1. INVESTMENT BANKING LESSON 6 FINDING THE DATA: DOCUMENTS AND REPORTS Investment Banking (2 nd edition) Beijing Language and Culture University Press, 2013 Investment Banking for Dummies, Matthew Krantz, Robert R. Johnson,Wiley & Sons, 2014

2. WHAT’S IN THE NEWS! WHAT’S THERE TO LEARN? JACK MA’S REPLACEMENT FORBES CHINA 30 ENTREPRENEURS UNDER THE AGE OF 30

3. LESSON 7 REVIEW 1. WHAT ARE THE 4 MAIN TYPES OF FINANCING? 2. WHAT DOES SENIORITY AND MATURITY MEAN? 3. WHAT IS INVOLVED IN BUILDING AN LBO MODEL? WHAT ARE THE THINGS YOU MUST CONSIDER? 4. WHAT TYPES OF FINANCING WILL YOU USE? WHAT FACTORS WILL YOU CONSIDER IN CHOOSING THE RIGHT KIND OF FINANCING? 5. DID YOU CREATE AN LBO MODEL? 6. WHAT CAN GO RIGHT? WHAT CAN GO WRONG?

4. 1. INTRODUCTION 2. THE SEC WEBSITE - EDGAR 3. GETTING FINANCIAL DATA INTO A FORMAT TO BE ANALYZED 4. KEEPING UP WITH THE NEWS AND THE IMPORTANCE OF NON-FINANCIAL INFORMATION

5. Investment Bankers business is to know other companies business. So they need access to lots of information. But once they get the info. They need to put it the data in a format that can be analyzed. But it’s not just the numbers they need. They also need non- financial data, which can be just as important. We will just briefly cover this chapter.

6. The SEC (Securities Exchange Commission) which regulates IB operates a database called EDGAR (Electronic Data Gathering Analysis and Retrieval). This information is free to the public.

7. A. WHAT TYPES OF INFORMATION CAN YOU FIND? 1. KEY FINANCIAL FILINGS – Annual report and quarterly statements 2. REPORTS SHOWING WHO OWNS LARGE PIECES OF A COMPANY - $100 million or more or more than 5% of a company must file a report (13F). 3. NEWS EVENTS AND CORPORATE DETAILS – How much executives get paid and important news must be filed (8K)

8. B. KEY DOCUMENTS THAT REGULATORS REQUIRE 1. ANNUAL REPORT (10K) – Shows the companies profits and value of what co. owes (debt) and owns. 2. QUARTERLY REPORT (10Q) – Like an annual report with financial statements but filed every 3 months. 3. PROXY STATEMENT (DEF 14A) – Shows items for shareholder approval and what top management gets paid.

9. B. KEY DOCUMENTS (cont) 4. PROSPECTUS (S-1) – Remember this for an IPO. This is information investors need to know before investing. 5. INTERIM REPORT OF EVENTS (8-k) – Inside information about a company that the world doesn’t know about must be shared with the world.

10. C. HOW TO USE EDGAR – If you’re an IB who is helping a healthcare co. sell to a larger co. Your client does not want to do an IPO because there are many other co. doing the same thing. An IPO takes too much time and the co. wants to gain market share NOW. As an IB you need to start researching co. that want to make a deal. You want to have a list of possible bidders for your clients co.

11. For many years, EDGAR has been THE source for investors and investment bankers. Now, with 2013 approval from the SEC, IB can now use social media like Twitter and Facebook to get and give out info. to investors. This will keep IB “on their toes” as they must also be tech saavy! What could be a problem with this? With social media anybody can post info – good & faulty!? Let’s look at a real world example:

12. REAL WORLD EXAMPLE: In 2000, a 23 year-old college student created a false press release about a tech co. called EMULEX. In just 16 minutes the stock price fell sharply and destroyed $2.2 million in market value. Lesson learned: Be careful how you use social media!!!

13. EDGAR has a lot of great information but getting it into a format that can be used for analysis is critical. There are 3 data service companies that provide “ready-made” research and that do most of the analysis. BLOOMBERG: Here you can find data about a specific company, but also the stock and bond data of the company’s competitors all with a few keystrokes!

14. S & P CAPITAL: Standard and Poor’s is a household name among investors and is best ranking the credit worthiness of companies and governments. This is a web-based information system that provides in-depth analysis of anything you want to know about a company. I showed you the example of FACEBOOK in a previous lesson. THOMPSON REUTERS: Is the oldest of the 3 data service companies with a long history in Europe. Since there are fees to use these services they are are not designed for consumer use.

15. Numbers and financial statements are what IB bankers are known for but they also have to pay attention to non-financial data, too. What are the recent developments of a company and who are the key players? What’s in the news? What’s happening with economy? There are 3 things to monitor or check closely. A. MONITORING THE MACRO ECONOMY – IB need to keep a close eye on how the economy is performing. So, they keep an eye on the economic indicators. The following are the key indicators that are most watched to see the health of the economy.

16. 1. Consumer Confidence: This data is based on surveys of 1000’s of households to reveal how consumers are feeling about the economy. 2. Unemployment Reports: This number from the US Department of Labor is critical in finding out if companies are hiring. If not consumers are not spending! 3. Retail Sales: Talk about spending! The US economy is consumer driven. Investors closely watch this number created by the US Department of Commerce. 4. Inflation: Rising prices can have a huge influence on the economy, companies and investors. This is measured by the Consumer Price Index (CPI)