Episode Details

Over the last few decades, disclosures have become bulkier, while becoming less informative. In this session, I look at reasons for this development, starting with a one-size-fits-all disclosure philosophy, extending into the definition of materiality (backward looking and earning focused). Using initial public offerings as illustration, I argue for triggered disclosures, where a company's business model and valuation story trigger related disclosures. A company that builds it valuation story around an immense Total Addressable Market (TAM) has the obligation to not only provide the basis for its estimate, but also expected market shares and continued reporting on how this market evolves over time, in subsequent disclosures. A subscription-based company should be required to report on churn rates, details of customer acquisition costs and cohort tables, describing how subscriber behavior changes, with subscriber aging. Triggered disclosures will allow us to have our cake and have it too, slimming disclosures, while making them informative.
Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/IPODisclosure.pdf
Blog Post: https://aswathdamodaran.blogspot.com/2021/10/triggered-disclosures-escaping.html
Paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3936750

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