Definition
Schedule 13D is a filing with the Securities and Exchange Commission (SEC) required for investors who acquire beneficial ownership of 5% or more of any class of publicly-traded securities in a company. It discloses the investor’s identity, their stake, their intentions, and any additional pertinent information. The purpose of this filing is to inform the public and regulators about significant changes in a company’s ownership, which may indicate an impending takeover, change in corporate direction, or other factors that may impact the company’s future.
Phonetic
Schedule 13D: /ˈʃedʒuːl θɝˈtiːn diː/What It Is: /wət ɪt ɪz/How to File: /haʊ tuː faɪl/Requirements: /rɪˈkwaɪɚmənts/Example: /ɪɡˈzæmpl/
Key Takeaways
- What It Is: Schedule 13D is a form required by the United States Securities and Exchange Commission (SEC) for any person or group acquiring beneficial ownership of more than 5% of any class of publicly traded securities in a US-based company. It is meant to provide transparency and information about the intentions of the investor, including plans for influencing the management of the company.
- How to File: Schedule 13D filing is done electronically through the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. It must be filed within 10 days after the acquisition of more than 5% ownership. The form requires information about the acquirer’s identity, the purpose of the transaction, the source of the funds used in the acquisition, and any contracts, arrangements or understandings with respect to the securities of the issuer.
- Requirements & Example: Filers of Schedule 13D are required to provide an accurate and complete disclosure of their intentions and plans related to the issuer company. This includes any plans to change the company’s management, engage in mergers or acquisitions, or dispose of a significant portion of the company’s assets. An example would be an activist investor or a group of investors acquiring a substantial stake in a company with the intention of advocating for specific corporate actions, such as spinning off a division of the company or replacing certain members of the board of directors.
Importance
Schedule 13D is an important business/finance term as it refers to a report that must be filed with the U.S. Securities and Exchange Commission (SEC) by any individual or group that acquires beneficial ownership of more than 5% of a publicly traded company’s voting class shares. The filing of Schedule 13D serves as a crucial disclosure tool for investors and the general market, as it enhances transparency around the intentions and plans of significant shareholders, which could potentially impact the company’s future strategy, control, or management. By understanding the filing process, requirements, and examples, interested parties can better evaluate the influence and intentions of large stakeholders, promoting a well-informed and fair investment landscape.
Explanation
The purpose of Schedule 13D is to promote transparency and provide pertinent information to both regulators and market participants. Essentially, Schedule 13D is a form filed with the Securities and Exchange Commission (SEC) by an individual or entity that acquires beneficial ownership of at least 5% or more of a company’s equity securities. By requiring significant shareholders to disclose their ownership stakes, Schedule 13D helps ensure that adequate information is available for investors to make informed decisions when trading in the market. Additionally, this disclosure can prove crucial for companies and their management teams, enabling them to better understand the intentions of large shareholders and take appropriate action, such as implementing anti-takeover measures or engaging in constructive dialogue.
To file a Schedule 13D, the beneficial owner must submit the form to the SEC within 10 days of crossing the 5% ownership threshold. The form requires detailed information such as the names and backgrounds of the reporting persons, the amount and class of the securities held, the date they acquired the securities, and the purpose behind the acquisition. Furthermore, disclosure of any plans or proposals the investor harbors in relation to the company’s operations or management must also be provided. For instance, an activist investor looking to effect change within a company’s board or influence its strategies would use Schedule 13D to communicate these intentions.
To illustrate, in 2015, activist investor Carl Icahn filed a Schedule 13D for his position in Freeport-McMoRan Inc., disclosing an 8.46% ownership stake and outlining his intent to engage in discussions with the company’s management pertaining to capital expenditures and corporate strategies.
