Plain English: How to Rewrite an SEC Disclosure – Geoff Translates

SEC reports are wordy. Here’s an example. The before paragraph is part of Birner’s 10-K. The after paragraph is my translation.

Before

The Company may see increased costs or lower revenue arising from health care reform. 

In March 2010, Congress passed, and the President signed, the Patient Protection and Affordable Care Act. This act may have a significant impact on health care providers, insurers and others associated with the health care industry, including the Company. The Company is currently evaluating the impact of this comprehensive act on its business. Federal and state governments may propose other health care initiatives and revisions to the health care and health insurance systems. It is uncertain what legislative programs, if any will be adopted in the future, or what action Congress or state legislatures may take regarding other health care reform proposals or legislation. In addition, changes in the health care industry, such as the growth of managed care organizations and provider networks, may result in lower payments for the services of the Company’s managed practices.

After

New Health Care Laws Can Hurt Us

In March 2010: the United States passed the Patient Protection and Affordable Care Act. This big, new law affects health care companies like Birner. We are evaluating its impact. We do not know what new health care laws governments will write. And we do not know how our industry will react. When we know, we will tell the SEC. Read our SEC reports to stay up to date.

Aletheia, a big stock fund allied with Ron Burkle, sold 71,610 shares of Barnes & Noble (BKS) after August 16th. 71,610 shares is 0.12% of the company. Aletheia can still vote these shares at the September 28th board election between Len Riggio and Ron Burkle. Shares are voted by whoever owned them August 16th.

In the last 2 months, Aletheia bought and sold stock on the same day 21 times. 15 of those days (71% of the time) Aletheia bought high and sold low. 6 of those days (29% of the time) Aletheia bought low and sold high.  Is Aletheia that bad at trading?

Aletheia owns 15% of Barnes & Noble. The public owns 26%.

Outsiders want to sell Barnes & Noble. Nothing is stopping them. Insiders want to buy Barnes & Noble. The poison pill is stopping them. If Aletheia wanted to sell, who would they sell to? Burkle? Riggio?

No. The public has to want to buy Barnes & Noble. It doesn’t. It’s the insiders versus the outsiders. The insiders are bullish. The outsiders are bearish. For Aletheia, Burkle, and Riggio, selling out would be a lot like taking Barnes & Noble public. The public has almost no net long ownership of BKS. The big guys are long BKS. The little guys are short BKS.

Buying and selling on the same day is normal for big fish in small ponds. I wouldn’t make much of it. Just keep track of Aletheia’s net sales over the long run.