May 20, 2021

Stock Buybacks: Back in a Big Way

Last year, Lynn blogged about a Sanford Bernstein report that suggested stock buybacks were fading as a result of the pandemic & predicted that they were likely to be “severely curtailed” for the next several years.  That seemed like a safe bet at the time, particularly when the CARES Act banned recipients of government bailouts from engaging in buybacks.

But according to this WSJ article, that prediction turned out to be about as good as the infamous Sports Illustrated cover that predicted the Cleveland Indians would win the AL pennant in 1987. A year later, and this excerpt says that buybacks are back with a vengeance:

After a year of hoarding cash, American corporations are ready to reward investors again. Companies across industries have been buying back stock and raising dividends at a brisk pace this year. That is a sharp reversal from 2020, when they suspended or cut such programs, warning of the urgent need to preserve liquidity in the early stages of the Covid-19 pandemic.

Already this year, U.S. companies have authorized $504 billion of share repurchases, according to Goldman Sachs Group data through May 7, the most during that period in at least 22 years. The pace of announcements trounces even the 2018 bonanza that followed the sweeping tax overhaul of late 2017.

Cleveland finished the 1987 season with a record of 61-101, 37 games behind the Tigers in the AL East. Still, I’m hard pressed to say Sports Illustrated did worse on that call than Sanford Bernstein did on this one.

ESG Disclosure Litigation: Derivative Claims Fizzle

Last year, it appeared that derivative claims based upon allegedly false or misleading corporate statements about diversity and other ESG-related areas might be the next big thing from the plaintiffs’ bar. But this Sidley blog says that, so far, these cases have fizzled.

Complaints in these cases generally allege breaches of fiduciary duty arising out of directors’ failure to address board diversity, and – in order to get into federal court – claims under Section 14(a) of the Exchange Act premised on allegedly false statements about diversity efforts in proxy statements. This excerpt from the blog says that these claims haven’t gotten much traction with courts:

The Facebook case was the first one decided. On March 19, 2021, Magistrate Judge Beeler held that the breach of fiduciary duty claims failed because the plaintiff did not establish that pre-suit demand was excused. In reaching this decision, the court stated that to show that demand would have been futile, the plaintiff needed to plead “actual or constructive knowledge that their conduct was legally improper” and that, in reviewing the actual composition of the board which included two black directors, four women directors and one director who is openly gay, the plaintiff had not satisfied the requirement.

These same facts also helped defeat the Section 14(a) claim of misleading statements about diversity in the company’s proxy. In addition, the court found that the statements in the proxy were immaterial as they were inactionable puffery and further, that there was no corporate loss that could be connected to the statements.

Of particular interest to those following Delaware law is that the court also held that the case had been filed in the wrong forum because Facebook had adopted a Delaware Chancery forum selection clause which was applicable to these claims.

The case against the board of Gap Inc. was similarly dismissed on April 27, 2021, on the basis of the company’s forum selection bylaw, which designated the Delaware Court of Chancery as the exclusive jurisdiction for derivative claims or breach of fiduciary duty claims. The plaintiff argued that applying the forum selection bylaw to this case was against public policy as it deprived her of the right to assert her Section 14(a) proxy statement claim, which can be brought only in federal court. Magistrate Judge Sallie Kim rejected the plaintiff’s arguments on the grounds that the plaintiff was not without remedy as she could bring her breach of fiduciary duty state law claims in Chancery Court.

The blog goes on to note that the more significant aspect of these decisions may be that both ND Cal. courts upheld Delaware forum selection bylaw provisions even when the result was that the plaintiffs’ Section 14(a) claims had no forum in which they could be brought. I recently blogged about that aspect of these decisions over on

Investor Conferences: Most Still Virtual for 2021

The country is finally starting to open up again as the pandemic begins to fade and the percentage of the vaccinated population continues to grow, but this IR Magazine article says that most sponsors of investor conferences aren’t ready to go back to fully in-person or hybrid events just yet:

While some investment banks are preparing for a tentative return to small in-person events in the coming months, the majority of investor events will likely continue to be held virtually this year, according to a study conducted by OpenExchange. Three out of four investor conferences during the second half of 2021 will be entirely virtual, according to OpenExchange’s survey of 139 decision-makers at 30 financial institutions.

The article says that sponsors are preparing for hybrid events, with 1/3rd expecting to hold their first hybrid investor conference by October and 2/3rds by the end of the year. Going forward, hybrid formats for investor conferences are expected to be the new normal, with 70% of 2022 events and 58% of 2023 events expected to have both physical and virtual components.

John Jenkins