PowerLinx Inc (PWNX)

[FrankNG]

Schedule 13D

This SEC document is filed by holders of 5% or more of any class of a company's shares outstanding. When a person or entity first reaches the 5% ownership level, a 13D must be filed within 10 days. Importantly, the intention of the investment must also be stated on the form. Subsequent trades must be promptly stated on an amended 13D.

The 13D was first mandated in 1968, when Congress passed changes to the 1934 Act designed to require disclosure by parties affecting the change of ownership of companies by acquiring shares.

Schedule 13Ds used to be some of the most monitored SEC documents around. In the midst of the mergermania of the 1980s, a 13D was often the first indication that a company was being taken over. Raiding firms would discreetly acquire 4.9% of their targets' shares, before pouncing across the 5% ownership barrier that required a 13D to be filed. Cover blown, the large investor declared its intention to take over the company whether management went along or not. A fight for the remaining shares often ensued, and professional arbitrageurs bet heavily on the outcome.

During this heady time, there was quite a crew in the SEC's public room vying to get a glimpse of the 13Ds as the SEC released them. There were also stories of enterprising individuals in the public room stealing the 13Ds of high profile filers and selling the information.

Nowadays 13Ds are mandatory to file on EDGAR, so this information reaches investors very efficiently. This has the further effect of making it extremely difficult to trade on any important 13D filings before half of Wall Street. But in this day and age, rumours of a takover are more likely to be confirmed on one of the 24-hour business tv and radio stations anyway.

Although the importance of 13Ds has waned somewhat in recent years, they remain a decent source of information on the trading activities of many larger investors.

http://www.insidertrader.com/faq/13d.asp