As expected.

Really quick stuff:

First, Mike Levin and I did a whole podcast on what would happen if the SEC proposed to rescind 14a-8, and one thing we speculated on was whether the SEC would try to tweak the rules to block “zero slate” proxy contests at the same time.

Interestingly, they are not proposing to do that, and in fact, they’re leaning in to the zero-slate contest as a viable option that partially justifies the loss of 14a-8. They even go out of their way to note that a shareholder could run a zero-slate contest without the 14a-19 requirement that they solicit 67% of the shareholders (except in Texas; Texas adopted the 67% requirement in its local shareholder proposal law), which would minimize costs.

What they are proposing to do is amend Rule 14a-4, to make zero-slate contests less procedurally threatening to the company. As I understand it, under the current rule, if there is a zero-slate contest, but the company does not include the proposal in its own proxy materials (as it is entitled to do), then, if a shareholder returns the company proxy card, they are functionally abstaining on the proposal – the company has no authority to vote no on the shareholder’s behalf. If the shareholder wants to vote “no,” the shareholder has to return the proponent’s card, which, among other things, means the company doesn’t collect or see those proxies. As a result, companies facing zero-slate contests have voluntarily included the proposals in their proxy materials, so as not to encourage shareholders to return the proponent’s card.

So, the SEC proposes to amend 14a-4 to give the company authority to vote proposals that do not appear on the company proxy statement or ballot, so long as the proxy statement includes a brief description of the subject of the proposal and how the company intends to vote (i.e., “no”). And, so shareholders don’t have to fear they’re returning ballots and giving the company unrestricted authority to vote on unknown items, the shareholders can check a box that says “you don’t have discretionary authority for anything that doesn’t appear on the ballot.” On first glance and without deep analysis (and without commenting on the broader proposal to rescind 14a-8) I can’t say the 14a-4 amendment strikes me as unfair.

I’ll go even further: the SEC is attempting to be so scrupulously fair in its 14a-4 amendments on this point (and its solicitation of comments) that it suggests to me that the SEC really really wants to defend the 14a-8 rescission by presenting zero-slate contests as a very viable option on which the SEC has not placed any kind of management-favorable thumb.

Update added upon further reflection: As I think further about the Rule 14a-4 amendments – the problem for the SEC is that, it isn’t wrong: procedurally, if the company has no discretionary authority to vote “no” on zero-slate proxy contests, that puts the company at a bit of a structural disadvantage as compared to the proponent with respect to collecting proxy cards.

On the other hand, it’s very difficult to come up with a rule that gives the company the authority to vote “no” on behalf of shareholders who return the company proxy card, without simultaneously having the company actually describe the proposal in its materials and give shareholders a chance to vote on it – which ends up just recreating Rule 14a-8. So, right now, the SEC is trying to square that circle by having the company put bare bones information about a zero-slate contest its in proxy materials, while giving shareholders a chance to opt-out of having the company vote their shares against the proposal.

But that means, the shareholder is potentially giving the company voting authority without full information on the proposals. One could say, that renders the proxy statement misleading. And that was the original justification for Rule 14a-8 in the first place: It’s misleading for companies to circulate proxy materials without a full description of what will occur at the meeting.

In its release, the SEC devotes a whole footnote to simply rejecting the idea that proxy materials are misleading if they don’t describe all items on the agenda (n.175), but the Commission’s struggle to come up with a 14a-4 rule that (1) allows the company to vote a shareholder’s shares against a proposal without (2) actually describing the proposal in the proxy materials, suggests the old justification for 14a-8 had merit.

Second, in a related release, the SEC proposes to entirely rescind Rule 14a-6. That rule was initially intended to require large shareholders to disclose certain proxy-related communications, but morphed into a convenient platform for shareholders to talk to each other. I previously posted that the SEC last year issued guidance to restrict its use for that purpose, but apparently that wasn’t good enough, because the SEC wants to get rid of it entirely. As I indicated in my post on the subject, there’s evidence that shareholders find that platform useful, and it’s a good way for shareholders to be able to centralize communications with each other; I’ll be sorry to see it go.

And another thing. I have a new paper up! Which, I must admit, kind of compiles a bunch of arguments I’ve made in this blog over the past several years, so it may be old hat for regular readers.

