What goes around comes around. On the heels of a damaging short-seller report from Hindenburg Research last week comes a new blow to Carl Icahn’s firm Icahn Enterprises: a federal investigation into corporate governance and financial practices. That has sent IEP shares plummeting – down more than 15% on Wednesday and down 37% since the initial Hindenburg report was issued. Bloomberg’s Liana Baker and Chris Dolmetsch report that investors became aware of the U.S. Attorney’s inquiry through a filing on Wednesday, one week after the short seller report. Icahn released a statement and without any sense of irony, claimed that Hindenburg’s “modus operandi is to launch disinformation campaigns to distort companies’ images, damage their reputations and bleed the hard-earned savings of institutional investors.” That has been Carl Icahn’s playbook since Barry Gibb and Frankie Vallie had their hit “Grease” in 1978.

Hindenburg, for its part, isn’t letting the air out of its campaign: the firm released another report yesterday morning addressing Icahn’s non-response, saying that “given that Carl Icahn has styled himself as a 50+ year warrior for corporate transparency, we expected he would provide clarity on the issues we highlighted.” The math isn’t adding up, as Hindenburg says, “the deal Icahn is making to retail investors is, essentially, ‘buy ~$9 worth of value for ~$32 and I’ll give you back $2 of your own money per quarter, for free.’”

Meanwhile in Delaware Courts, the $306 million purchase of music streaming service TIDAL by Square’s owner Block may be a “terrible business decision,” according to Delaware Chancellor Kathaleen McCormick, but it’s not illegal. The recent decision pits shareholders against Block CEO Jack Dorsey and certain board members and answers whether Block’s directors acted in bad faith.

Despite a few factors, including Dorsey’s close relationship with Jay-Z (a major investor in TIDAL and member of Block’s board), Dorsey’s handling of the negotiations and the deal being described as “a $300 million bar tab to hang out with Jay-Z", Chancellor McCormick affirmed the standard for liability is high when a board is comprised of mostly disinterested members. Bloomberg’s Matt Levine summarizes the decision saying, “the law can make boards of directors check the right boxes, but it can’t make them make the right decisions.”

Lastly, in case anyone hasn’t noticed, the deal market remained depressed exiting Q1. S&P Global Market Intelligence released a report this week that found global M&A value for the quarter was lower year-over-year by more than 45%. However, it’s not all doom and gloom, according to J.P. Morgan’s Anu Aiyengar, who thinks there are strategic buying opportunities aplenty. While speaking at Axios’ BFD event in San Francisco, the bank’s global head of M&A said “if you are an investment grade, strategic buyer and you don't do a deal now, you're going to kick yourself.”

Have a great weekend,

GPP Team

Bloomberg: Icahn Enterprises Shares Fall After US Attorney’s Office Requests Informatio

After the investment firm shared it was under investigation by the Southern District of New York, IEP lost about 36% of its value. Liana Baker and Chris Dolmetsch outline Icahn’s response to the damaging Hindenburg Research report. Read More

Money Stuff: Companies Are Allowed to Do Bad Mergers

Matt Levine reports on a Delaware Chancery Court opinion around Block’s acquisition of TIDAL, which stated "a board comprised of a majority of disinterested and independent directors is free to make a terrible business decision without any meaningful threat of liability, so long as the directors approve the action in good faith.” Read More

Axios: Pace of unsolicited M&A pursuits increasing, JPMorgan says

According to JPMorgan’s Anu Aiyengar, unsolicited outreach to companies surrounding M&A—though oftentimes held behind closed doors—is rising sharply. Michael Flaherty reports on the talk delivered by Aiyengar at Axios BFD; her view remains that the deal market very much favors buyers. Read More

ACTIVISM

Goldman Sachs: Do Activist Investors Boost Shareholder Returns?

