Here is Novo Nordisk’s bid for Metsera. Because the deal requires prolonged regulatory clearance, Novo will buy nonvoting convertible shares from Metsera, with the cash to be paid as a dividend to Metsera’s shareholders now. Since the convertibles are nonvoting, no regulatory preclearance is required, and cash gets to Metsera right away. Before NN can convert to voting and take over the company, it has to obtain regulatory clearance.

Which sounds fine except for how this looks a lot like what DOJ called an evasion of antitrust law just a few years ago with Toshiba and Canon.

Here, the parties might argue that this structure is not solely to evade preclearance, as it was there – it’s also to give assurances to Metsera in the context of a contested takeover battle, and meet contractual requirements to qualify as a superior offer. 

Maybe that wins the day but it’s why, I guess, Pfizer says this is an “illusory” offer and Metsera may not terminate the current agreement.

If I’m getting this wrong, though, someone let me know so I can edit/delete and bury my shame. (Commenting doesn’t seem to work well here but feel free to email).

Look, I get why courts are hesitant to allow securities fraud plaintiffs to state a claim based on false pretensions to corporate “ethics.” Courts fear this would cast too wide a net; Matt Levine’s “everything is securities fraud” would become literally true if any kind of corporate misconduct rendered an ethical code “false,” such that the code itself becomes a violation of Section 10(b). And that, as I have previously written, erodes the line between state law governance claims, and federal law fraud claims.

Still, I find it maddening when courts choose to dismiss these kinds of claims on the ground that ethical codes must be puffery because they are required by regulators. For example, the court in Andropolis v. Red Robin Gourmet Burgers, Inc., 505 F. Supp. 2d 662 (D. Colo. 2007), “A company’s essentially mandatory adoption of a code of ethics simply does not imply that all of its directors and officers are following that code of ethics. In fact, the mandatory nature of the adoption of such a code makes clear that all public companies—whether run by crooks or angels—will adopt just such a code.”

May I make the radical suggestion that the fact that…

But if he’s behind this campaign, he needs to file on Schedule 14A.

(and if it’s a Tesla shareholder with a $5 million stake, they need to file with the SEC as well)

I spoke to Law.com about the potential switch to semi-annual reporting, and one of the questions I was asked concerned securities fraud risk – more? less?

Answer: it’s complicated.

On the one hand, fewer statements means fewer potentially false statements, and so fewer opportunities for someone to bring a lawsuit over what you say.

On the other hand, probably a lot of companies will continue to speak to the market – and even voluntarily disclose quarterly earnings. Except, they may not include all of the details that a 10-Q would include. Depending on what they choose to disclose, and whether they change their practices over time, there might be some vulnerability to a charge of misleading half-truths/omissions.

Additionally, semi-annual reporting means the market will be receiving less information on the company, and the information it does receive may come as a surprise, resulting in more volatility. Surprise information, coupled with a big price movement, is the stuff securities fraud actions are made of. Fewer disclosures means fewer opportunities to telegraph changed expectations and slow walk the stock in a particular direction.

But on the other hand! Securities fraud actions live or die by the event study – proof that…

Out of Delaware’s Court of Chancery, we have another tale of messy startup contract drafting, with facts that are increasingly bizarre and horrifying.

Consultant was hired by a startup, and the startup fell into arrears paying its bills.  The CEO and sole director offered a warrant for stock in lieu of payment, at a cheap (“practically free”) exercise price.  The company’s counsel (Wilson Sonsini) drafted the warrant for 1% of outstanding shares at the time of the warrant’s issuance.  The consultant’s attorney then amended the agreement to say 1% of shares at exercise.  The consultant returned the signed amended agreement to the CEO, but not in blackline and with no warning of the change.  The CEO, apparently without reading it, signed the revised agreement.  The agreement was recorded on the company’s books as being for 100,000 shares, i.e., 1% at time of issuance.

Later, the company conducted a stock split, and the warrant was revised on the company’s books to reflect 1 million shares.  At one point, KPMG audited the company for a counterparty considering a transaction, and flagged the discrepancy, but the company made no change.

Eventually – plot twist! – the consultant apparently got into some…

This week, the Second Circuit issued an opinion reversing a district court’s dismissal of a securities fraud complaint filed against The Hain Celestial Group. The facts are these.

The plaintiffs alleged that Hain Celestial Group, and certain of its officers, engaged in a channel stuffing scheme by offering various concessions to distributors, so that it could book sales early and meet Wall Street expectations.  Allegedly, Hain failed to properly account for the concessions that it offered, which were accomplished through “off book” arrangements.  Distributors were granted an “absolute right to return,” with one employee reportedly processing hundreds of thousands of dollars in returns in one quarter – but the sales were included in Hain’s financial results regardless.

Eventually, as with all channel stuffing schemes, things fell apart, and the whole thing ended in the restatement of several years of financial results and a dramatic drop in sales.

The Second Circuit first held that the plaintiffs had properly alleged misstatements in violation of Section 10(b).  Restatements are a per se admission of falsity, so that covered the financials.  Further, Hain had engaged in misleading half-truths when it attributed its purportedly positive results to customer demand, rather than the distributor concessions.…

A while back, I posted about what was then the new voting choice programs being adopted at large mutual fund complexes, giving retail shareholders the right to choose voting policies that would apply to their pro rata share of fund ownership.

Well, Alon Brav, Tao Li, Dorothy S. Lund, and Zikui Pan have a new paper out, The Proxy Voting Choice Revolution, that dissects the early results for Vanguard’s funds, and what is actually the thing that stands out to me is not what the choices reveal about retail shareholders, but what they reveal about proxy advisors.

The thing is, proxy advisors have a benchmark policy of standard voting recommendations, and they have custom policies that can be tailored to the needs of their individual clients, and they also have “themed” policies which are somewhere in between – “off the rack” so a client doesn’t have to pay for tailoring, but specialized beyond the basic policy.  Except we don’t have a lot of insight into exactly how ballots are cast for these themed policies – until, apparently, now.

The authors are able to use the data from Vanguard to infer how Glass Lewis’s ESG themed voting policy…