Incorporated: 1995 as Cybernet Data Systems, Inc.
NAIC: 541990 All Other Professional, Scientific, and Technical Services; 518111 Internet Service Providers
SIC: 7389 Business Services Nec; 7375 Information Retrieval Services
EDGAR Online, Inc., provides business and financial information derived from EDGAR, the U.S. Securities and Exchange Commission's (SEC's) electronic filing system. The company subscribes to a Level 1 feed of real-time SEC regulatory filings, which are sent to its primary technology center in Rockville, Maryland, home to unaltered SEC filings kept by the company since 1993. EDGAR Online extracts information from the raw filings and processes it before delivering the information in multiple formats to its customers. The company serves financial institutions, accounting firms, law firms, corporations, and individual investors, who pay a subscription fee for searching, filtering, and downloading tools. EDGAR Online is not affiliated with the SEC. The company uses the EDGAR name through a nonexclusive, royalty-free licensing agreement with the SEC.
Origins of EDGAR
By the mid-1980s, the SEC was in crisis. By its own reckoning, the federal regulatory agency was failing to do its job, lagging far behind in its review of corporate data, the primary way it enforced rules designed to make financial markets fair for all. The SEC watched over nearly 50,000 public companies, requiring each publicly traded concern to file reports that provided detailed information on a comprehensive range of subjects. The filings, consisting of roughly 400 different form types such as 10Ks, S-1s, 10Qs, and 13Ds, enabled the SEC to scrutinize the operations of each public company, but the investigative power of the agency had been rendered impotent. By 1985, the SEC's corporate finance division was reviewing only 5 percent of corporate interim reports. Only 22 percent of the annual 10K reports submitted to the SEC were evaluated. Less than 1 percent of 13D reports, which revealed significant stock purchases, were read by SEC investigators. The problem was paper, mountains of paper, the five million pages of information the agency received each year. The SEC, as the August 1993 issue of Public Relations Journal observed, was "drowning in paper," choking on the 70,000 corporate filings it received each year. Something needed to be done to correct the problem, and between 1984 and 1985, the SEC took action, launching an experimental project that aimed to unclog a congested system.
For an organization awash in paper, EDGAR was the proposed solution. The SEC, with the help of accounting giant Arthur Andersen, created the Electronic Data Gathering and Retrieval System, or EDGAR, an ambitious attempt to build an asynchronous transfer mode system that would enable companies to file their reports electronically. The SEC hoped EDGAR would liberate the regulatory body from the suffocating weight of paper, but the conversion to electronic filing had the twin, and arguably more profound, effect of making public documents actually available to the public. Although SEC filings were considered part of the public domain, only those who visited the SEC's public reference room in Washington, D.C., could peruse the information filed by public companies and mutual funds, an arrangement that essentially limited access to securities analysts and lawyers and accountants employed by the nation's largest investment firms. Electronic filings promised to democratize the information submitted to the SEC, a phenomenon first seen in 1988, when the SEC opened the first EDGAR viewing rooms to the public in New York City, Chicago, and Washington, D.C. The establishment of viewing rooms represented a symbolic first step, but three locations in a country of 250 million people did not bring financial information to the masses. It was the revolutionary distributive power of the Internet that unleashed the potential of electronic filings. The marriage of EDGAR and the Internet made the SEC's documents truly public for the first time, creating a business opportunity that EDGAR Online and others in the field seized.
The first nod to the business potential of a repository of financial reports occurred one year after the SEC opened the first public EDGAR viewing rooms. In 1989, the SEC granted exclusive sales rights to distributing EDGAR files to the Lexis/Nexis division of Mead Data Central. The agreement, which extended through January 1997, gave Lexis/Nexis the right to distribute EDGAR files, both in real-time and with a 24-hour delay, to companies that operated as value-added resellers (VARs), the wholesalers of EDGAR files. The VARs paid an annual subscription fee of $208,000 to Lexis/Nexis for instantaneous access to the files, gaining the raw text and figures public companies submitted to the SEC the moment they filed their statements electronically. The "value" added by the VARs essentially involved making the forms easier to read and to manage. The forms were submitted in SGML, or Standard Generalized Markup Language, format, which presented the reader with a cluttered, often difficult to decipher, document that printed as one uninterrupted scroll. VARs, through various software programs, removed SGML tags, cryptic headers and footers, and added page breaks. They aligned text and tables and gave the reader a variety of fonts to choose from, transforming an unwieldy spew of letters, code, and numbers into a formatted document that could be read, navigated, and shared among readers.
