====== 8-K ======
An 8-K is a mandatory report filed with the U.S. [[Securities and Exchange Commission]] (SEC) by a [[publicly traded company]] to announce major, unscheduled events that are important to [[shareholders]] and the financial markets. Think of it as the official "breaking news" alert for a company. Unlike the scheduled quarterly ([[10-Q]]) and annual ([[10-K]]) reports that provide a comprehensive look back, the 8-K is filed in near real-time—typically within four business days of a [[material event]]. This makes it an incredibly powerful tool for investors. For practitioners of [[value investing]], an 8-K is a goldmine. It provides a raw, unfiltered look at a company’s evolving story, long before the narrative is polished into a glossy annual report. It's where you find the clues—both good and bad—that can signal a significant change in a company's intrinsic value, often before the rest of the market has had time to fully digest the news.
===== Why Should a Value Investor Care? =====
While the market often reacts frantically to the headlines of an 8-K, a savvy value investor knows the real treasure is buried in the details. These filings are not press releases; they are legal documents that must present the facts. This is your chance to be a detective and get ahead of the crowd.
An 8-K can be the first sign of trouble, such as a major customer loss or the departure of a key executive. This might scare off momentum traders, but for a value investor, it could be the start of a market overreaction that creates a buying opportunity. Conversely, an 8-K might detail a strategic acquisition or a new patent that the market undervalues or misunderstands. By reading the primary document, you can form your own judgment about an event's impact on the company's long-term earning power, rather than relying on the simplified (and often sensationalized) interpretations from financial media.
In short, 8-Ks help you answer a critical question: **Is the company better or worse off today than it was last week?**
===== What's Inside an 8-K? =====
The [[SEC]] outlines specific events that trigger an 8-K filing. While the full list is long, some of the most crucial ones for an investor to watch for include:
==== Key Triggers for an 8-K Filing ====
  * **Changes in Leadership and Governance:** The resignation or appointment of a CEO, CFO, or other top-level directors. A sudden, unexplained departure of a CFO is a classic red flag.
  * **Business and Operations:** Entering or terminating a significant contract, or the loss of a major customer.
  * **Financial Information:** Announcing preliminary earnings (often before the 10-Q), taking on significant new debt, or events that could lead to bankruptcy or receivership.
  * **Asset Transactions:** The acquisition or sale of a significant amount of assets. This tells you if the company is expanding, consolidating, or perhaps selling the "crown jewels" to survive.
  * **Changes in Accountants:** If a company fires its auditor or the auditor resigns, the 8-K must explain why. This can be a major warning sign of accounting disagreements or financial irregularities.
  * **Securities and Trading:** Announcing delisting from a stock exchange or failure to meet listing requirements.
===== A Treasure Trove of Clues =====
Reading an 8-K is a skill. It's not just about knowing an event happened, but about understanding its implications.
==== How to Read an 8-K Like a Pro ====
=== Look Beyond the Headline ===
The filing will have a clear title, like "Item 5.02 Departure of Directors or Certain Officers." Don't stop there. Read the full description. A CEO's departure could be a planned, orderly retirement announced a year in advance, or it could be an abrupt "resignation to pursue other opportunities" effective immediately. The former is business as usual; the latter demands deep skepticism and further investigation.
=== Read the Exhibits ===
This is where the real magic happens. The body of the 8-K provides a summary, but the exhibits contain the source documents. For example:
  * //Exhibit 10.1// might be the actual text of a new debt agreement. Here you can find the interest rates, covenants, and penalties.
  * //Exhibit 99.1// is typically the company's press release about the event, which provides management's spin.
  * //Exhibit 99.2// could be a slide presentation for investors.
Comparing the dry, legal language of the agreement with the optimistic spin of the press release is a classic value investing technique for uncovering the truth.
=== Connect the Dots ===
An 8-K should never be read in a vacuum. How does this new information fit with what the company said in its last 10-K or shareholder letter? If a company known for its fiscal discipline suddenly takes on a mountain of high-interest debt, you need to ask why. Also, cross-reference the 8-K with other filings. For example, if a CEO suddenly resigns (8-K), are other insiders also selling their shares (check [[Form 4]] filings)? This paints a much more complete picture than any single document can.