February 2, 2021

Market Mania: Starlings, Shorts & Stonks

During the initial lockdown last spring, my wife & I became enamored with bird watching.  We hung several different feeders in our back yard and spent a lot of time on our porch watching all sorts of cool birds. Yes, we party hard here in the Cleveland suburbs!

Anyway, we’ve attracted a real menagerie. We’ve kept the feeding going during the winter & have seen some new arrivals, all of which were more than welcome – that is, until the European starlings showed up.  I’ve quickly learned to hate these guys. They travel in large flocks, poop everywhere and bully all the other birds off the feeders.  We’re trying to get rid of them, but it looks like it’s going to take some effort.

Nobody invited the starlings to the party, and now they’re why the other birds can’t have nice things.  Their presence at our bird feeders made me think of last week’s stock market shenanigans involving GameStop, AMC and a handful of other “stonks.” My annoyance at this situation is similar to my annoyance with the starlings in my back yard. After all, nobody invited people who treat the stock market like a casino to the party, and they’re a big reason why a lot of companies & stakeholders can’t have nice things.

The only thing is, like a lot of other people, I’m not exactly sure who the starlings are in this scenario. Are they the “Eat the Rich” crowd from Reddit – or are they the billon dollar hedge funds that publicly paraded their short positions & ended up being taken down by the Internet’s sans-culottes? Maybe the starlings are the trading apps, the clunky way Wall Street clears trades, or even Donald Trump supporters? Perhaps the answer is “all of the above.”

It’s going to take me a while to sort this out in my own head. Based on the recent joint statement that the SEC commissioners issued on the situation, it looks like it’s going to take the agency some time as well. This whole thing is far from simple – check out this NYT article to get a sense of the challenges that the SEC faces here. So for now, I guess all we can do is just sit back & enjoy the memes and the free chicken tenders.

SEC Makes Some Interesting Appointments

The SEC announced yesterday that HLS professor John Coates has been appointed to serve as Acting Director of Corp Fin.  It’s an interesting appointment – the head of Corp Fin has traditionally been a practitioner, while Coates is a long-time academic. Of course, he’s also a former Wachtell M&A lawyer, so it’s not like he doesn’t know his way around a deal.

The SEC also announced the appointment of Satyam Khanna as Senior Policy Advisor for Climate and ESG. Khanna  previously served as counsel to former commissioner Robert Jackson. In his new role, Khanna will “advise the agency on environmental, social, and governance matters and advance related new initiatives across its offices and divisions.” His appointment is another signal that ESG issues and rulemaking projects are likely to feature prominently on the SEC’s agenda.

Transcript: “Streamlined MD&A and Financial Disclosures – Early Considerations”

We have posted the transcript for the recent webcast – “Streamlined MD&A and Financial Disclosures: Early Considerations.”

John Jenkins