Years of testing followed the launch of the EDGAR project, as the SEC grappled with the enormous challenge of leaping into the digital age. By the early 1990s, nearly a decade after the project was started, the regulatory agency was ready to begin accepting electronic filings. In mid-1992, the SEC began accepting voluntary filings from 1,200 companies. In April 1993, EDGAR officially opened when the SEC began requiring companies to file electronically, initiating a phased deployment of EDGAR that required groups of 1,500 firms each fiscal quarter to submit their reports into the EDGAR databases.
As queues of public companies formed, passing through the SEC's electronic turnstile in groups of 1,500 every four months, the dynamics of EDGAR as a business changed dramatically. Initially, selling access to EDGAR documents was the domain of companies who charged top-dollar prices for search services. Large investment banks, for instance, spent upwards of $500,000 per year for the files. In 1994, the situation began to change as the relationship between EDGAR and the Internet began to develop. Researchers at New York University, financed by a grant from the National Science Foundation, began posting EDGAR files on the World Wide Web on a 24-hour delay for free. The purpose of the project was to demonstrate the feasibility of delivering EDGAR files through the Internet and to spark public interest in the documents, a promotional exercise that worked. During a 19-month period, the public was offered free access to 4.7 million documents and responded by downloading an average of 16,700 files per day. When funding for the project ended in 1995, public pressure mounted to keep EDGAR files available online for free, prompting SEC chairman Arthur Levitt, Jr., to make an announcement that ensured access to EDGAR databases would be widespread. In a speech in Nashville, Tennessee, Levitt said the SEC in September 1995 would begin offering EDGAR filings on its own web site on a 24-hour delay. Levitt's speech, as excerpted in the October 1995 issue of Searcher, marked an historic moment in the evolution of the pilot project begun 11 years earlier. "Taxpayers and shareholders," Levitt informed his audience, "have already paid to compile this information--they should not have to pay again. And a library that charges people by the page, or by the minute, is no longer a library. With a personal computer and a modem, you'll be able to have the entire SEC Public Reference Room in your own living room. You'll be able to research information and download documents. Nothing could be better for investors, and nothing could be better for the market, which thrives on accurate information."
Formation of EDGAR Online: 1995
At this juncture in the development of EDGAR, EDGAR Online made its debut. The company, incorporated in November 1995 as Cybernet Data Systems, Inc., was founded by husband and wife Marc Strausberg and Susan Strausberg, who earned undergraduate degrees at Muhlenberg College and Sarah Lawrence College, respectively. Roughly six months after the couple started their company, the conversion to electronic filings was complete. In May 1996, the last group of 1,500 public companies submitted their required reports to EDGAR, making it mandatory from that point forward for all public companies and mutual funds to file electronically. A dozen years after the project was begun EDGAR was complete, and its existence was generating considerable interest. The SEC's EDGAR web site was averaging 80,000 hits per day, reflecting a substantial demand for financial information that the Strausbergs intended to meet. Susan Strausberg assumed day-to-day control over the young company, taking the title of chief executive officer as she positioned Cybernet Data to compete as one of a handful of competitors that mined the EDGAR databases for data to sell to customers. The company launched its EDGAR Online web site in January 1996 and began courting individual and corporate customers, charging monthly subscription fees ranging between $9.95 and $99.95 for its services as a VAR.
From its headquarters in Norwalk, Connecticut, Cybernet Data marketed technologies to enhance data stored in EDGAR databases. The company generated $169,000 in revenue during its first full year in business, $1 million in 1997, and $2 million in 1998. Its services included providing real-time access to SEC filings and a variety of features such as "EDGAR Online People," which allowed subscribers to search for executives mentioned in EDGAR filings, "EDGAR Online Personal," which allowed users to store their queries and receive e-mail alerts when new EDGAR filings matched their criteria, and "EDGAR Online IPO Express," which allowed subscribers to monitor initial public offerings (IPOs) of stock as they were filed. In 1999, after changing the name of their company to EDGAR Online, Inc., at the beginning of the year, the Strausbergs decided to take their company public and raised $34 million in the stock offering. They claimed to have more than 100,000 registered users and 6,000 paying subscribers at the time of the IPO, as well as more than 70 corporate customers that included American Express, Merrill Lynch, and Intel.
