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Like many students making last-minute preparations before the start of school, Elon Musk and his team want more time and a chance to make edits. Specifically, Musk filed to amend his countersuit to include Peiter “Mudge” Zatko’s whistleblower complaint and push the trial from October to November. Musk and his team are trying to make the argument that the whistleblower complaint has severe consequences to the business constituting a “material adverse effect.”
DealBook goes through how the whistleblower complaint could change the case, including a new federal securities fraud lawsuit against Twitter. This would be a higher bar to clear and could anger the Delaware Court of Chancery, where Twitter is not Musk’s only pending case. Other commentators, like Bloomberg’s Matt Levine also believe Musk has an “uphill climb”—mainly because he has yet to prove his central argument about bots and the fact that the agreement said nothing about bots. All eyes will be on how Chancellor Kathaleen McCormick rules on the latest.
Shifting gears. Along with football, apple pie and grape harvest, September brings the long-awaited universal proxy rules that go into effect. Practitioners and others are weighing in and gearing up, as Bloomberg’s Scott Deveau interviewed experts such as Scott Winter, managing director at proxy solicitation firm Innisfree M&A, who noted how proxy contents will become “significantly more affordable.” In a Breakingviews piece, Lauren Silva Laughlin agrees cheaper campaigns will make it easier for activists to nominate directors, however, she argues it still comes down to the CEOs leadership.
Kai Liekefett, partner and chairman of the shareholder activism practice at Sidley Austin takes this a step further calling the new rule a “disaster for Corporate America” and the most dramatic rule change for proxy contests in a generation. To help navigate these changes, Sidley Austin launched its Universal Proxy Card Resource Center to offer guidance as this continues to evolve.
Meanwhile, Monday started with an activist investor showdown between Zendesk and one of its investors, Light Street Capital. In its letter to Zendesk’s board, Light Street said it would vote to reject a proposed $10.2 billion take-private deal and expressed the need for a new CEO. Light Street founder Glenn Kacher joined Scott Wapner on CNBC’s Halftime Report to discuss, but had a less confrontational tone, praising the current CEO and private equity saying, “we respect [Zendesk CEO] Mikkell” and “we’re big fans of private equity.”
Zendesk fired back at Light Street’s proposal, calling it weak compared to the take-private deal, and saying it would result in “uncertain value and an increase in operation, financial and governance risk.”
Have a great Labor Day weekend,
GPP Team
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