An Inconsistency in SEC Disclosure Requirements? The Case of the 'Insignificant' Private Target

The underpricing of private targets

“…As noted in Rodrigues and Stegemoller (2007), acquirers are not legally required to disclose target financial data, or even the deal value, for targets below a certain relative size threshold unless the transaction can otherwise be classified as material or is not made in the course of normal business. Thus, of the deals that do not require disclosure, acquirers may report only the most beneficial transactions.…”

Moving from Private to Public Ownership: Selling Out to Public Firms versus Initial Public Offerings

“…The second way we acquire private target data is through the transaction being a "material" transaction to the acquirer. Depending on the transaction year and the method of payment, acquisitions that are 10% to 20% or more of the acquirer's total assets must file target financial statements, since these transactions meet the level of materiality as discussed in Rodrigues and Stegemoller (2007). Owing to these restrictions, we limit our sample of sellouts to those deals valued at $50 million or higher.…”

The market for shareholder voting rights around mergers and acquisitions: Evidence from institutional daily trading and voting

“…13 In contrast, retail investors usually do not subscribe to 7 Rodrigues and Stegemoller (2007) show that acquisitions by publicly traded corporations of privately-held targets classified as "insignificant" by the SEC appreciably affect acquiring firms' market prices. However, because the SEC defines these transactions as insignificant, information like target financial statements remain undisclosed to the market.…”