For those who have never read a 10K in their life, the SEC requires all companies who publish non-GAAP metrics to also (1) publish GAAP metrics more prominently than non-GAAP metrics and (2) publish a reconciliation on how they arrived at their non-GAAP measure from the published GAAP metrics.<p>Here’s a writeup of the SEC rules on non-GAAP metrics in earnings reports: <a href="https://www.protiviti.com/US-en/insights/sec-issues-guidance-non-gaap-measures" rel="nofollow">https://www.protiviti.com/US-en/insights/sec-issues-guidance...</a><p>There’s a difference between what Enron did (ie. fraud) vs presenting alternative ways to measure business performance. If an investor thinks community adjusted EBITDA is a good metric to judge a business and then loses all their money, that’s on the investor. Even our most recent poster child of non-GAAP shenanigans publishes the GAAP numbers ahead of the non-GAAP measures (see eg. Page 111 which is the first mention of “adjusted EBITDA” presented below GAAP metrics vs page 21 on which the GAAP income statement is first published): <a href="https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm" rel="nofollow">https://www.sec.gov/Archives/edgar/data/1533523/000119312519...</a>
Worth pointing out that this is largely a US only problem. Rest of the world uses IFRS which clamped down on that non-GAAP adjustment stuff pretty hard because well it’s not exactly a subtle gambit
The Bezzle, which I think has been on a HN post before:
<a href="https://klementoninvesting.substack.com/p/the-bezzle" rel="nofollow">https://klementoninvesting.substack.com/p/the-bezzle</a>
What a horrible article most investors understand Chinese companies lie about their number all the time. The non Chinese example is WeWork which was completely rejected by the market and failed to go public?