I posted about the comment letters here and I have a LinkedIn update here, but, in addition, allow me to make a brief observation.

Vanguard filed a letter opposing. So did Citadel and Sigma Two. I have not seen any other large asset managers say boo. Their trade associations object, though, as you can see.

Fidelity apparently objected, strongly, though this letter is the only reason we know that; Fidelity itself has not submitted a comment.

We all can draw our own conclusions – and to be fair, the SEC continues to post letters so maybe there are some that just are not public yet – but my concern is that regulated entities may be hesitant to publicize disagreement with the Trump Administration.

The deadline has passed to comment on the SEC’s proposal to permit semi-annual reporting (though the website seems to be still slowly updating with additional letters).

Professor Tzachi Zach at Ohio State has set up a useful, searchable tracker, and as of this posting, he clocks a total of over 80,000 submissions (of which 66,000 were form letters, identified by the SEC as templates A through K).  All of the form letters oppose; of the non-form letters, 99% oppose.

Some brief takeaways and highlights (I didn’t use LLMs or machine-reading or anything; I just used my actual web browser to click on actual links I thought were interesting and read the results, so this is a very rough overview; Professor Zach’s searchable database is more granular. Also, I only looked at what was posted through Friday morning.)

The comments overwhelmingly come from retail investors – not just the form letters, but even the individualized ones.  Which isn’t to say there isn’t industry interest; just that retail interest is big.  I’m sure we all saw the letter from r/wallstreetbets (still trying to figure out the governance structure that allows one person or persons to speak for WSB) but have…

The incentive for a company to

I personally will collect the bets on which firm will be the first to argue that, because it only reports semi-annually, its stock price cannot be presumed to be efficient and therefore it cannot be the target of a fraud on the market Section 10(b) class action.

Headline quote from the SEC proposal:

The proposed amendments, however, could also lead to efficiency reductions. As discussed above, a switch to semiannual (or hybrid) reporting would likely increase information asymmetries, thereby reducing the informational efficiency of share prices and reducing stock market liquidity for the companies that move away from quarterly reporting.

Also worth noting, to determine if a market is efficient, courts look to whether the company qualifies for S-3 filing – but the SEC proposes to make that a lot easier, too.

Direct/derivative.  I’ve previously blogged about how the direct/derivative distinction comes out when blockholders increase their position into hard control via nontraditional means, such as stock buybacks, open market purchases, and stock giveaways.

The latest in the genre is the complaint filed in ZipRecruiter. The company went public with a dual class share structure, but no single insider had hard control; control was distributed among several officers and VC backers (which meant, I take it, the company was not “controlled” for NYSE purposes).   Over time, most of the insiders sold down their positions, which left one VC backer with hard control, and the founder with a substantial voting block.  After that, the Board caused the company to institute a share buyback program, run by the founder/CEO, and that buyback program included a lot of negotiated purchases from the VC backer, as well as on the open market.  Which meant, ultimately, the founder was left with hard control.

The plaintiff alleges that the board violated its fiduciary duties by enabling this transfer of control to the founder, without requiring a control premium.  And, the plaintiff is bringing the claims directly rather than derivatively.

As you can see from my prior…

We have what I think is our first decision interpreting the new DGCL 144: Ayers v. Foley, from VC Will.

This is a derivative action challenging a board’s award of compensation to itself, and an award of compensation to the company’s founder and Chair.  What is particularly amusing is that the company, Fidelity National Financial, is now organized in Nevada; its reincorporation became effective one day after the lawsuit was filed.  What is also amusing is that FNF’s first attempt to reincorporate to Nevada failed a shareholder vote; the company was only able to win shareholder approval by committing in its charter to adopting greater shareholder protections than Nevada provides. 

So, the case.  With respect to the award to the board, the defendants conceded that this was an interested transaction, with no cleansing mechanisms, and demand was excused; the only argument they made was that plaintiffs’ complaint did not make it “reasonably conceivable” that the compensation was not entirely fair.  That argument was a heavy lift, and VC Will rejected it; those claims will proceed.

The real action concerned the grant to the company founder and chair.  He held only 3.6% of the stock; there was no…

Everyone’s talking about the possibility SpaceX will acquire Tesla, presumably in a stock merger, likely using the nonvoting shares SpaceX has authorized but unissued in its charter.

If that happens, the question is – who wins, SpaceX shareholders, or Tesla shareholders, or will the price be perfection itself?

If you assume that Elon Musk’s personal interests will play a role here, then part of the pricing will have something to do with his relative financial stake in each company, which I am in no way going to try to calculate (also, I suppose he might have tax considerations, again, not going to calculate). But legally, there are very good reasons why the price would favor Tesla shareholders.

First, Elon Musk’s pay package at Tesla awards him around 35 million shares when he hits certain market cap milestones, coupled with operational milestones. But if Tesla is acquired, the operational milestones disappear, and the merger price becomes the market cap. Which means, if Tesla is acquired for a nominal price of $2 trillion, he gets an additional 35 million Tesla shares (which, in a stock for stock merger with SpaceX, convert to SpaceX shares). If Tesla is acquired for 2.5…