Supreme Amnesia: The Shifting Standards for Fraud-on-the-Market Class Certification

In a series of cases, beginning with Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804 (2011), and concluding with Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System, 594 U.S. 113 (2021), the U.S. Supreme Court has offered shifting and conflicting understandings of the fraud-on-the-market presumption and its role in class certification. The confusion has filtered down to the lower courts, where class certification determinations have become wide-ranging inquiries into the merits, untethered from the fundamental question whether class treatment is appropriate. This Essay, written for the ILEP 30th Anniversary of the PSLRA Symposium, explores how the Supreme Court has created an impossible class certification maze for parties to navigate, and recommends that courts no longer adjudicate fraud-on-the- market at class certification.

And yet another thing. New Shareholder Primacy podcast! This week, Mike Levin and I talk about what he’s seen with universal proxy in 2026. Here at Apple; here at Spotify; here at YouTube.

Just some things I’ve been meaning to blog about.

First, in Dodiya v. Franklin, VC Will concluded that a take-private involving a conflicted director and conflicted CEO did not satisfy the safe harbors of DGCL 144 and therefore could be the subject of a shareholder fiduciary claim.  The case is generally interesting as one of the early interpretations of the new safe harbors, and in particular, the 144(a)(2) safe harbor, concerning the cleansing effect of a shareholder vote.  I previously worried that the language of the statute might be read to suggest it had altered the definition of what it means for a shareholder vote to be “fully informed,” i.e., that shareholders could cleanse transactions with less information than they were required to have previously.  But VC Will didn’t go that way; instead, she held “Section 144 does not define ‘informed,’ but Delaware common law does,” and relied on prior caselaw in concluding that the proxy was misleading.

Second, this column by Sujeet Indap is a popcorn-worthy report of the trainwreck of a process employed by the Cloudflare board to evaluate a proposal to recapitalize the company in order to extend the founders’ sunsetting control rights. I previously blogged about the case here; the plaintiffs argue that, because they are seeking injunctive relief to block a transaction intended to “deter, delay, or preclude a change of control,” the new safe harbors of DGCL 144 do not apply, and instead, the transaction could only have been cleansed under the old MFW regime.

As I understand it, it is precisely because plaintiffs have a colorable argument that this transaction is outside of DGCL 144’s coverage that they were given access to some discovery.  And that is why we know, for example, one member of the special committee turned to a chatbot to obtain justifications for extending control rights without asking for any countervailing arguments, and selected a particular academic to present on dual-class structures because he already knew the academic would speak in support.

All of which would cast doubt on the good faith of the board’s process for approving the transaction, and the disinterestedness of the directors, even if DGCL 144 did apply, much less the stricter standards of MFW.

But the vast majority of cases won’t involve the quirky exception to DGCL 144’s application, i.e., transactions intended to “deter, delay, or preclude a change of control.”  Instead, they’ll be ordinary conflict transactions, subject to board-level cleansing, with heightened presumptions of director disinterest.  Plaintiff-shareholders will only have access to the materials available under the now-restricted DGCL 220, and courts will evaluate the transactions on the basis of that very limited record.  Which means, I suspect, rather a lot of sketchy chatbot transcripts will never see the light of day.

And finally, we have an interesting direct/derivative dispute playing out before VC David in Charter Township of Shelby Fire & Police Retirement System v. Pershing Square Capital Management, L.P. et al., No. 2026-0184 (this particular type of direct/derivative dispute happens to be an ongoing interest of mine). The plaintiffs allege that HHH’s board improperly gave Bill Ackman’s Pershing Square new shares and contractual control rights, without charging him a control premium and in breach of their fiduciary duties.  And they also allege that, because the transaction involved a transfer of control, their claims should be treated as direct, rather than derivative.

