April 15, 2011

SEC to Ease Private Placement Constraints for Pre-IPOs?

Last week, this WSJ article reported how Rep. Darrell Issa had sent this 17-page letter to the SEC on March 24th regarding small business capital formation, particularly in the pre-IPO context. That set off a barrage of news coverage. Last week, SEC Chair Schapiro responded with this 26-page letter, indicating that she has ordered a review of all the rules affecting capital formation for small companies and is reconsidering current restrictions on communications in IPOs. Learn more in the March-April issue of The Corporate Counsel that is being dropped in the mail today.

Small Company Capital Formation Act of 2011: Regulation A Revival?

Here’s news culled from this Morrison & Foerster memo:

On March 14th, Representative David Schweikert (R-AZ) introduced the Small Company Capital Formation Act of 2011 in the U.S. House of Representatives. The bill seeks to increase the offering threshold from $5 million to $50 million for public offerings of smaller companies exempt from registration under the Securities Act pursuant to Regulation A. The bill also will require the SEC to review the threshold every two years.

Activists Target Companies With Market Caps Over $50 Billion

From this memo by Marty Lipton of Wachtell Lipton:

In a speech to the Council of Institutional Investors last week, Nelson Peltz, one of the most successful of the activist investors, said the recent changes in corporate governance would enable him to make investments in the heretofore “untouchables”–companies with market capitalizations over $50 billion. Mr. Peltz noted that the new governance rules give activists more tools with which to pressure companies, noting that larger companies provide bigger profit opportunities than smaller companies.

Activist investors with significant records of success will be able to use the new governance rules to convince institutional investors, like the members of the Council of Institutional Investors, to join them in pressuring companies to change their business strategies to those advocated by the activists, whether or not they are in the best interests of the long-term success of the companies and their long-term investors.

There has been a notable increase in hostile takeover and activist investor activity this year. If the present favorable market conditions for this activity continue, there will be a further increase. There is also little doubt that Mr. Peltz’s prediction that the targets will be among the largest companies is also correct. All companies, even the very largest, should have up-to-date plans for dealing with activists and strategies to avoid inviting the notice of activists.

Heading Out for Spring Break!

I’m headed out for a week off – Spring Break ’11, doing the college campus tour thing with my oldest son. Reminds me of my youth, working in Fort Lauderdale for a spring break season after I graduated college. That’s back when Lauderdale was popular for spring break. Remember Spuds McKenzie?


– Broc Romanek