Blame the pandemic, or inflation, or supply chain disruptions — or maybe all three. Amid that trifecta of economic woes, corporate executives are starting to think more about two ugly potential outcomes: bankruptcy and a recession.
The trend is apparent in keyword searches of public company regulatory filings. Our parent company, Thinknum Alternative Data, gathers this information from the U.S. Securities and Exchange Commission. Using that data, we can count the number of times certain words appear in all corporate filings.
We took a look at several keywords: “recession,” “bankruptcy,” “default” and “insolvency.” Obviously, given the deadlines for regular public company filings, such as 10-Ks and 10-Qs, there is a cyclical nature to the appearances of these terms. But all have also been trending upward over the past year or two.
While it’s true that a lot of these words appear in boilerplate in many financial filings, increases in the total suggest that the terms are also showing up elsewhere, or at the very least are getting incorporated into boilerplate more often.
Mentions of the term “default” for instance were at 5,200 on March 1, 2018; 5,400 on March 1, 2019; at 8,480 on March 1, 2021; and at 7,970 on March 1, 2022. In other words, mentions of “default” in SEC filings were up 63% in 2021 and 53% in 2022 compared with 2018. That sounds pretty significant.
Mentions of “recession” also trended much higher over the past two years compared with 2019 and 2019.
On March 1, 2018, the total was just 506. By May 1, 2020, recession fears had really started to jump, the number of mentions had nearly tripled to 1,380. And it stayed elevated after that. On March 1, 2022, the total slipped to a somewhat more modest 820.
A similar pattern has played out when it comes to the term “insolvency.” On March 1, 2018, there were 3,170 mentions of the term in SEC filings. On March 1, 2021, there were 6,170. On March 1, 2022, the total was 5,190.
Same situation for “bankruptcy.” On March 1, 2018, the total number of mentions of the word in SEC filings was 4,470. On March 1, 2021 that total shot up 67% to 7,450. The number continued to stay elevated. On March 1, 2022, the total was 6,660.