But, post-transaction, Pershing Square does not have majority voting control, as defined by DGCL 144(e)(2)(a).  Which raises an interesting question: Can plaintiffs maintain a direct claim alleging a transfer of control rights, even if, post-transaction, the holder of those rights is not a controller as defined by DGCL 144 for cleansing purposes?  (Of course, this case does not present the cleanest set of facts for answering that question, because the plaintiffs also argue that even if Pershing was not given hard control under DGCL 144(e)(2)(a), it was given practical control alongside its 1/3 voting power under 144(e)(2)(c)). I, of course, have argued that “equity issuances might give rise to direct claims even if they did not result in the creation of a new controlling shareholder, so long as they ended up redistributing specific control rights away from the public shareholders,” but either way, this question takes on new significance in light of SB 313, authorizing boards to enter into broad shareholder agreements.

And another thing. New Shareholder Primacy podcast is up!  Me and Mike Levin answer a mailbag question about the current mishegoss at the SEC over Rule 14a-8.  Here at Apple; here at Spotify; and here at YouTube.

Dear BLPB Readers:

“Description

Job Summary: The Stephen M. Ross School of Business at the University of Michigan has an Assistant Professor level position available in Business Law starting in the 2027-28 academic year.

Responsibilities: Teaching at the graduate and/or undergraduate level. Research, publishing, and service contributions are required.

Qualifications

Qualified candidates must have earned a J.D. from an ABA-accredited law school. The candidate must have an excellent academic record and demonstrate a strong interest, and ability, in conducting high-quality, scholarly research in an area relevant to business. Examples of such fields include, but are not limited to, corporate law, contract law, employment law, financial regulation, securities law, intellectual property, law and technology, and international trade.  A qualified candidate must also demonstrate excellence in university teaching or the potential to be an outstanding teacher in business law.”

Complete details about this position and the application process are here.

Following up on the last post in this series, we now have data from January through August 2026. Special thanks to three student research assistants, Boyd Law students Rocco Marino and Enya Dinca, and UNLV Honors College undergraduate student Micaela Benavidez-Sosa, for all the work they did to pull together this information. A copy of the spreadsheet used to produce this report is available here.

I’ve leaned on Claude to create infographics to help summarize the information. Any errors or omissions in this are mine alone.

Deal Flow by Month

We’re still seeing a significant number of offerings going to market. SpaceX still stands apart, but SK Hynix’s IPO also raised a huge sum. We’re also seeing more direct listings than I would have anticipated.

SPACs, Operating Company IPOs, and Direct Listings

SPAC IPOs continue to account for over half of the dataset.

Jurisdictional Choices by Capital Raised and Deal Count

Texas leads as the jurisdiction raising the most capital, driven largely by SpaceX.

When you pull SPACs out, the data shows the Cayman Islands dropping away.

If we look at deal count instead of capital raised, the Cayman Islands reign supreme because there are so many SPACs.

When we exclude SPACs, Delaware takes the crown for most deals by a solid margin, coming in at 61%. This struck me as a little suspicious initially because I had not thought of the Cayman Islands as a hub for operating company IPOs. The 11 Cayman operating company IPOs are mostly small cap raises. Five happened in August. It’s a real uptick in the Cayman share for operating company IPOs.

If we look at the distribution for SPACs, the Caymans really dominate with Nevada, Delaware, and Maryland each picking up a single SPAC.

Direct Listings

When we turn to direct listings, Delaware leads Nevada by one with a range of other jurisdictions in the mix.

Issuer Counsel Leaders for Direct Listings

For this segment, a range of different law firms worked on direct listings.

Underwriters

We see a range of underwriters involved in IPOs this year.

If we evaluate by proceeds raised, Goldman Sachs stays on top.

Issuer Counsel

Here, the firms representing SPAC issuers participate in the most deals.

But if we exclude SPACs, the most present firms for issuer counsel are Latham and Goodwin.

Underwriter Counsel

There is some overlap between issuer and underwriter counsel. This shows underwriter counsel both with and without SPACs.

Controlled Company Choices

Companies that self-identify as controlled companies seem to make different jurisdictional choices than others. Although Delaware pulled about 61% of operating company IPOs in this set so far, the Delaware share of controlled company IPOs comes in lower.

When we look at companies we flagged as having dual class stock, it’s a similar finding. There is a good bit of overlap between dual class companies and controlled companies, but not every controlled company will have dual class stock and not every company with dual class stock will self-identify as a controlled company.

