but before the SEC closes at 5:30 is legal, but sounds a little sketchy. How often do you find these sorts of things are disclosing information that ultimately affects the stock’s price?
Michelle Leder: I would say, pretty often, although it’s not an instantaneous thing, um, a lot of what I do is I see an early warning sign. here I’m out in LA and I often think about it as going to the dermatologist and saying, “Hey, I see this mole on my upper arm. Is that cancer? Or do I not have to worry about it?” that’s the type of thing.
It’s an early warning sign that there could be a potential problem. Rarely I would say, do you find like a, what I would call, like what someone might call a smoking gun. It’s not like, like, oh, the CEO embezzled, $500 million, whatever, and we’re filing for bankruptcyMonday morning type of thing.
Barry Ritholtz: Tell us about the non-disclosure. Disclosure. I love that phrase.
Michelle Leder: Companies know that they have to disclose stuff, and what they often do is they’ll give you the bare minimum of facts, and that’s what they do.
They might say, like, for example, director Alan Smith resigned on a Friday. But they don’t tell you that, oh, maybe he was a member of the audit committee, or maybe he was the former CEO of the company, or maybe he was chairman of the audit committee, or any number of other information and that requires you to go to another filing the proxy statement really to figure out was he a long time director?
Had he only served on the board for three months? All of these things are, information that companies have, but they’re not providing it to their investors. So that’s like, that’s what I would call non-disclosure disclosure. It’s like they’re giving you the bare minimum, but not giving you anything more.
Barry Ritholtz: Let’s talk about some metadata, red flags. A phrase I’ve picked up from you. I’ve read discussions about repeated amendments of, of various filings or reports that are consistently late. How much of this is just, “Hey, the world is complex and sometimes these things don’t happen on time,” and how much of this is Potentially predictive of real problems at the company?
Michelle Leder: I would say anytime a company can’t get its 10 K or 10 Q in on time, that’s a potential problem. If that happens repeatedly, that’s pattern recognition, right? Like if it goes on for a quarter for, several quarters, or longer that’s a potential problem, right? Companies know, for the most part, they have to get their queues in 40 days after the close of the quarter. And so, if they don’t, those companies that don’t get their filings, they’re 10 queues in on time. If they’re on a September quarter, that’s an indication of a potential issue.
If it’s the third time they haven’t been able to get their 10 Q in on time? And of course there’s exceptions, maybe the company’s going through a big merger, right? Like, when you saw like. For example, like the Albertsons-Kroger thing, a couple years ago, there was like problems there because they were trying to merge the company and there was all this regulatory stuff
If you can easily explain a late filing. I wouldn’t say that every single time a late filing is a problem, but I would say more often than not, it is.
Barry Ritholtz: Your website is called Footnoted. Tell us an example of what looked like a minor footnote in a company filing, or disclosure that. You spotted that later turned out to be a really big story.
Michelle Leder: There’s a couple of examples. One is like, Zoetis, the major animal pharmaceutical company. I started looking into them earlier, well late last year, I would say the, to toward, toward the tail end of 2024. And I put out some research to my clients, back in February of this year.
At the time, they were underplaying their, the dangers associated with one of their so-called blockbuster drugs.
Barry Ritholtz: If I recall, their drug was causing seizures and deaths on in dogs that had no previous, history of that. There, there literally should not have been released to the veterinary community.
Give us another example that, that. A footnote turned out to be a big story.
Michelle Leder: Back in in 2022, Nicola had like a, uh, what I would call a seemingly minor disclosure. It was about a sudden resignation, by an executive, not the CEO or CFO, just another, like another.
Person who was a “named executive” – that’s a formal term, which is usually the five top executives of the company. Suddenly, and it seemed kind of unimportant, but then it turned out to be an early sign of like basically rats abandoning the ship. And of course we all know Nicolo wound up filing for bankruptcy.
And so it’s kind of like following those breadcrumbs and trying to figure out, figure out what’s really going on at the company. What are they disclosing? What are they trying to tell investors? How can I, try to figure out what’s going on.
Barry Ritholtz: How do you separate what’s really a material red flag and and something that might actually be tradable to just a normal CYA language? That’s in every legal document a corporation produces.
Michelle Leder: I think that’s a great question. And quite frankly, it’s kind of tricky, right? Like it’s, it’s, there is a lot of CYA language in the filings and, um, it can be problematic.
I’d like to think that. after 20 years of reading, SEC filings pretty intensively, that I’m pretty good. My BS meter is pretty well defined and I can kind of tell when something is CYA versus something is, more serious. Of course there is a lot of that language. the filings are ultimately written by lawyers. Now, maybe they’re written by lawyers. I’ve seen a lot more these days. Maybe they’re written by, chat GPT or whatever AI, whatever AI platform they wanna use to write these filings. But ultimately it’s the lawyers that are signing up and lawyers are obviously, tend to be risk averse
Barry Ritholtz: Given the ubiquity of AI these days. How significant is AI in things like corporate filings and how do you use AI to kind of figure out what’s going on with, with all these different things?
Michelle Leder: Well, I think AI is pretty significant in corporate filings. You’re seeing it, more and more, and I’ve certainly, I think I read a journal story like, two or three weeks ago that talked about filings in quarterly work. Or it’s an even conference call, trans, conference call scripts are being written by AI and being used to kind of train, um, executives on how to answer questions, whereas before it used to be sort of in person and, kind of that thing.
I think like AI is of course, becoming much more common in this type of thing. And then of course there’s the tools that are being used to uncover what’s going on in the filings.
I do use AI. There’s a tool that I been using, um, a lot lately. It’s called Fin Tool. And, it’s, interesting because it’s really AI definitely designed around SEC filings as opposed to a more generic AI like a Chat or like, Claude or, pick your AI tool of choice. This one’s strictly focused on SEC filings and, and financial disclosures. And I find it to be pretty good.
Of course, AI is not perfect and so you have to kind of, figure things out. It’s not gonna get everything. But I think, increasingly it can be a helpful tool in trying to detect patterns.
So, like, for example, if I wanted to know, like, how many CFOs, let’s just say, company X has had in the past 10 years. in the past I would’ve had to dug through different filings, I mean, Bloomberg would of course have that information on the terminal, but, that’s the type of thing that AI can really help you with.
Things like that — going through and, and putting the pieces together.
Barry Ritholtz: To wrap up, if you’re an active trader or if you buy speculative stocks or. Even if you have questions about the management of some of the companies you own, it might be useful to pay attention to their SEC filings, especially the things they may not want you to see items they’re dumping on a Friday evening.
Or barely meeting the minimum disclosure requirements. There’s a, there’s gold in them. There are hills if where to look, and if how to interpret it. I’m Barry Ritholtz. You are listening to Bloomberg’s At the Money.
Outro: “Honesty is such a lonely word, Everyone is so untrue
Honesty is hardly ever heard, And mostly what I need from you”
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Find our entire music playlist for At the Money on Spotify.
