======Material Fact======
A Material Fact is a piece of information that, if made public, would likely influence the price of a company's [[securities]] or be considered important by a reasonable investor when making a decision to buy, sell, or hold those securities. Think of it as a "game-changing" piece of news. Companies are legally required to disclose these facts to the public in a timely and comprehensive manner to ensure all investors are playing on a level field. This principle of fair disclosure is the bedrock of transparent capital markets and the primary defense against illegal [[insider trading]], where individuals with private knowledge of a material fact trade on it before it's public. For a value investor, understanding and monitoring material facts is crucial for assessing a company's true health and prospects, rather than just getting swept up by market noise.
===== Why Material Facts Matter to a Value Investor =====
For practitioners of [[value investing]], the goal is to calculate a company's [[intrinsic value]] and buy its stock for less than that amount. This calculation isn't guesswork; it's built on a deep understanding of the business's fundamentals, its competitive position, and its future earnings power. Material facts are the essential, verified inputs for this analysis.
When a company promptly discloses a major new contract or a setback in a clinical trial, it provides all investors—from a hedge fund manager in New York to a retiree in Brussels—with the same core information. A value investor doesn't necessarily react instantly to this news. Instead, they use it to update their investment thesis. Does this new fact fundamentally alter the company's long-term value? Does it confirm a positive trend or signal a new risk? By focusing on the //substance// of material facts, you can look past the market's short-term emotional reactions and make more rational, long-term decisions.
===== What Counts as a Material Fact? =====
Not every piece of company news qualifies as material. The key is its potential impact. A company changing its logo is rarely a material fact, but a company losing its biggest customer almost certainly is.
==== The "Reasonable Investor" Test ====
Courts and regulators use a benchmark called the "reasonable investor" test. They ask: would a hypothetical, sensible investor consider this piece of information important in their decision-making process? It’s a commonsense standard. A change to the office coffee supplier fails the test. The sudden resignation of a visionary CEO, a merger with a major competitor, or a groundbreaking patent approval would all pass with flying colors. The information must be specific and significant enough to alter the company's risk profile or earning potential.
==== Common Examples ====
While not an exhaustive list, here are some classic examples of information that is almost always considered material:
  * Significant financial results, such as quarterly or annual earnings that dramatically exceed or miss expectations.
  * News of pending or proposed [[mergers and acquisitions]] (M&A), or the sale of a significant subsidiary.
  * Major changes in senior management or the board of directors.
  * The launch of a major new product line or a significant technological breakthrough.
  * Gaining or losing a major customer, supplier, or contract.
  * Significant legal or regulatory events, such as a major lawsuit or an investigation by a government agency.
  * A change in the company's [[dividend]] policy, like an unexpected cut or increase.
  * Developments regarding a company's debt, such as a credit rating downgrade or an event of default.
===== Where to Find Material Facts =====
Fortunately, you don't need a secret source to find this information. Public companies are required to make it... well, public!
==== Official Filings ====
The most reliable sources are the official regulatory filings.
  * **In the United States:** The [[SEC]] (U.S. Securities and Exchange Commission) requires companies to file all material information on its [[EDGAR]] database. The most important filing for real-time material news is the [[Form 8-K]], which is used specifically to report unscheduled material events. Broader financial details and management discussions are found in the annual [[Form 10-K]] and quarterly [[Form 10-Q]].
  * **In Europe:** The [[ESMA]] (European Securities and Markets Authority) sets the overarching rules, which are then implemented by national regulators (like Germany's BaFin or France's AMF). Companies must publish "inside information" through official channels, which are often found in the investor relations section of their websites and distributed through regulated news wires.
==== Other Sources ====
While official filings are the gold standard, companies also disseminate material information through:
  * Company-issued press releases.
  * The "Investor Relations" section of their corporate website.
  * Public conference calls and webcasts following earnings releases.
===== The Capipedia Bottom Line =====
Keeping an eye on material facts isn't about trying to time the market or trade on the news of the day. For a value investor, it's about being a diligent business owner. A consistent flow of positive material facts—new patents, expanding margins, smart acquisitions—can confirm that your investment thesis is on track. Conversely, a string of negative facts—lost contracts, regulatory troubles, executive turnover—is a clear signal to dig deeper and question whether the company's intrinsic value is deteriorating. By focusing on the facts that truly matter, you can build a more robust and informed investment strategy.