Probing questions from the SEC

CDAY, MSTR, FTCH SEC correspondence



SEC commentary on corporate disclosure ranges from polite to biting. Now you can explore the best of it with Bedrock AI.


One of the roles of the Securities Exchange Commission (SEC) is to review the quality of corporate disclosure. Fortunately for us, their commentary is made public and it is now available through Bedrock AI.

When the SEC has questions about a filing, they send the company a comment letter, generally requesting that the company explain their disclosure decisions and/or amend their filing. Bedrock AI’s dashboard now facilitates exploration and analysis of SEC commentary. We’ve included interesting comments sent to CDAY, MSTR and FTCH below.

SEC comment letters provide incredible insights, but can be hard to find.

  • The majority of comment letters are routine communication, along the lines of “we received your filing and it was not reviewed”.

  • Comment letters are released to the public a minimum of 20 days from the date of communication to the issuers, and the delay is often longer. When they are released to the public via EDGAR, they’re listed based on the original private communication date, not the release date, so they can get lost in the archives.

Bedrock AI now facilitates exploration of SEC comment letters. Our tool allows users to view by public release date, separates important letters from routine communications and displays impactful requests/comments from the SEC in ordered lists. Never miss a release again. Contact us at info@bedrock-ai.com to demo our institutional dashboard and access real-time analysis of over 7,000 tickers.

We wrote about trends in SEC commentary in our newsletter episode The SEC in 2021 - A Year in Review. CERIDIAN HCM HOLDING INC (CDAY) | $13.5B

Released: 2022-02-08 | First filed: 2021-12-16

CDAY’s presentation of cash flows is unusual and objectionable(?) according to the SEC.

SEC: (1) Your presentation of cash flows excluding customer funds is not consistent with your GAAP Statements of Cash Flows and creates an alternative basis of accounting and presentation. Please remove this presentation...

MICROSTRATEGY INC (MSTR) | $5.4B

Released: 2022-01-20 | First filed: 2021-10-07 / 2021-12-03

The SEC took issue with the add back of bitcoin impairment in MSTR’s non-GAAP earnings.

SEC: (5) Please tell us and expand your discussion to explain why you believe that adjusting for bitcoin impairment charges provides useful information to investors in light of your strategy and business purpose for purchasing and holding bitcoin.
SEC: (1) We note your response to prior comment 5 and we object to your adjustment for bitcoin impairment charges in your non-GAAP measures. Please revise to remove this adjustment in future filings.

For more on this letter, check out Nicola M White's article here.

FARFETCH LTD (FTCH) | $10.9B

Released: 2022-01-11 | First filed: 2021-09-30 / 2021-11-24

Farfetch fully impaired intangibles from their Topline acquisition, but argud\e that goodwill was not impaired as they still have access to the acquired customers. We’ll be watching Farfetch’s goodwill balance going forward!

SEC: (3) You disclose the primary reason for the acquisition of Toplife was for the Group to leverage the JD App Level 1 Access Button and you recorded goodwill of approximately $41 million in the acquisition....Please tell us whether you impaired any of the related goodwill, and if not, the reason for not doing so.

Response:

FTCH: The acquisition allowed Farfetch to leverage the JD App Level 1 Access Button and transition consumers using the Toplife JD Store into direct consumers on the Farfetch platform.
FTCH: We initially recognized the Level 1 Access Button as an intangible asset and, in November 2020, fully impaired this asset due to the closure of our direct consumer-facing channels on JD.com. The goodwill recognized at acquisition was largely derived from the exposure of JD.com customers to the Farfetch platform and, accordingly, was recorded as part of our Marketplace cash-generating unit. Following the closure on JD.com, these consumers were able to continue their relationship with Farfetch directly through the platform. The total goodwill associated with our Marketplace cash-generating unit was assessed for impairment in the fourth quarter of 2020, with no impairment identified.”

Bedrock AI now facilitates exploration of SEC comment letters. Our tool allows users to view by public release date, separates important letters from routine communications and displays impactful requests/comments from the SEC in ordered lists. Never miss a release again. Contact us at info@bedrock-ai.com to demo our institutional dashboard and access real-time analysis of over 7,000 tickers.

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