13-D Proposed Rule Changes by SEC are Either a “Misguided Assault on Activism” or “Will Improve Transparency,” You Get to Choose!
|
|
Taken together, The Business Roundtable is in favor and believes the proposals “will improve transparency and are appropriate in light of the many changes in technology” since the reporting requirements were put in place 50 years ago.
Wachtell Lipton, whose partners have long called for these changes and whose imprint is on the SEC’s proposals, wrote that the proposed rule changes are an “important step forward for market transparency and addresses many of the deficiencies in the current rules that inappropriately permit investors to accumulate significant stakes in publicly traded securities in secrecy and profit from information asymmetries at the expense of other market participants.”
Most academics don’t like the proposals. Alan Schwartz (Yale) and Steven Shavell (Harvard) make the point in a joint letter that “asymmetric information is a feature, not a bug, of informationally efficient markets.”
Elliott calls the sweep of proposals a misguided assault on shareholder activism. The SEC’s proposals to “expand the definition of beneficial ownership under Rule 13D in a way that also harms shareholder activism and would virtually shut down the ability of engaged shareholders to communicate with each other except at unreasonable legal peril.”
Long-onlys are also concerned about the rule changes. Says the submission from T. Rowe Price, “[W]hile we are not “activist” investors, we have serious concerns that the SEC’s proposed changes to the 13D regime (and its separate proposal on the disclosure of certain swap instruments) are designed to discourage activism…We and other long-term investors have a strong interest in preserving the important corrective mechanism that activism serves.”
Chill the Chilling
Among the most written-about topics as revealed by the cross-section of comments is the opposition to redefining the definition of a group.
A typical concern raised by State Street in its letter. “We are concerned that the proposed change in the definition of “group” may inadvertently chill important asset stewardship activities by asset managers, and we recommend that the SEC provide greater clarity that such activities are permitted.” State Street proposes sticking with the current definition of group which requires an agreement by the parties to form a group.
Similarly, Neuberger Berman weighed in with similar language saying the proposals “and the inherent reliance on a "facts and circumstances" test could have an unintended chilling effect on investor engagement.”
The Proposed Rules around ”the definition of a group “may have far-ranging, unintended consequences on a variety of typical market transactions, which may result in a chilling effect on raising capital,” according to a letter submitted by Jennifer Nadborny of Simpson Thacher.
So maybe the SEC should chill on the group definition a bit.
Have a great weekend,
Steve
|
|
ADDITIONAL READINGS AND LISTENING
|
|
Bloomberg Opinion: Activists Do Activism on Each Other
Matt Levine, author of Bloomberg’s Money Stuff, breaks down what happens when an activist investor (Nelson Peltz) is the target of insurgent investors. Read More
|
|
Reuters: Judge Rules in Favor of Aerojet Chairman in Dispute with Company CEO
According to a ruling by Delaware Chancery Court Judge Lori Will, Aerojet CEO Eileen Drake violated a court order by using company resources to back her slate of director candidates in a proxy fight with the company’s executive chairman. Read More
|
|
Wall Street Journal: JetBlue Lifts Offer for Spirit Airlines, Commits to Selling Assets
“JetBlue Airways Corp. is continuing its quest to buy Spirit Airlines Inc., increasing its offer and strengthening its commitment to divest itself of assets to get regulatory approval for the deal.” Read More
|
|
Richard Collings uses data provided by Refinitiv to compare retail M&A from this point in 2022 to last year at the same time. So far, this year’s total is more than last year with about $29 billion in deal value transacted. Read More
|
|
The Deal: Who’s Helping Whom: Proxy Solicitors
Ronald Orol and The Deal’s latest list takes a look at the top proxy solicitation advisers to corporations and activists from January to May of this year. Also featured, top activist or contested M&A situations each adviser worked on in that time period. Read More
|
|
CNBC: Franchise Group Considers Lowering Kohl’s Bid Closer to $50 a Share From About $60
According to a person familiar with deal talks, Franchise Group could potentially lower its bid for Kohl’s by approximately 17%. The move is reportedly due to the difficult outlook certain retailers are facing. Read More
|
|
Fortune: Leadership Next
Senior Editor Ellen McGirt sits down with Hayden Brown, CEO at Upwork, to discuss current challenges facing business leaders in a “divisive” environment. Brown believes the role of CEOs goes beyond simply stewarding a business and requires taking a stand on certain issues and being transparent when doing so. Listen Here
|
|
CNN Business: Twitter Board Recommends Shareholders Vote In Support of Musk Acquisition
Tuesday’s filing revealed that Twitter’s board has unanimously recommended that company shareholders vote to approve the sale to Elon Musk. A special shareholder meeting to vote on the acquisition is expected to happen in the coming months. Read More
|
|
Bloomberg: Musk Says Bots Are a Problem for Twitter Deal, Not China
In a virtual interview at the Qatar Economic Forum, Elon Musk said, “Twitter’s bot problem is a very significant matter” and in his words a roadblock to completing the $54.20 per share deal. l. He also cited shareholder votes as another hurdle, which most assuredly will not be a problem with Musk talking the stock down to $38.72. Read More
|
|
FROM OUR DESK TO YOURS
On our watchlist this week, CNBC’s David Faber got an inside peak into ExxonMobil, one of the world’s largest energy companies (and formerly one of the most press-shy). David went from Guyana to the Permian Basin to take an in-depth look at ExxonMobil’s strategy and aim to reduce carbon emissions at a time of record-high gas prices. He reviews what has changed since the company lost its proxy fight with Engine No 1. Watch Here
|
|
PEOPLE MOVES
-
Ken Griffin, Founder and CEO of Citadel, has announced the company will relocate its corporate headquarters from Illinois to Miami. Chicago Tribune
-
David Taylor, former Procter & Gamble CEO, joined private equity firm Clayton Dubilier & Rice as a senior operation advisor. Wall Street Journal
-
Hannah Miao, who previously served as Markets & Investing reporter at CNBC, has joined Wall Street Journal as markets reporter. Link
|
|
Let us know if you have any comments or suggestions for our newsletter format.
|
|
Please feel free to forward this along.
|
|
|
|
|
|
|