A new research report by Goldman Sachs examining the stock performance of almost 150 companies targeted by shareholder activists reveals that activist campaigns generally lead to "mixed" share price results. Read More

Bloomberg: Tempur Sealy to Buy Mattress Firm for About $4 Billion

Tempur Sealy woke up on the right side of the bed on Tuesday morning as the company announced it plans to buy Mattress Firm in a cash-and-stock deal valued at roughly $4 billion, writes Catherine Larkin and Janice Kew. Read More

Harvard Law School Forum on Corporate Governance: Delaware M&A: Spring 2023

Partners from Paul, Weiss, Rifkind, Wharton & Garrison LLP react to the Delaware Court of Chancery decision to dismiss two separate motions accusing SPAC sponsors of breaching their fiduciary duty and highlight the increasing importance for companies to be more open about potential conflicts of interests regarding SPAC deals. Read More

CLS Blue Sky Blog: The Real Effects of Disclosure in Going Private Deals

Professors Pietro Bianchi and Maria Vulcheva (Florida International University), and Miguel Minutti-Meza (University of Miami) share their research revealing that adequate and transparent disclosure to all shareholders strongly increases the chances of closing take-private deals, underscoring the importance of strong corporate communications. Read More

Bloomberg: US Antitrust Enforcers Are Chilling Big Mergers

Leah Nylen and Michelle F Davis examine the impact of the FTC and Justice Department's "aggressive" stance on scrutinizing M&A activity, which has made dealmaking "costlier, as well as more uncertain and time consuming." Read More

Corporate Secretary: Companies Seek to Limit Officers’ Liabilities This Proxy Season

Ben Maiden reports on the influx of proposals added to company proxies geared toward codifying and implementing protections against directors’ financial liability. A change in Delaware’s General Corporation Law opened the door for the sharp influx of such proposals. Read More

FROM OUR DESK TO YOURS

In terms of new restaurants, we tried Mavericks Montauk, which bills itself as a steak house in one of the best fishing grounds on the East Coast. Indeed, their menu was both full of great steaks but also great choices from the sea such as fluke crudo and smoked bluefish rillette. And its nearly 300 bottle wine list is officially the deepest wine list in our little drinking town with a fishing problem. We had a 2013 Grgich Hills Estate Cabernet Sauvignon from a landmark winemaker whose patriarch made a winning wine in the famous 1976 Judgement of Paris, a blind tasting that had upstart American wines beat the world’s best French wines. 

Yes, we are fixated on wine, and we are fixated on “Succession,” and we praise the producers and directors for making wine a critical part of the show’s drama. As Esther Mobley points out in the San Francisco Chronicle, last week’s episode at Shiv and Tom’s party, Tom delicately tells the waitstaff to tell the guests their wine “is light and fruity. Don’t say it’s biodynamic.” That of course is code for natural wine, which has the ability to divide wine-drinkers like Hatfields and McCoys. 

“Oh, look! A Sbarro. My favorite New York pizza joint.” While not at Sbarro, GPPers channeled their inner Michael Scott this week, trading our laptops in for dough rollers in the name of a New York slice. The Gladstone team dropped by EVÈNTO for a fun (and messy) pizza making class where we handcrafted our own deliciously greasy pies that saw many creative takes on the classic cheesy triangles. Thanks again to the team at EVÈNTO for such a terrific evening!

PEOPLE MOVES

• UBS announced that it would integrate Credit Suisse current CEO and CFO, Ulrich Körner and Sarah Youngwood, respectively, into their rebranded executive team. Read More

• The New York Times appointed chief strategy officer, William Bardeen, as the paper’s next CFO beginning July 1. Read More

• Puck News co-founder and CEO Joe Purzycki announced he is leaving the company. Read More

• May 19, 2023: The 80^th Annual Financial Follies – New York, NY

• June 6, 2023: The Deal Economy 2023: Predictions and Perspectives – New York, NY

• June 6-8, 2023: NIRI Annual Conference – Chicago, IL