2 negative consequences if quarterly earnings reports vanish

Doing away with quarterly reporting by companies could come with a few negative consequences, Citi warned in a new note on Thursday.

The news: SEC Chair Paul Atkins introduced a proposal on Tuesday, which would give public companies the option to file a new Form 10-S every six months instead of the traditional Form 10-Q every quarter.

“One unintended consequence could be for a greater shorter term influence of macro data and inputs,” Citi strategist Scott Chronert wrote. “That is, against a backdrop of less frequent fundamental disclosures, markets may be more inclined to trade stocks relative to perceived sensitivity to economic and monetary inputs. In some cases this could create shorter term inefficiencies.”

Chronert added, “We would expect that the sell side will need an adjustment period. Here, there is risk of inefficiency where analyst models are updated less frequently. The same issue will affect us from an equity strategy perspective. Simply, full year and next twelve month estimates are at risk of getting stale, if not inaccurate, in a two vs four reporting cycle circumstance.”

Read more: How to start investing: A 6-step guide

Chatter: The SEC’s recent proposal for public companies to opt out of quarterly earnings filings is a positive change, according to eToro (ETOR) CEO Yoni Assia.

The “Make IPOs Great Again” agenda is a step in the right direction, Assia told Yahoo Finance at the Milken Institute Global Conference (video above). The proposal enables “more innovation and unlocking some historical burdens to make sure that people can innovate at faster speeds in the US markets.”

While the incentive could potentially entice more private firms to go public, Assia views quarterly reporting as a fundamental duty rather than a burden. He traces this philosophy back to the launch of eToro, when his father — a former public company CEO — gave him a piece of advice.

“He told me, ‘Now you have shareholders. It’s their right to understand everything happening in the company every three months,’” Assia recalled. Because of that philosophy, Assia plans to keep delivering shareholder reports, balance sheets, and cash flow updates every 90 days, regardless of any newfound regulatory flexibility.

The bottom line: Investors are inundated with information, which has made them more like traders than investors, often to their detriment. Maybe unilaterally imposing fewer numbers on investors will be a good thing.

Either way, we’ll find out soon!

Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.