EDGAR Online in the 21st Century
As EDGAR Online entered the 21st century, it sought to increase its customer base, particularly the number of corporate clients it served. Toward this end, the company reached an agreement in 2000 to acquire Financial Insight Systems, a private company that sold EDGAR-derived data and information systems to large financial institutions. The deal, valued at $28 million, doubled EDGAR Online's revenues, adding Financial Insight Systems' corporate clientele. For the individual investors the company served, "IPO Profiler" was added to the company's EDGAR Online IPO Express service in 2000, enabling individuals who developed business plans to compare their plans to those developed by companies that had filed for IPOs.
EDGAR Online's financial performance during its first decade reflected a company struggling to find firm footing. Revenues reached $16.1 million in 2002 and demonstrated little vitality afterward, dropping to $12.8 million in 2004 before inching up to $16.2 million in 2006. More worrisome was the company's lack of profits, a condition that had plagued the Strausbergs since their start in 1995. After posting an $11 million loss in 2002, EDGAR Online generated its first quarterly profit in 2003, recording $23,000 in net income during the second quarter, but the year ended with a net loss of $2.1 million, the same result registered in 2004. The string of annual losses ran to 11 consecutive years after EDGAR Online posted a $5.5 million loss in 2005 and a nearly $6 million slide in 2006.
The challenge of turning EDGAR Online into a profitable enterprise was passed to a new chief executive officer in 2007, the first change in leadership in the company's history. Susan Strausberg relinquished her duties as chief executive officer midway through the year, handing the reins of command to Philip D. Moyer, who joined EDGAR Online in April 2007 as president in anticipation of leading the company. Moyer, who had no previous experience in the content industry, spent much of his career at Microsoft, where he began as a systems engineer, eventually rising to the position of general manager of the company's professional services business. In the years ahead, Moyer's guidance would prove crucial to EDGAR Online's survival, as the company aimed for the common, but often difficult to achieve, goals of increasing revenues and generating consistent profits.
Principal Subsidiaries
FreeEDGAR.com, Inc.; Financial Insight Systems, Inc.
Principal Competitors
Thomson Financial; Bloomberg L.P.; 10-K Wizard Technology, LLC.
Further Reading
Adams, Greg D., "Unlocking EDGAR's Treasures," Financial Executive, September 2001, p. 41.
Barney, Lee, "Will the Real EDGAR Please Stand Up?" Wall Street & Technology, December 1995, p. 29.
Castelluccio, Michael, "The SEC Opens the Door," Management Accounting, July 1996, p. 58.
Dwyer, Joe, "For On-Line Investment Information, Ask EDGAR," St. Louis Business Journal, January 20, 1997, p. 6B.
"EDGAR Online Launches University Edition," Information Today, May 1999, p. 29.
Evans, Lynn, "EDGAR and IPOs: The Challenge of Going Public," Public Relation Quarterly, Winter 1996, p. 38.
"Excalibur RetrievalWare to Be Incorporated As Component in Federal Filings EDGAR Direct Service," Information Today, February 1997, p. 13.
Garrity, Brian, "EDGAR IPO Falls Flat with Skittish Internet Investors," Investment Dealers' Digest, May 31, 1999.
Healy, Peter, "EDGAR Online Names New CEO, Chairman," Stamford Advocate, August 2, 2007.
Horton, James L., "Electronic Filing Portends Market Volatility," Public Relations Journal, August 1993, p. 27.
"Internet EDGAR Snatched from Death!" Searcher, October 1995, p. 18.
Jayson, Susan, "EDGAR Update: No More Fear of Filing," Management Accounting, March 1994, p. 24.
Khasru, B. Z., "EDGAR Trims Losses," Fairfield County Business Journal, February 14, 2005, p. 35.
Lee, Richard, "Norwalk, Conn., Financial Data Provider Reports First-Ever Profit," Stamford Advocate, August 1, 2003.
"LexisNexis Offers SEC Data from EDGAR Online," Information Today, January 2003, p. 20.
"New Electronic Filing Tools from Xyvision," Seybold Report on Publishing Systems, July 4, 1997, p. 52.
O'Neil, James P., "At Long Last, Meet EDGAR!" Financial Executive, January-February 1993, p. 44.
Sinnett, William M., "XBRL: A 'Revolution' in Corporate Reporting?" Financial Executive, January-February 2006, p. 40.
"This EDGAR Is a Real Know-It-All," Business Week, May 24, 1999, p. 110E10.
"XBRL for EDGAR Now, but FDIC Will Wait and See," Securities Industry News, October 11, 2004.
— Jeffrey L. Covell
