John Rotonti explains how accounting footnotes hide material information that changes valuations. Companies bury adjustments in fine print, and New Constructs built technology to find them at scale.
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Talk to us about why it's important to make sure your data's right. Why do the adjustments matter?
You know, there's just so much material information that affects the numbers that companies can bury in the footnotes of the financial statements. And, you know, they're releasing it. So the public, it's in the corporate filings. A lot of times it's just on page like 87 in footnote 13 or something like that. A lot of times those adjustments can make a material difference on the metrics that drive intrinsic value growth.
Do you know anybody else that regularly and with scale goes through the footnotes in the way that New Constructs does?
I know some individual investors that go through footnotes and read every page, but at scale, I don't know of anyone that does it at scale like New Constructs. Not saying it doesn't exist, but I'm not aware of it yet.
Yeah, there are no other services, no other research firms. Some individuals are willing to roll up their sleeves and do that.
Individuals, yes, but they can't do it across 2,000 names. I'm not aware at this point in time of another service. That does it and provides the traceability to the auditability.
That's the only way, you know, that we really do it. As you know, as a buyer or user of a lot of different platforms, the traceability of data back to the footnotes does not exist anywhere else.
I haven't seen it. I haven't trialed every platform out there, but I haven't seen it.
Fair enough. I shouldn't say it doesn't exist because I don't know that, but we've never seen it. And you think that if you had it, you'd show it. We want our clients to know how much work we're doing for them. That's why we show these details.
Yeah. And clearly you've also built a technology platform that allows you to do that at scale, which is impressive.
That's what the business was for, is to have that technology. Because you need technology. There's just no way that any one person can do this kind of work and continue to do it. Or even a team, you know, in terms of managing, making sure people are getting data right. That takes systems. I think so. There's not enough people in the world who want to read 10-Ks cover to cover, and certainly even fewer that want to do it and share it with everybody else. That's typically their key to their advantage.
