Schedule 13D
Quick Facts
- Trigger: Acquiring more than 5% of a public company's voting stock
- Filing deadline: 5 business days after crossing 5% threshold (updated 2024)
- Amendment required: Within 2 business days of material changes (including 1%+ ownership changes)
- Alternative: Schedule 13G for passive investors
A Schedule 13D is an SEC filing required when any person or group acquires more than 5% of a public company's voting stock with the intent to influence or change control of the company. It's often called a "beneficial ownership report" and is one of the first public signals that an activist investor or potential acquirer is building a significant position.
In Plain English
When someone starts buying a lot of a company's stock—more than 5%—they have to tell the world about it. Schedule 13D is that announcement. It reveals who's buying, how much they own, where they got the money, and most importantly, why they're buying. For companies and investors, a 13D filing is like a warning shot: someone with serious money has arrived, and they probably want something.
How It Works
- Investor crosses 5% ownership of voting securities
- Clock starts: 5 business days to file Schedule 13D
- Filing submitted to SEC via EDGAR system
- Public disclosure: Anyone can read the filing
- Ongoing updates: Amendments required for material changes
What Schedule 13D Discloses
Required Information
- Identity: Name, address, and background of the filer
- Source of funds: How the purchase was financed
- Purpose: Why the shares were acquired (this is the key section)
- Holdings: Number and percentage of shares owned
- Contracts or arrangements: Any agreements with other shareholders
- Plans: Intentions regarding the company (mergers, board changes, etc.)
Item 4: Purpose of Transaction
This is the section everyone reads first. Common disclosures include:
- "Investment purposes only" (often followed by activist campaigns)
- Intent to seek board representation
- Plans to push for strategic alternatives (code for "sell the company")
- Opposition to announced transactions
- Proposals for operational changes
2024 Rule Changes
The SEC significantly updated Schedule 13D requirements in 2024:
| Requirement | Old Rule | New Rule (2024) |
|---|---|---|
| Initial filing deadline | 10 calendar days | 5 business days |
| Amendment deadline | "Promptly" | 2 business days |
| Filing cutoff time | 5:30 PM ET | 10:00 PM ET |
The shorter deadlines limit the "window" during which investors can secretly accumulate shares after crossing 5%.
Schedule 13D vs. Schedule 13G
Schedule 13G is a simpler, short-form alternative for passive investors:
| Schedule 13D | Schedule 13G |
|---|---|
| For activist investors | For passive investors |
| Detailed disclosure | Simplified disclosure |
| 5 business day deadline | 45 days after quarter-end (or 5 days for passive investors crossing 5%) |
| Requires purpose statement | No detailed purpose required |
Who can file 13G:
- Qualified Institutional Investors (QIIs) like mutual funds
- Passive investors (under 20% ownership, no control intent)
- Exempt investors (acquired before registration)
Trap: If a 13G filer develops activist intent, they must convert to 13D within 10 days.
Famous Schedule 13D Filings
Carl Icahn's Apple Position (2013)
Icahn filed a 13D disclosing a large stake in Apple and publicly called for a $150 billion share buyback. Apple eventually increased its buyback program significantly.
Elliott Management vs. AT&T (2019)
Elliott's 13D disclosed a $3.2 billion stake and a detailed letter demanding strategic changes, including divesting DirecTV. AT&T eventually spun off WarnerMedia.
Elon Musk's Twitter Stake (2022)
Musk's late 13D filing (he missed the deadline) revealed a 9.2% stake in Twitter. The delayed filing became a point of legal contention, as Musk was able to buy shares at lower prices while the market was unaware of his accumulation.
Strategic Implications
For Target Companies
A 13D filing often means:
- Activist campaign is coming
- Stock price will likely increase (short-term)
- Board should prepare for engagement
- Review and potentially implement defenses
For Other Investors
A 13D filing signals:
- Smart money sees value or opportunity
- Potential catalyst for stock movement
- Possible M&A or strategic changes ahead
- Worth reading the "Purpose" section carefully
Wolf Pack Tactics
Modern activists sometimes coordinate informally with other investors—a "wolf pack"—where each member stays below 5% to avoid filing requirements. The SEC has scrutinized these arrangements, and the 2024 rules clarified that coordinated groups must aggregate their holdings.
Penalties for Late Filing
- SEC enforcement: Fines and injunctions
- Private litigation: Shareholders may sue for damages
- Reputational harm: Signals sloppy compliance
- Profit disgorgement: May have to return gains from delayed disclosure
Practical Takeaways
For founders: Monitor 13D filings religiously. When an activist files, you typically have weeks—not months—before they make demands public. Use the time to understand their thesis, engage proactively, and prepare your board.
For investors: Read 13D filings for companies you own. They're free on SEC.gov and often reveal investment theses from sophisticated investors. Pay special attention to Item 4 (Purpose) and any attached letters.
Related Reading
- Hostile Takeover — Often preceded by 13D filings
- Proxy Fight — What often follows activist 13D filings
- Tender Offer — May be announced in a 13D filing
- Standstill Agreement — How companies settle with 13D filers