We originally published this report in February 1, 2019 to FactSet. We are now republishing it on our blog since it was referenced and quoted in a securities lawsuit against Symantec, which has since changed its name to NortonLifeLock Inc.

In our previous piece “Birds of a Feather: How to Tell a Gray Swan from a Black Swan,” we discussed how difficult it may be to spot when a company disingenuously blames an impairment of goodwill on the effects of the coronavirus, as opposed to righfuly blaming it on preexisting conditions at the company. We then specifically mentioned Under Armour’s (UA) Latin American reporting unit as one to watch because PwC highlighted the goodwill impairment testing of that specific reporting unit as requiring particularly “challenging, subjective, or complex judgements” in its Critical Audit Matters (CAMs).

Kraft Heinz (KHC) announced a massive $15.4 billion impairment in February, 2019 to its goodwill and intangible assets. This impairment was essentially an admission by management major components of the combined company were worth billions less than recorded on the balance sheet. It was also an admission that 3G Capital (3G) and Warren Buffett’s much touted merger of Kraft and Heinz was a failure. In the aftermath, Warren Buffett admitted that he had overpaid for his 27% of combined company.

KHC’s impairment crushed share prices and has led to lawsuits, rapid executive bloodletting, an SEC investigation, and other deleterious events. We wrote about the KHC bus-crash last September and argued that KHC’s core problem was a loss of investor trust and a poor management ethos.

Joseph Burke PhD. and Joseph Yarbrough PhD, have produced two white papers for Watchdog Research that show that companies with higher Gray Swan Event Factors have a lower return on investment. This is because accounting-related risks are not properly priced into the market, potentially giving investors who use this valuable tool an edge over the broader market.

We originally wrote this post on Luckin Coffee over a month ago on April 27th, 2020. Since then the story has significantly developed. Since we wrote this piece, Luckin has changed its story and admitted that its CEO was involved in the massive fraud and delayed releasing its annual report. The WSJ has also written a devastating piece that confirmed our suspicions that many of the expenses were fabricated and that Charles Lu, the chairman, sat at the center of a complicated web of related party transactions that began before the IPO. Luckin has also been delisted from the Nasdaq, hopefully for good.

In this post we look at the large accelerated filers who have not filed their 10-Qs yet due to the coronavirus. These companies are outliers, with only 27 active filers delaying quarterly reports out of a population of nearly 600. We have already expressed concerns about the SEC allowing companies to be less transparent during such a critical time, and these concerns were not allayed by our research for this post. We will look at some broader trends and highlight a few egregious examples.

To protect the elderly and immunocompromised, federal and state officials have locked down society to flatten the rate of infections. An unfortunate byproduct of these shut-downs has been the destruction of large swaths of the economy and skyrocketing unemployment. To relieve some of the financial pressure these lockdowns have put on businesses, federal and state officials have tried different measures intended to aid businesses. For its part, the SEC has permitted companies affected by the coronavirus to delay their annual and quarterly statements that would normally be due from March 31st-July 1st.