We’re out to conquer the world of financial content, and one of the most important pieces of the due diligence puzzle are the company and regulatory filings. Some filings, like annual financial statements and share allocations, are mandatory for all companies so that governments and investors may understand the true state of the company. Other filings may be optional but help promote a strong sense of transparency and communication.
However, there are millions of companies around the world generating reports and filings, which makes it very difficult for the average retail investor or even a small team of analysts to track everything efficiently. One potential issue is missed investment or risk management opportunities, such as when small companies, which receive little media coverage, submit filings that materially affect their business. This could be management changes, scheduled share issues, or even bankruptcies. Since small companies do not garner headlines, investors risk missing out on the information until it is too late. On the other hand, if an investor learns about the filing submission, he or she may be able to act before the market moves.
One such example is Den Automation, with only a single headline from a lesser-known publication hinting at its demise before the wind-up resolution and appointment of a liquidator were published on 16 December 2019. Even two weeks later (December 31st), no other news story on the topic had been published. An investor using our filings service and monitoring Den Automation or bankruptcies would have seen this the day of publication, but most investors may not check until financial reports came due.
Since we at CityFALCON are leveraging technology to democratise finance, we have set out to make the massive flow of filings more easily understandable through automation, summarisation, and user-friendly interfaces. This includes myriad types of filings, like court orders, company information amendments (address changes, etc.), management changes, issues of equity, buybacks and own-share transactions, insolvency and dissolution documents, and, of course, financial statements.
Our first product to do this involves processing and making available end-of-day (EoD) filings from the London Stock Exchange’s Regulatory News Service (LSE’s RNS). First, let’s look at the LSE as an institution and what filings come from RNS. Then, we will briefly explore how filings are useful and finally talk about the future of filings processing at CityFALCON.
The History and Background of the London Stock Exchange
The LSE is often quoted as one of the oldest continuing stock exchanges in the world, citing 1571 as the year its predecessor, the Royal Exchange, was founded and 1698 as the year it was officially named the London Stock Exchange.
More than just a long-standing institution, the LSE is verifiably one of the largest and most influential stock exchanges in the world with more than 2,000 listed companies valued at £3.8 trillion, placing it just behind Euronext, Hong Kong, and Shanghai in market capitalisation. As of November 2019, almost 1,200 of these participated in the prestigious Main Market, which is reserved for larger, established companies. The rest were listed mostly on AIM, the LSE’s market for growth and smaller companies.
The global predominance of London as a financial centre ensures major corporations are headquartered in the City (and consequently usually listed on the exchange). The FTSE 100 is one of the most important stock market indices in the world and contains exclusively LSE-listed companies. In 2019, the exchange counted at least 18 companies valued at over £50 billion, 370 companies worth at least £1 billion, and capital raises of more than £15 billion on its primary Main Market (new and further issues for large companies). AIM saw over £3.3 billion in raised funds on its primary market.
Of course, all of these public companies and newly issued stock entail significant documentation and regulatory obligations in the form of filings to keep the investing public well-informed. With more than just annual and quarterly reports, the LSE’s RNS provides plenty of documentation for potential investors.
The Regulatory News Service (RNS)
According to their own statistics, LSE’s RNS processes nearly 350,000 announcements every year, accounting for 70% of “regulatory and potentially price-sensitive” announcements in the UK. Moreover, RNS provides filings and announcement services for UK-based companies with many global regulatory agencies, among them the SEC, NASDAQ, and regulators across Europe.
The service offers several other perks for announcing companies, including a standardising format that makes it easier for investors to read the announcements and understand vital information. They also distribute these announcements to non-government information platforms around the world, including Bloomberg, Dow Jones, Thomson Reuters, and now yours truly, CityFALCON, through the RNS feed API. Ultimately, 2 million individuals are potential recipients when an announcement or filing is published through the service.
Not all announcements through the channel must be regulatory, though. The RNS also offers RNS Reach, which is a channel for voluntary announcements to help companies reach high-profile investors and institutions with non-mandated information. This is an excellent channel for PR due to the large number of highly-suitable individuals who will be able to see the announcement.
All of this is very enticing for UK-listed companies because it removes some headaches of regulatory filings distribution, especially for any that have overseas obligations, and it gives the companies a single partner with whom to provide announcements and filings for global distribution. A company registered with and providing filings through the RNS will not have to deal with Bloomberg, Thomson Reuters, the SEC, and others independently but can simply rely on RNS. Thus the high percentage of UK announcements and filings processed by the service.
Of course, UK companies are not required to use RNS. It’s a service that one must pay for, and it is not a government body but a private one. Moreover, even LSE-listed companies do not have to use the LSE RNS, though that is very often the case because of the service’s high profile, massive distribution network, and many perks. Smaller companies may not participate due to costs, but, nonetheless, most of the largest and most influential companies in the UK will use RNS.