Although there has been substantial discussion on differences in state corporate law driving incorporation choices, not as much attention has been paid to cost differentiation between the states. As many know, Delaware charges smaller public companies organized as corporations up to $200,000 annually. Large filers pay Delaware a flat $250,000 annually. But not every company will benefit from Delaware’s premium subscription plan.

Carliss Chatman and I wrote a response to Professor Bainbridge’s thoughtful DExit Drivers piece that was published in the Journal of Corporation Law. Our response, entitled DExit for Dollars, explores a complementary angle on the Delaware franchise tax and how it may be more material than previously appreciated for some smaller companies. Instead of focusing on the companies that have left Delaware to see what drove them—or at least what they put in the proxy, we consider the annual financial costs paid by companies that opt to remain. I also covered some of the cost considerations in a recent podcast with the Council of Institutional Investors.

One of our main contributions is to suggest that companies should look at becoming subject to Delaware’s annual franchise tax or escaping Delaware’s annual franchise tax as something akin to a perpetuity. A company paying $200,000 annually for the privilege of operating as a Delaware entity should consider the value that being a Delaware entity provides relative to other options in the market and whether swapping to some other jurisdiction would be beneficial when taking into account the cost to move or to attempt a move. For example, companies with substantial Texas operations pay an unavoidable activities-based tax to Texas every year. If the Texas Business Court now offers a suitable local forum, the question becomes whether Delaware’s additional cost offers benefits worth the recurring fee.

Calculating the value of avoiding Delaware’s franchise tax depends on picking an appropriate discount rate. At a higher 20% rate, avoiding a $200,000 annual fee is worth about $1 million. A 10% discount rate gives a $2 million figure.

Companies and investors must pick a discount rate that makes the most sense for their situation. A company expecting to be acquired in the next year or two might select a very high discount rate. In contrast, a stable company with long-term plans may warrant a lower discount rate.

Some aspects of this are hard to put a number on. How do you value access to the Court of Chancery? How much value does the corporation get from the comfort and confidence stockholders may take in knowing that Delaware’s vigorous plaintiffs’ bar will investigate and police possible misconduct when it is profitable for them to do so?

Other options also exist to mitigate Delaware’s annual franchise tax cost. We explore how companies have amended their charters to reduce authorized shares for a lower fee burden from Delaware’s annual franchise tax. But this “remain and reduce” approach comes with some risks. The company may not be well-positioned to raise capital quickly if it will require another charter amendment to authorize more shares for issuance. And, if retail stockholding increases, the company may struggle to secure enough votes to authorize a later amendment.

At least one company has simultaneously proposed a reincorporation alongside a reduction in authorized shares as an alternative. The attorney fees and other costs involved in a reincorporation or charter amendment must still make financial sense for a company to pursue it. For example, a small public company that shifts to Nevada might lower its annual fee burden to about $1,000 a year. This saves it $199,000 the first year and every year after that. If it will cost about $350,000 to pursue a reincorporation, the company must consider the odds its effort will succeed and whether the result will be financially beneficial over time. Companies with controlling or other large stockholders may face reduced risk as to whether they can get the votes. They might also prefer reincorporation for other reasons, but the cost benefits remain real.

There may also be options for law firms to defer fees in some circumstances for clients with cash-flow challenges. For example, a firm might do the work and then split the surplus generated over the next four or five years to make the move immediately cash-flow positive for the client. This would also give the law firm some payment risk.

To be clear, the franchise tax likely won’t matter to many of the largest public companies that make headlines, but it may matter more to smaller entities. Nevada has long served the smaller company market and constrained governance costs in a way that may generate value for smaller firms.

And there are a significant number of smaller public companies incorporated in Delaware today. There are about 520 Delaware-incorporated nanocaps with market caps under $50 million. There are roughly 540 Delaware-incorporated microcaps with market caps between $50 million and $300 million. And there are about 740 Delaware-incorporated small-cap companies with market capitalizations between $300 million and $2 billion. Roughly 1,200 public companies with market capitalizations under $500 million now operate as Delaware corporations.

The proxy disclosures around Delaware’s fees for this market segment are not always the best. Smaller companies looking at a move should break these figures out clearly and present the compounding benefits and costs over time to help investors understand how it matters–whether they are coming or going.