What Is Schedule 13D?
Let me explain Schedule 13D to you directly: it's a key SEC filing you need to submit within 10 days if you acquire more than 5% of a company's voting shares. This form, which we also call a beneficial ownership report, ensures transparency by revealing major ownership positions. It keeps the markets and other shareholders aware of possible shifts in control, like mergers or hostile takeovers. By grasping what Schedule 13D requires and why it exists, you as an investor can handle changes in public company ownership more effectively.
Key Takeaways
Here's what you need to know upfront: Schedule 13D is the form you file with the SEC when acquiring more than 5% of a company's voting shares. You file it for transparency, to notify the public about big ownership stakes and any potential control changes. Submit it within 10 days of hitting that 5% mark, and amend it if your stake shifts by 1% or more. The required details include who the buyer is, where the funds came from, the reason for the purchase, and any related agreements.
How Schedule 13D Impacts Shareholders
You might buy a large chunk of shares in a public company for various reasons, such as being an activist investor pushing for a hostile takeover, an institutional investor spotting an undervalued stock, or a dissident shareholder planning a proxy contest to replace management.
When you or a group acquires more than 5% of a voting class in publicly traded securities, the SEC demands disclosure via Schedule 13D. Sometimes, a simpler Schedule 13G might apply instead.
After filing with the SEC, the company and its trading exchanges get notified about the new beneficial owner. Schedule 13D tells everyone who these new shareholders are and their motives for buying in big. It flags possible control changes, like a takeover or proxy fight, so current shareholders can decide accordingly.
The filing duty falls on you as the new beneficial owner, since the company might not even know who's behind the buy. You have to file within 10 days after the purchase.
Key Requirements of Schedule 13D Filing
In Schedule 13D, you as the beneficial owner must detail specific items. Start with Item 1, covering the type of securities and the issuer's name and address. Then Item 2 requires your identity and background, including business type, citizenship, and any criminal or civil issues in the last five years.
Item 3 explains the source and amount of funds, noting if any were borrowed. Item 4 is crucial as it reveals the transaction's purpose, alerting others to potential changes like mergers, reorganizations, or liquidations.
In Item 5, list the shares purchased and the percentage of outstanding shares they represent. Item 6 describes any contracts, arrangements, or relationships regarding the securities, such as voting rights, fees, joint ventures, or options. Finally, Item 7 includes exhibits like copies of relevant agreements.
When to Amend Schedule 13D: Material Changes Explained
If anything material changes in your Schedule 13D info, you must amend it within two days. That includes any 1% increase or decrease in your ownership percentage.
You can find most Schedule 13D filings in the SEC's EDGAR database, listed as 'SC 13D–General statement of acquisition of beneficial ownership.' Amendments show up as SC 13D/A.
Real-World Example: IAC's Acquisition of MGM Shares With Schedule 13D
Take the case of media conglomerate IAC/InterActiveCorp (IAC) buying a big stake in MGM Resorts International (MGM). They filed their 13D on August 20, 2020, with the SEC.
In that filing, IAC is listed as the reporting person. They bought 59,033,902 shares, which equaled 12% ownership based on MGM's outstanding shares at the time. (Note: The original document includes images of the filing's title page and details, showing the structured format of such reports.)
The Bottom Line
Schedule 13D is an essential SEC form you file when acquiring over 5% of a company's voting shares, offering transparency on potential control shifts. You must submit it within 10 days and update for material changes.
Knowing Schedule 13D's details helps you, the company, and the public make sound financial choices. The IAC-MGM example shows how this disclosure clarifies ownership stakes.
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