Common Filings and Their Importance
The most commonly analysed documents published via RNS are financial statements in the form of quarterly and annual reports plus any stock issues. Director or C-suite appointments and changes, company holdings, reportable transactions, and other material announcements are examples of other important announcements made through the service. For funds, the most commonly published document on RNS is likely Net Asset Value information, which is published daily. PR announcements and updates for companies of any type occur frequently, too.
Financial statements are the essential ingredients for any fundamental analysis, and even traders might use them sometimes to identify longer-term swing trade opportunity. Critical data like revenue, profit, debt and equity structure, and more are presented in these statements, and important calculations like debt-to-equity ratio, profit margin, and COGS are derivable if not simply published in the statements.
If you are new to investing, peruse the posts in our Investing for Newbies section of this blog to learn more about how financial statements are useful in valuing companies and stocks – and how to identify value investment opportunities from the statements.
Director changes, reportable stock transactions, and new stock issues are always very important for understanding the fundamental position of a company. Management changes are generally regulatory requirements because C-suite personnel have significant impact on an organisation. Reportable stock transactions may be buybacks or material changes in holdings, while the issuance of new stock will inject cash but may alter the current voting power of shares or the share class structure.
As mentioned earlier, there is also considerable investment opportunity and risk management possibilities that arise from monitoring filings. This is especially true for smaller companies that do not capture headlines or perhaps have no media coverage at all. Since LSE’s AIM segment is small companies, access to RNS filings can be very useful for investors who prefer small-caps but do not have the time or resources to track everything that goes on in that market. Traditional news-monitoring may fall short here due to lack of coverage, but those companies are still required to file certain documents or may publish announcements. The media can overlook those filings and announcements, but CityFALCON will catch them.
How CityFALCON Works with RNS
350,000 annual filings and announcements means an average of 1000 documents are published every day through the RNS, both on its web platform and via the API. Of course, no one will be able to read and digest all that information. Traditionally, this was not a problem: investors would only focus on the stocks they owned and seek out filings and announcements only for those companies. However, this has two drawbacks: first, one must search for the filings, and second, it is much harder to discover trends and investment opportunities because most published documents will be ignored (due to the infeasibility of humans to read and digest 1000 filings per day, every day of the year).
Our Filings product will solve both of these problems. Using watchlists, a user can track certain companies and any time a filing comes through our system for that company, it will be added to the company’s filing page. Moreover, after filings start to accumulate, it will be very easy to find all relevant filings directly from the company page.
Any filings that are related to the watchlist, trends, or other features we offer will be supplied to the user upon publication, either through the normal pull-request features on our website and mobile apps or through push notifications for email and mobile. This solves both issues, because now users no longer need to seek out filings for trends or market movements. They will automatically be supplied to the user, who can support their trading or investment strategy with officially-sanctioned documentation.
When a filing hits our system, we extract and store the type of filing, a basic description, and some other information like the date of publication. We also place the filing into its respective category, grouping it with similar filings and giving users at least two dimensions to analyse: different filings by the same company and the same type of filing by other companies. Then this data is made easily searchable and conveniently viewable in a summary table for users, adding value to the traditional search-and-peruse method available before.
Of course, API users can continue to make their own queries based on their preferred companies, filing type, or several other criteria. This integration means CityFALCON is one step closer to being the only platform anyone needs for due diligence, whether they are using our web platform or API.
The Future of Filings Integration at CityFALCON
We are proud to start offering end-of-day (EoD) filings from the London Stock Exchange Regulatory News Service, but this only covers LSE- or AIM-listed companies or UK based companies (if not on the LSE or AIM). We are rapidly working towards integrating filings from the Securities and Exchange Commission (SEC) in the United States as well as government-mandated company registries in the UK (Companies House), India, Canada, Australia, and others.
In the future, we may also start to use Optical Character Recognition (OCR) to provide the full text of the filing in a more machine-readable format and forward that information to API users. Of course, that also allows us to extract vital information from the filing instead of only the metadata provided by the supplier. Naturally, this data will be available through our API as well as our web platform, where it will likely come in the form of visualisations.
To start using our Filings service now
You can start using our EoD Filings service via API for $100/month for non-commercial, non-business use or $250/month for businesses. Since the feature is fresh, contact us for details and to sign up.
Web and mobile access will be available in early 2020 as we finish developing the user interfaces and designs. If you’re already registered, you’ll notice right away as new features come online and present themselves on the platform – and you’ll receive an update email from us in case you miss the new features. If you aren’t registered yet, sign up for CityFALCON and join the Financial Content Revolution.