Examples
Schedule 13D is a document that investors holding 5% or more of a company’s securities must file with the U.S. Securities and Exchange Commission (SEC). It provides essential information about the investor’s holdings and their intentions. Here are three real-world examples involving Schedule 13D filings:
1. Icahn Enterprises and Herbalife Ltd. (2013)Activist investor Carl Icahn and his company Icahn Enterprises filed a Schedule 13D for acquiring a significant stake in Herbalife Ltd. Carl Icahn increased his holdings to over 15% of the company’s outstanding shares, which triggered the Schedule 13D filing requirement. The document outlined his intentions to engage with the management to increase shareholder value. As a result of his involvement, Herbalife’s stock price increased significantly.
2. Sardar Biglari and Cracker Barrel (2011)In 2011, Sardar Biglari, the CEO of Biglari Holdings Inc., filed a Schedule 13D after his company acquired a 9.3% stake in Cracker Barrel Old Country Store Inc. The Schedule 13D filing outlined his intentions to push for changes in Cracker Barrel’s management and board of directors. Biglari’s involvement led to a proxy fight, but he was eventually unable to win any board seats.
3. Third Point LLC and Yahoo! Inc. (2011)Hedge fund Third Point LLC, managed by activist investor Daniel Loeb, filed a Schedule 13D in 2011 for acquiring a 5% stake in Yahoo! Inc. The filing disclosed that Third Point planned to engage in discussions with Yahoo! Management and the board of directors to improve shareholder value. Ultimately, Loeb’s involvement led to changes in the company’s board composition and the appointment of Marissa Mayer as CEO.
In each of these examples, the Schedule 13D filing allowed the public and other investors to understand the intentions of a significant shareholder and anticipate potential shifts in company management or strategy.
Frequently Asked Questions(FAQ)
What is Schedule 13D?
Schedule 13D, also known as the “Beneficial Ownership Report,” is a form filed with the U.S. Securities and Exchange Commission (SEC) which provides detailed information about the acquisition or ownership of more than 5% of a company’s publicly traded securities. It is required under Section 13(d) of the Securities Exchange Act of 1934 and aims to provide transparency to investors and protect them from secret takeovers or other hidden activities.
Who needs to file Schedule 13D?
Any individual, institution, or group that accumulates beneficial ownership of more than 5% of a company’s publicly traded securities (such as stocks or bonds) must file a Schedule 13D. This form must be submitted within 10 days of acquisition to the SEC, and the company and any securities exchanges where the securities are traded must also be notified.
What are the requirements for filing Schedule 13D?
Schedule 13D requires the filer to provide various information, including:1. The name and address of the beneficial owner and their background information.2. The purpose of the transaction and any plans or proposals related to the acquired securities.3. The source of funds used to acquire the securities.4. The number of shares owned, both directly and indirectly, and percentage of total outstanding shares.5. Any contracts, arrangements, or understandings related to the securities.6. The filing party’s relationship with the issuer.7. A certification that all information provided is accurate and complete.
How do I file a Schedule 13D?
Schedule 13D can be filed electronically through the SEC’s online filing system, known as the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system. Filers need to obtain an EDGAR access code and a Central Index Key (CIK) to file. The form and instructions are available on the SEC website.
What is the difference between Schedule 13D and Schedule 13G?
While both Schedule 13D and Schedule 13G are filed by beneficial owners of more than 5% of a company’s securities, Schedule 13G is a shorter and less detailed form intended for passive investors who have no plans to influence the management or control of the company. Schedule 13D is for active investors who may seek to influence the company or engage in transactions that could impact its future.
Can you provide an example of a Schedule 13D filing?
An example of a Schedule 13D filing would be a case where a hedge fund acquires more than 5% of a publicly traded company’s stock. In this situation, the hedge fund would be required to file a Schedule 13D form, disclosing its identity, ownership percentage, the source of funds, and any plans or intentions regarding the acquired shares, such as proposing changes in the company’s management or advocating a merger with another company.
Related Finance Terms
- SEC Form 13D
- Beneficial Ownership Report
- 13D Filing Process
- 13D Reporting Threshold
- Amending Schedule 13D
