By Dennis McCarthy – (213) 222-8260 – email@example.com -
US Public companies should take note. A key US Supreme Court ruling which backstops most securities fraud litigation is being challenged.If the Supreme Court reverses this ruling, the plaintiff’s securities litigation bar loses an important tool.
Since 1986, securities fraud cases have relied on a key ruling that stock prices reflect all publicly available information.This is known as the efficient market hypothesis.
Applying the efficient market hypothesis enabled the US Supreme Court in Basic v. Levinson to conclude that any shareholder buying or selling stock while fraudulent information was publicly available suffered from that fraudulent information.A shareholder didn’t have to read and rely on the specific fraudulent information, it was already reflected in the stock price.
Now, compare that position with a tougher standard which some believe is the correct standard.
What if, in order to sue for securities fraud, a shareholder had to show that he actually read and relied on the fraudulent information.Given that relatively few shareholders, buying or selling, actually read company’s publicly available information, that would set a much higher standard.
That standard would make today’s class action securities fraud lawsuits less likely.It would remove key leverage used by the plaintiff’s bar.
To give you an idea of the magnitude of what’s at stake here, Cornerstone Research, a financial and economic consulting firm, determined that there were over 3000 securities litigation cases brought over the last 15 years.During this period, companies and their insurers paid over $73 billion in settlements and judgments.The plaintiff’s bar collected $17 billion in fees.
So the stakes are high and many of us noticed when a company involved in a long-running securities litigation, petitioned the US Supreme Court to overturn the decision in the “Basic” case and apply the tougher standard.
We’ll be watching whether the Supreme Court takes up the issue and, if it does, whether this key ruling applying the efficient market hypothesis will be overturned.
I’ve attached an excellent article on this topic by Steven M. Davidoff writing in The New York Times “Dealbook”.
Please contact me to help your company to complete any capital market project.
Postscript: In my research, I came across a blog “The D&O Diary” with several articles providing background on trends in securities litigation following the demise of the law firm Milberg Weiss and a review of the book “Circle of Greed” about the fall of Bill Lerach.
Corporate Governance Webcasts: A Complimentary Series2014 Proxy Season: Strategically Preparing for Your Fall and Winter
The fall is a critical period for US public companies and their management and directors to become educated and organized for the 2014 Proxy Season.During this 60-minute program, Latham & Watkins and Georgeson join together again to provide recommendations on the pro-active steps companies should consider taking during this period in order to prepare for the 2014 Proxy Season. Topics that will be covered include:
Say-on-Pay Advance Preparation: lessons learned in the first three say-on-pay vote seasons; engagement with key institutional investors regarding executive compensation policies; preparation for compensation committee deliberations; dealing with new policies from the proxy advisory firms and more compensation proposals from shareholders; the impact of the new NYSE and Nasdaq listing standards on Compensation Committee advisor independence.
Proxy Season Advance Preparation: constructive engagement with key institutional investors and the proxy advisory firms to identify and seek early resolution of corporate governance issues; consideration of proposed SEC rulemaking; and potential proxy season litigation.
Advance Preparation for other hot button shareholder proposals such as political contributions and lobbying, board declassification, independent chairmen, proxy access, environmental, social and other governance issues.
For more information and questions about this event, please contact: Michele Bravo
Latham & Watkins is a leading global law firm dedicated to working with clients to help them achieve their business goals and overcome legal challenges anywhere in the world. The firm has earned considerable market recognition based on a record of landmark matters and a unified culture of innovation and collaboration. From a global platform of offices covering the world’s major financial, business and regulatory centers, the firm’s lawyers help clients succeed. For more information, visit www.lw.com.
Georgeson is the world’s foremost provider of strategic shareholder consulting services to corporations and shareholder groups working to influence corporate strategy. We offer unsurpassed advice and representation in annual meetings, mergers and acquisitions, proxy contests and other extraordinary transactions. In global transactions, our capacity and network is unmatchedOur core proxy expertise is enhanced with and complemented by our strategic consulting services, as well as by the Georgeson inVU™ platform, a software tool that provides insight into investor ownership and voting profiles. For more information, visit www.georgeson.com.
By Dennis McCarthy – (213) 222-8260 – firstname.lastname@example.org -
Stats now confirm what many of us in the M&A business have recognized for some time (link). Middle market M&A activity has gotten stronger over the last several quarters.
The stats that I mention are courtesy of Mergermarket, the well-regarded source for M&A data. Mergermarket reports that middle market M&A value is up 40% so far in 2013 vs the same period last year as reported in its “Q1-Q3 M&A Trend Report”.
Stats like these are valuable but they’re a lagging indicator of deal activity because M&A projects typically take months from initiation to completion. This report captures M&A deals that closed during this last three quarters ended September 30, 2013. Companies embarked on those projects many months before, many in 2012, for example.
Now, another point to consider. The fourth quarter of last year was a very strong quarter for M&A deals because deals closed in 2012 qualified for favorable tax treatment. So the full year 2013 results may not show such a dramatic increase because last year’s fourth quarter was such a big M&A quarter.
I think the trend of increasing middle market M&A activity will continue; the conditions driving the trend remain favorable.
I’ve attached a link to the Mergermarket report below.
Please contact me to help your company to successfully complete an M&A deal or any capital market project.
As a timely reminder to those of us who work with public companies, the SEC just charged an investor relations person at a public company with selective disclosure of what was material non-public information.
Those of us who’ve worked with public companies for many years recall the outrageous abuses which prompted Reg FD in order to promote full and fair disclosure of material financial information.
Even after Reg FD, however, occasionally company executives forget or get sloppy about following the disclosure rules strictly.
This case, then, is a valuable reminder to us all. Please click here to take you to the article by Holland & Knight which describes the circumstances of the case.
Amendments to Delaware Merger Statutes:
An Arrow in Your Quiver, Not a Silver Bullet
The Delaware State Bar Association recently proposed amendments to the Delaware General Corporation Law (DGCL) intended to facilitate the use of tender offers in acquisitions of publicly traded corporations. If adopted, these amendments will, in many circumstances, permit the purchaser of a simple majority of a target’s outstanding shares (as opposed to the current 90 percent threshold) to effect a short-form merger immediately, saving substantial expense, eliminating the delay associated with SEC review of disclosure materials and facilitating financing for leveraged transactions.
Click here to register for this webcast. A confirmation message will be sent to your email address with instructions for logging on to the webcast.
In this 60-minute webcast, we will explore the intended benefits of the proposed amendments, why they represent a positive step in the recent evolution of tender offer practice, and what private equity firms in particular need to consider regarding this transaction structure.
For more information and questions about this event, please contact Michele Bravo at email@example.com or +1.213.892.3054.
Latham & Watkins LLP is a leading global law firm dedicated to working with clients to help them achieve their business goals and overcome legal challenges anywhere in the world. The firm has earned considerable market recognition based on a record of landmark matters and a unified culture of innovation and collaboration. From a global platform of offices covering the world’s major financial, business and regulatory centers, the firm’s lawyers help clients succeed. For more information, visit www.lw.com.