You might want to take a look at this interesting column from Bloomberg’s Matt Levine, talking about some recent developments in the IPO market. Apparently, a second company is contemplating conducting an IPO through a direct listing, a listing process run outside of the conventional underwritten offering in which the company files with the SEC to allow certain of its outstanding shares to be sold directly into the market, without the traditional help from the underwriters in marketing the deal. Although the company does not raise any funds itself, it becomes a public company and provides a market in which shares may sold by selling shareholders at prevailing market prices. The process may be particularly appealing to companies that are very well known and well funded, but want to trade publicly, since the costs of going public are generally lower and the process can be somewhat quicker than a traditional IPO.
You’ll recall that, at the end of last year prior to the shutdown, Corp Fin posted a series of FAQs designed to help companies in the registration process (or contemplating offerings) but expected to be caught in the shutdown. (See this PubCo post.) Corp Fin has now updated those FAQs, revising numbers 4 and 5 and adding new numbers 6 and 9, briefly summarized below. (The mystery is how Corp Fin was able to prepare the updates if no one was permitted to work?)
If you’re looking for some entertaining reading, look no further! It’s the Cooley Alert version of The Big Short: SEC Adopts Final Hedging Disclosure Rules. Why wait for the movie adaptation when you can read the Alert now?
On Tuesday, the SEC finally dredged up the 2015 proposal to implement section 955 of Dodd-Frank regarding hedging disclosure in proxy statements and, without an open meeting, voted—yes finally—to adopt it. Section 955 mandated disclosure about the ability of a company’s employees or directors to hedge or offset any decrease in the market value of equity securities granted as compensation to, or held directly or indirectly by, an employee or director. According to the legislative history, the purpose was to “allow shareholders to know if executives are allowed to purchase financial instruments to effectively avoid compensation restrictions that they hold stock long-term, so that they will receive their compensation even in the case that their firm does not perform.” The final rules were adopted “along the lines proposed,” but with some modifications.
Right before the SEC open meeting originally scheduled to discuss the issue, the SEC has posted a “request for comment soliciting input on the nature, content, and timing of earnings releases and quarterly reports made by reporting companies.” (The matter has been deleted from tomorrow’s agenda.) According to the press release, the request for comment solicits “public input on how the Commission can reduce burdens on reporting companies associated with quarterly reporting while maintaining, and in some cases enhancing, disclosure effectiveness and investor protections. In addition, the Commission is seeking comment on how the existing periodic reporting system, earnings releases, and earnings guidance, alone or in combination with other factors, may foster an overly short-term focus by managers and other market participants.” The public comment period will be open for 90 days following publication of the Request in the Federal Register.
(Note that the SEC also adopted hedging policy disclosure rules and likewise removed that from tomorrow’s agenda, but more on that tomorrow.)
As discussed in this PubCo post, human capital management has become a significant concern of institutional investors. For example, for 2018, asset manager BlackRock identified human capital management as one of its engagement priorities, echoing the exhortation from BlackRock CEO Laurence Fink in his 2018 annual letter to public companies: with governments seeming to fall short, it is up to the private sector to “respond to broader societal challenges”; companies must look to benefit their broader communities and all of their stakeholders, including employees, and that involves investment in efforts to create a diverse workforce, to develop retraining programs for employees in an increasingly automated world and to help prepare workers for retirement. (See this PubCo post.) Some institutional investors have also encouraged companies to provide more transparency on HCM practices. But what exactly should they disclose?
At last week’s meeting of the SEC’s Investor Advisory Committee, the Committee members held a Q&A session with SEC Chair Jay Clayton, followed by a discussion of environmental, social and governance disclosure, where the main question appeared to be whether to recommend that ESG disclosure be required through regulation, continued as voluntary disclosure but under a particular framework advocated by the SEC or continued only to the extent of private ordering as is currently the case.
Among the points addressed in the Q&A was a potential government shutdown. Clayton said that the SEC was planning for a possible shutdown, and that, as in previous shutdowns, he expected the SEC would be able to continue its operations for a number of days post-shutdown.