Schedule 13D

A Schedule 13D is a form that must be filed with the Securities and Exchange Commission (SEC) when an individual or group acquires more than 5% of a company’s equity securities. This filing provides important information to the public, especially other shareholders and potential investors, about who holds significant stakes in a company and their intentions regarding that investment. This document, also known as the “beneficial ownership report,” is crucial for ensuring transparency in the financial markets.

What Is Schedule 13D?

Definition

Schedule 13D is a regulatory filing mandated by the US Securities and Exchange Commission (SEC). The form is required under Section 13(d) of the Securities Exchange Act of 1934. When a person or group surpasses the 5% ownership threshold in a publicly traded company, they must submit this form within ten days of the transaction.

Purpose

Schedule 13D is intended to inform the investing public about the acquisition. Key details in the filing include:

The form also discloses any transactions in the company’s shares in the 60 days prior to the acquisition.

How to File Schedule 13D

Filing Process

Filing a Schedule 13D can be broken down into several steps:

  1. Acquire Necessary Information: Gather details about the acquisition, including the number of shares purchased, the percentage of ownership, and the identities of the buyers.

  2. Complete the Form: The Schedule 13D form must be completed accurately, including all requested information. Failure to provide complete and accurate data can result in legal consequences.

  3. Submit the Form Electronically: Filings must be submitted electronically via the SEC’s EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system. The filer must first register with EDGAR if they have not done so previously.

Sections of Schedule 13D

  1. Cover Page: Includes basic information such as the name and contact details of the reporting person, the date of the event, and the number of shares acquired.
  2. Item 1. Security and Issuer: Provides details about the company in which the shares were purchased.
  3. Item 2. Identity and Background: Includes information on the reporting persons, such as names, addresses, occupations, and any criminal convictions.
  4. Item 3. Source and Amount of Funds or Other Consideration: Specifies where the funds for purchasing the securities came from.
  5. Item 4. Purpose of Transaction: Describes the purpose of the acquisition and any plans regarding the company’s future.
  6. Item 5. Interest in Securities of the Issuer: Contains detailed information on the number and percentage of shares owned.
  7. Item 6. Contracts, Arrangements, Understandings, or Relationships with Respect to Securities of the Issuer: Lists any agreements with other parties relating to the securities.
  8. Item 7. Material to Be Filed as Exhibits: Includes any schedules, agreements, and other exhibits.

Requirements for Filing

Filing Deadline

The primary requirement for filing a Schedule 13D is the 10-day deadline following the acquisition that puts the party’s ownership above the 5% threshold. Missing this deadline can result in penalties and legal complications.

Amendments

If there are any material changes in the information filed (such as additional purchases or changes in ownership percentage), the filer must promptly amend the Schedule 13D. The amendment process follows the same steps as the original filing but uses the form labeled “Schedule 13D/A.”

Exemptions

There are certain exemptions to filing Schedule 13D. For instance, if the acquisition is purely passive with no intent to influence or control the issuer, the filer can submit Schedule 13G, which has fewer disclosure requirements and is simpler.

Example of Schedule 13D Filing

Hypothetical Scenario

Let’s consider a fictional company, Tech Innovators Inc. Suppose that on March 1, 2023, an investment fund called Growth Capital Partners, LP, acquired 6% of Tech Innovators Inc.’s common stock. The fund used $50 million sourced from its existing cash reserves to make this purchase.

Completed Schedule 13D

Below is an illustrative example of what parts of Growth Capital Partners, LP’s Schedule 13D might look like:

Schedule 13D

  1. Cover Page

    Name of Reporting Person: Growth [Capital](../c/capital.html) Partners, LP
Address of [Principal](../p/principal.html) [Business](../b/business.html) Office: 123 [Finance](../f/finance.html) Avenue, New York, NY 10001
Telephone Number: (212) 555-1234
Date of Event: March 1, 2023
[CUSIP Number](../c/cusip_number.html): [Unique Identifier for Tech Innovators Inc.]
  2. Item 1. Security and Issuer 
    Title of [Security](../s/security.html): [Common Stock](../c/common_stock.html)
Name of [Issuer](../i/issuer.html): Tech Innovators Inc.
Address of [Issuer](../i/issuer.html)'s [Principal](../p/principal.html) Executive Offices: 456 Technology Road, San Francisco, CA 94105
  3. Item 2. Identity and Background 
    a) Name: Growth [Capital](../c/capital.html) Partners, LP
b) State of Formation: Delaware
c) [Principal](../p/principal.html) Office: 123 [Finance](../f/finance.html) Avenue, New York, NY 10001
d) Occupation: [Private Investment Fund](../p/private_investment_fund.html)
e) [Principal](../p/principal.html) [Business](../b/business.html): [Investment Management](../i/investment_management.html)
f) No criminal convictions
g) Manager of the [Fund](../f/fund.html): John Doe, CEO
  4. Item 3. Source and Amount of Funds or Other Consideration 
    The $50 million used to purchase the [shares](../s/shares.html) of Tech Innovators Inc. was derived from Growth [Capital](../c/capital.html) Partners, LP’s general cash reserves.
  5. Item 4. Purpose of Transaction 
    The purpose of the [acquisition](../a/acquisition.html) is investment. Growth [Capital](../c/capital.html) Partners, LP has no current plans or proposals that would result in any material change to the [business](../b/business.html) or corporate structure of Tech Innovators Inc.
  6. Item 5. Interest in Securities of the Issuer 
    a) [Shares](../s/shares.html) purchased: 1,000,000 [shares](../s/shares.html)
b) Percentage of class: 6%
c) Number of [shares](../s/shares.html) beneficially owned: 1,000,000
d) Sole power to dispose: 1,000,000 [shares](../s/shares.html)
  7. Item 6. Contracts, Arrangements, Understandings, or Relationships with Respect to Securities of the Issuer 
    None.
  8. Item 7. Material to Be Filed as Exhibits 
    Exhibit A: Purchase agreement dated March 1, 2023.

Real-World Example

A real-world example of a Schedule 13D filing can be found through the SEC’s EDGAR database. For instance, when billionaire investor Carl Icahn acquired a significant stake in Apple Inc. in 2013, he filed a Schedule 13D detailing his purchase and intentions. You can view such filings on SEC EDGAR.

Conclusion

Understanding and properly filing Schedule 13D is crucial for compliance with SEC regulations. It ensures transparency, allows investors to make informed decisions, and helps maintain the integrity of the financial markets. Knowing how to file and the requirements for amendments can prevent legal issues and contribute to a more transparent and efficient investment landscape.