We’ve been blogging about the bills in Congress seeking to change stock buybacks practices (here’s the latest). Expounding on prior research he conducted last summer, SEC Commissioner Robert Jackson sent this letter to the Senate last week providing further evidence to show that corporate insiders are using buybacks to cash out.
Here’s a MarketWatch article noting that, at a Senate Banking Committee hearing, SEC Chair Jay Clayton said that he thought Jackson’s results may be coincidental, since that timeframe may coincide with when companies open their trading window for insiders. To investigate Clayton’s comment about it being potentially coincidental, Jackson extracted data on all buybacks for a two-year period – estimating the length of pre-announcement trading blackouts, since companies have different policies.
But even after taking pre-announcement differences into account, Jackson found that, on average, executives sell more stock after they announce a buyback than on an ordinary day. 38% of the companies conducting buybacks had no trading in the 30 days prior to their buyback announcement date – but a majority had insiders making their own transactions during the eight days after a buyback was announced.
More on “SEC Seeks Contempt Order for Tesla’s Musk Over New Tweet”
Recently, Liz blogged about Tesla’s Elon Musk tweeting some production stats without getting internal pre-approval and the SEC subsequently filing a motion for contempt. This CNBC article contains some analysis of how the court may rule. Yesterday, Musk’s responded that the SEC is infringing on his 1st Amendment “freedom of speech” rights and that his tweets didn’t violate his settlement agreement with the SEC (here’s his court filing). I imagine we will get a court ruling soon.
Meanwhile, institutional investors have filed a lawsuit in the Delaware Court of Chancery seeking a declaratory judgment against Elon and Tesla’s board for violation of their fiduciary duty, injunctive relief relating to the Twitter use and monetary damages…
March-April Issue: Deal Lawyers Print Newsletter
– Two Recent Delaware Decisions Provide Practical Transaction Guidance
– Antitrust Merger Review: The Worst Case is Worse Than You Think
– Cross-Border Carve-Out Transactions: Due Diligence and Purchase & Sale
– Shareholder Activism: Nine Lessons Learned
– The Couple in the Conference Room
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