After the end-of-semester crunch and a bout with Covid, I’m back to reading Hilary Allen’s Driverless Finance.  Chapter three, focused on Fintech and Capital intermediation seems prophetic today.  In it, she explains how stablecoins could lead to fiat currency runs and fluctuations.  She also explains how concerns about a particular cryptoasset could trigger panics affecting other cryptoassets.

This brings me to our world today.  TerraUSD, a stablecoin, has become unstable.  It aimed to hold its value at $1 per coin to allow crypto enthusiasts to park cryptoassets in TerraUSD, avoiding market fluctuations.  For most of the past year, TerraUSD largely achieved this goal.  But then it didn’t.  As of Wednesday, TerraUSD traded at $0.23.  To help readers see the carnage, check out these charts, first the year and then the last seven days.

Allen predicted that these sorts of things could happen.  The Wall Street Journal described the panic briefly spreading to another stablecoin, explaining that the “collapse saddled investors with billions of dollars in losses. It ricocheted back into other cryptocurrencies, helping drive down the price of bitcoin. Another stablecoin, tether, edged down to as low as 96 cents on Thursday before regaining its peg to the…

As everyone knows by now, in In re Tesla Motors Stockholder Litigation, VC Slights refrained from engaging all the meaty doctrinal issues.  He did not decide whether Elon Musk is a controlling shareholder of Tesla; he refused even to decide whether a “controller” is a different thing than a “controlling shareholder,” see Op. at 81 n.377.  He didn’t decide whether the Board was majority independent, going so far as to raise the possibility that even a board that operates under serious conflicts may nonetheless “prove” their independence at trial, see Op. at 81 n.378.   He did not decide whether passive investors’ stakes on both sides of a merger may render them not disinterested for cleansing purposes, see Op. at 63 n.311.  Instead, he found it easier to conclude that Tesla’s acquisition of SolarCity was entirely fair, rather than engage with all the thorny legal questions the case raised.

That was sort of a surprise (though you can’t help but wonder how much of that was hindsight, see Op. at 126-27).  Yet in many respects, it was ultimately a very Delaware sort of decision. 

It has long been observed that while liability is rarely imposed on Delaware fiduciaries, the Delaware…

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Below is an interesting and perhaps Twitter-relevant excerpt from Charles Korsmo & Minor Myers, What Do Stockholders Own? The Rise of the Trading Price Paradigm in Corporate Law, 47 J. Corp. L. 389, 394 (2022).

Expressed in the conventional analytical framework, Delaware now protects the stockholder’s entitlement in a public corporation with a liability rule, where the stockholder’s entitlement may be taken in a non-consensual exchange like a merger at any price exceeding the prevailing trading price.

This paradigm shift augurs dramatic change not simply in appraisal, but in all of merger law. Most obviously, the shift will necessarily affect the basic measure of damages in other contexts. Indeed, the Court of Chancery has already confronted this scenario: a breach of fiduciary duty that gave rise to no damages because the transaction was at a premium to the market price. But perhaps the most notable doctrinal reckoning involves Unocal and its progeny, which afford directors the power to defend against the threat of acquisitions where the price is “too low.” That power reached is fullest expression in the 2011 Air Products v. Airgas decision, a ruling that remains controversial. The board of Airgas blocked a $70 acquisition offer from…

I recently posted (here) a link to, and brief overview of, a letter from twenty-two of the nation’s leading professors of law and finance urging the SEC to withdraw its climate disclosure proposal. Brett McDonnell submitted an interesting comment to that post, highlighting a potential tension between espousing views that prioritize shareholder wealth maximization while at the same time rejecting the calls of some of the world’s largest shareholders for greater climate-related disclosures. (Please be sure to read his full comment.) In response, Lawrence Cunningham suggested I post an additional excerpt from the letter, which addresses this issue in more detail. You’ll find that excerpt below. However, this all reminded me of a recent article by Amanda Rose, and so I’ll start my excerpts with a quote from that article.

Traditional asset managers claim their commitment to ESG is motivated by a desire to improve long-term fund performance for the benefit of investors. But agency costs offer an alternative potential explanation: embracing the ESG movement may help asset managers curry political favor, enabling them to fend off greater regulation of the industry; it may advance the personal sociopolitical commitments of those who ran them; or it may offer a way to attract investors to fund offerings without imposing any meaningful limitations on how a fund is managed.

Amanda M. Rose, A Response to Calls for SEC-Mandated ESG Disclosure, 98 Wash. U.L. Rev. 1821, 1824–25 (2021).

Now, on to the letter (the full version is here):

Look, I know the Tesla/SolarCity decision just came down, and I’m, like, contractually obligated to blog about it, but to tell you the truth, this was the last week of classes, exams are next week, and I just got back from a conference thing, so comments on the Tesla decision will have to wait (though, yes, I did appreciate the wink in footnote 377).

So, proxy solicitations.  Specifically, the Eighth Circuit’s decision in Carpenters’ Pension Fund of Illinois v. Neidorff, 30 F.4th 777 (8th Cir. 2022), which I was alerted to by the Deal Lawyers’ blog.

In Neidorff, the plaintiffs brought a derivative Section 14(a)/Rule 14a-9 claim alleging that Centene Corporation solicited a vote in favor of a merger by way of a misleading proxy statement that failed to disclose known problems with the target company. Rule 14a-9 prohibits proxy statements from:

containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct

…

As per the relevant press release (via Lawrence Cunningham): “Twenty-two of the nation’s leading professors of law and finance this week wrote the Securities and Exchange Commission (SEC) to dispute the agency’s authority to adopt a new far-reaching climate disclosure regime and to urge an immediate withdrawal of the proposal.” You can find the full letter here. Here is a hopefully useful excerpt:

The following analysis raises concerns that the Proposal is neither necessary nor appropriate for either investor protection or the public interest and will not promote other statutory goals. The SEC would do better to withdraw the Proposal and revisit the subject with a fresh approach focused on America’s ordinary investors rather than an elite global subset. The three parts of this letter address each statutory issue in turn, as follows:

I. “Investor Demand” versus “Investor Protection”
    A. Investor Varieties: Diverse Institutions and Individuals
    B. Climate Shareholder Proposals: Few Are Made, Most Lose, Many Are Political
    C. The Ample Supply of Climate Disclosure
    D. Correlation of Climate Practices with Economic Performance Is Not Causation
II. Authority of Others and the “Public Interest”
    A. The Environmental Protection Agency’s Statutory Jurisdiction
    B. State Corporate Law Prerogatives on Purposes…