So instead, I’ll just say, like my co-blogger Stefan who posted yesterday, I’ve also been paying attention to corporate responses to protest movement. Because we’re both talking about that subject, I’ll just start by quickly reproducing the links that I gave Stefan in my comments on his post:

Many Claim Extremists Are Sparking Protest Violence. But Which Extremists?

The Justice Department’s rhetoric focuses on antifa. Its indictments don’t.

Misinformation About George Floyd Protests Surges on Social Media

Twitter says fake “Antifa” account was run by white supremacists

And one I forgot to add:

Armed white residents lined Idaho streets amid ‘antifa’ protest fears. The leftist incursion was an online myth.

Anyhoo, as I said, I’ve been watching how corporations are responding, but unlike Stefan, I haven’t perceived silence at all – quite the opposite.  But, what corporations are saying is interesting.  These are the articles that captured my attention:

Corporate Voices Get Behind ‘Black Lives Matter’ Cause (“Some companies were more cautious in their approach. Target, which is based in Minneapolis and was hit by looting at a store there last week, described ‘a community in pain’ in a blog post but never mentioned the word ‘black.’”)

What CEOs Said

…

Both as a corporate governance scholar and an American citizen, I’ve spent the last few days riveted by Twitter’s decision to go to war with the President of the United States.

And it was a decision; after Twitter posted its first fact-check of a Trump tweet, its VP of Global Communications said, “We knew from a comms perspective that all hell would break loose.”

All hell did.  Trump responded with an executive order (whose legal effect is, ahem, questionable), and Twitter’s stock price plummeted.  But Twitter doubled-down, hiding a Trump tweet for glorifying violence, and doing the same when the White House twitter account repeated the same quote.

We’ve talked a lot here about corporate political stances, and – especially in the context of Nike and Colin Kaepernick — how despite appearances, they’re often justifiable on a theory of shareholder value maximization.

A similar argument could be made about Twitter’s conduct.  It has come under increasing pressure to control its platform; trolls and bots and harassment by some users have driven away others.  Trump’s tweets about Joe Scarborough specifically led to a torrent of criticism, essentially begging Twitter to hold Trump to the…

So, this blog post about DoorDash and pizza arbitrage has been making the internet rounds; you’ve probably already seen it, but if not, it’s well worth a read.  It highlights some of the irrationalities of the platform-food-delivery business – irrationalities that have resulted in losses despite the fact that the pandemic has caused business to boom.  UberEats and GrubHub are now considering a merger, and I suppose their lack of profit might be interpreted as the result of predatory pricing, which would raise antitrust concerns, but honestly it looks more like they are just having trouble making the business model work. 

So what struck me about the blog post was this:

You have insanely large pools of capital creating an incredibly inefficient money-losing business model. It’s used to subsidize an untenable customer expectation. You leverage a broken workforce to minimize your genuine labor expenses. The companies unload their capital cannons on customer acquisition, while this week’s Uber-Grubhub news reminds us, the only viable endgame is a promise of monopoly concentration and increased prices. But is that even viable?  

Third-party delivery platforms, as they’ve been built, just seem like the wrong model, but instead of testing,

…

It’s long been blackletter law that a Section 10(b) claim can be rooted in statements that are not targeted to the company’s investors, and are not specifically about the health of the company, so long as investors rely on them, or the speaker should have expected such reliance.  See, e.g., In re Carter-Wallace, Inc. Sec. Litig., 150 F.3d 153 (2d Cir. 1998); Semerenko v. Cendant Corp., 223 F.3d 165 (3d Cir. 2000).  As a result, even product advertisements and other consumer-facing material can form the basis of a securities fraud claim.  Notably, in the recent case of Roberts v. Zuora Inc. et al., 2020 WL 2042244 (N.D. Cal. Apr. 28, 2020), the plaintiffs based their 10(b) claims both on the company’s statements to investors and its general product advertisements, and the court – denying a motion to dismiss – drew no distinction between the two.

Which is why I thought Background Noise? TV Advertising Affects Real Time Investor Behavior by Jura Liaukonyte and Alminas Zaldokas was so interesting (you can read the paper at this SSRN link, and their summary at CLS Blue Sky Blog here).  In the paper, the authors find that after…

I’ve blogged a lot about the complexities of Delaware’s controlling-stockholder jurisprudence (here, here, here, here, here, and here), and written an essay on the subject.  The latest Chancery opinion on this issue, Gilbert v. Perlman, represents another, unusual, addition to the genre.

In Gilbert, Francisco Partners was the controlling stockholder of Connecture with a 56% stake.  During its tenure, however, it worked closely with Chrysalis Ventures, a firm that it had coordinated with in prior ventures, and who was the next largest Connecture blockholder with an 11% interest.  A Chrysalis partner, Jones, also served as Connecture’s Chair.  Eventually, Francisco proposed to buy out the minority Connecture shareholders in a deal that was neither conditioned on the approval of an independent director committee nor a majority of the minority shareholder vote.

According to the proxy statement, the Connecture board, in the course of its internal deliberations, considered it important that Chrysalis support any proposed transaction.  Chrysalis suggested that it be permitted to roll over its shares in the new entity, which would, it believed, allow Francisco to bump up the price for the remaining minority shareholders.  A few days later,…

Much of the SEC’s disclosure regime is predicated on the idea of market efficiency: it’s not necessary that companies constantly repeat publicly available information, because that information is already known to, and absorbed by, market participants.  The problem is, even the SEC is never quite sure how far to run with this. 

Case in point: the SEC’s proposal to eliminate Item 303(a)(5), which requires that registrants provide a tabular disclosure of contractual obligations.  As the SEC explains, “We do not believe that eliminating the requirement would result in a loss of material information to investors given the overlap with information required in the financial statements and our proposed expansion of the capital resources requirement, discussed above in Section II.C.2.   As many commenters pointed out, much of the information presented in response to this requirement overlaps with U.S. GAAP and is therefore included in the notes to the financial statements…”

 Both the SEC’s Investor-As-Owner subcommittee, and the Council of Institutional Investors, have objected to the proposal.  For example, the Investor-As-Owner Subcommittee says:

Investors and analysts, however, have informed the subcommittee that the information in the current tabular format is useful and material.  While much of the information can be

…

All right, it’s probably a little premature to call it an “age of direct listings”; we’ve had Spotify and Slack and I guess some company called Watford Holdings and Airbnb was reportedly considering one, and in the Before Times a lot of VCs were making noises about preferring direct listings to traditional IPOs, but in the immediate future I don’t expect to see a lot of new firms going public either way (notwithstanding the occasional ambitious SPAC), so these issues may turn out to be nothing more than a curiosity. 

BUT!  In the meantime!  We have Pirani v. Slack Technologies, 2020 WL 1929241 (N.D. Cal. Apr. 21, 2020), in which a district court refused to dismiss Section 11 claims brought by investors who purchased Slack shares after the company listed directly on the NYSE. And, it turns out, direct listings raise a lot of unsettled questions under Section 11.

 Slack, like a lot of companies these days, never formally sold its stock to the public; instead, it distributed stock in exempt transactions, subject to various securities law rules that permit these kinds of distributions but generally require the investors to hold their stock for some period…