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Hey Aspiring Analysts: Cancel That Vacation?

Listing Requirements

Of the 12,052 stocks currently available for purchase on the TD Ameritrade Institutional platform, 6,173 are listed on one of the national exchanges. This includes the 3,297 names listed on the NASDAQ, the 2,654 stocks that populate the NYSE (big board), and the 222 are out in left field on the AMEX. The remaining 5,879 are traded using local exchanges in what are called the over the counter (OTC) market or the bulletin boards (Pink Sheets). These "unlisted" stocks are usually very small companies with very low trading volume and shares prices that are usually measured in the pennies rather than dollar amounts. For this reason, they are sometimes also referred to as "penny" stocks. It is somewhat akin to school kids playing baseball outside of a professional stadium. Sometimes it is great. Other times, not so great.

The listing requirements of each of the three national exchanges varies, but has a few common themes. There is a listing fee that is similar to an initiation fee at a fancy club. Then, there is an annual fee akin to membership dues. The exchanges also require that at least 1 million shares be issued by the company and that the share price maintain some sort of minimal value - typically at least $1. If the stock cannot maintain these minimums, the company has a few options: (1) it can perform a stock split (or reverse split) to better manage the stock price and keep it closer to an "optimal" trading price, (2) it can go on a "road show" to generate enough demand for the stock to boost the price above the hurdle price, or (3) it can accept the delisting notice and willingly play with the school kids outside the big stadium. Here are some of the key metrics required of the three national exchanges.

ExchangeListingsInitial SharesMinimum PriceApplication FeeListing FeeAnnual Fee

Reporting Requirements

Running a privately held company can be expensive. Running a publicly traded company allows access to a larger pool of capital through anonymous investors - who may help accelerate growth. But, the growth potential may be offset to some degree by the expense of the reporting requirements associated with playing in a bigger stadium. One of the primary benefits to investors is that the national exchanges all have stringent listing and reporting requirements. These include periodic reports - such as quarterly (Form 10-Q) or annual releases (Form 10-K) - or less predictable notices about material developments within the company. One of the key aspects to the annual filings is that they are required to be audited for accuracy by an independent outside accounting firm. Furthermore, officers of the stock company and the accounting firm must sign that these 10-Ks are a "fair and accurate" statement describing the business operations. This gives investors some degree of confidence that the report contents are reliable enough to be used for critical sell-hold-buy decisions relating to the company stock.

The reporting schedule required for listing states that companies must submit their Form 10-Q within 40-45 days after the end of each fiscal quarter. The requirements also state that the audited - and signed Form 10-K must be filed within 60-90 days after the end of each fiscal year. The longer allowable lags are alloted to the smallest listed firms (who presumably employ limited resources to produce said reports) while the larger firms are allowed shorter lags before releasing their information. These reports (both Forms 10-Q and 10-K) include descriptive information regarding the business operations as well as quantitative histories of financial results. These financials are displayed in three main tables: (1) the balance sheet, (2) the income statement, and (3) the statement of cash flows. Each of these tables tells a story about the changes that have occured within the firm operations and the external markets for their goods and services. All Forms 10-Q and 10-K are uploaded to the SEC database using the publicly available EDGAR database.

Reporting Patterns - Weekdays

These reports are typically uploaded by the company investor relations department - or the Chief Investment Officer at a very small company. Once they are uploaded, they can be viewed and downloaded by any investor with an internet connection. These uploads are often referred to as "earnings releases" and they are closely watched and thoroughly scrutinized by every budding (and professional) stock analyst. Most are uploaded in the middle of the week, while many are released on Thursdays, Mondays, and Tuesdays. When financial results for the quarter are better than expected, a company may have an incentive to post the report to EDGAR on Monday to allow the stock room to run with the good news. On the other hand, corporate officers who are about to deliver less than stellar quarterly numbers, may want to slip the report into the database on a Friday afternoon before a beach weekend - hoping no big investor will notice. Here is the pattern for NASDAQ earnings releases between July 1 and September 30, 2021.

Reporting Patterns - Calendar Days

As stated above, there is some leeway in company reporting dates to fulfil their listing requirements on an exchange. In addition, larger companies may have an incentive to move the date of their fiscal year end to a date before December 31 of each calendar year. Products companies who generate a large portion of their sales revenue around the turn of the calendar year (think Apple and Macy's) are a good example of their accounting choice. This makes it a little harder to determine when exactly earnings "season" begins and ends for most firms. The chart below shows that most companies whose stock is listed on the NASDAQ exchange have submitted - or expect to submit - their  next earnings report between July 19 and August 13. This might be one of the reasons that it is much easier to find a senior Wall Street analyst on their boat rather than at their desk in the second half of August!








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