August 15, 2019
Survey: Ending Blackout Periods
Every few years, we survey the practices relating to blackout & window periods (we’ve conducted over a dozen surveys in this area). Here’s the results from our latest one:
1. Which factor is most important in allowing a blackout period to end one day after an earnings release:
– Filer status being large accelerated filer and a WKSI – 19%
– Number of analysts providing coverage on company – 23%
– Average daily trading volume for the company – 10%
– None of the above is important – 48%2. How many analysts covering the company is considered sufficient to allow blackout period to end one day after an earnings release:
– 1-5 – 3%
– 6-10 – 26%
– 11-15 – 13%
– 16 or more – 6%
– None of the above is important – 52%3. What average daily trading volume is considered sufficient to allow blackout period to end one day after an earnings release:
– 1% of its outstanding common stock – 7%
– $5 million or more in average daily trading volume (daily trading volume x stock price) – 3%
– $10 million or more in average daily trading volume (daily trading volume x stock price) – 6%
– $25 million or more in average daily trading volume (daily trading volume x stock price) – 15%
– None of the above is important – 69%
Please take a moment to participate anonymously in these surveys:
Dual Class: CII Names & Shames “Dual-Class Enabler” Directors
Last week, the CII published a list of 159 directors who served on boards of 2018 & 2019 IPO companies that went public with dual-class share structures & no sunset provisions. The CII’s “Dual-Class Enablers Spreadsheet” identifies the other public boards on which these directors serve. Here’s an excerpt from the CII’s press release discussing its rationale for the “naming & shaming” approach:
“The board that brings a company to public markets with unequal voting rights is responsible for the decision to disempower public shareholders,” said CII Executive Director Ken Bertsch. “The board’s decision can be a red flag of discomfort with accountability to outside shareholders.” He said that investors “may want to raise concern about that in their engagement with other boards on which these directors serve. Some investors may choose to vote against directors of single-class companies who participated in pre-IPO board decisions to adopt dual-class equity structures without sunsets elsewhere.”
The release also says that the list may have a deterrent effect on private companies considering dual class structures. Perhaps that’s the case. After all, this is the first time that the CII has taken action that provides a potential reputational downside for the directors of these companies. But personally, I’m skeptical. I still think that companies will only be deterred from going public with dual class structures when investors finally abandon their “buy now, whine later” approach to investments in them.
BlackRock: “Remain Calm! All is Well!”
Remember my recent blog about BlackRock’s defense of the size of its investment positions in public companies? Well, it published another blog on the Harvard Governance Forum that defends the voting power those investments represent. BlackRock reviews various proxy voting scenarios – elections, M&A, say-on-pay & shareholder proposals and the average margins of victory for each. From that data, they draw this conclusion:
The view that asset managers are ‘determining’ the outcome of proxy votes is not supported by the data. The vast majority of ballot items are won or lost by margins greater than 30%, meaning that even the three largest asset managers combined could not change the vote outcome. While the small subset of votes on shareholder proposals tend to be closer, the considerable variation in voting records among asset managers negates the concept of a multi-firm voting bloc as the ‘swing vote”.
In other words, – “most votes aren’t close, so you shouldn’t worry that we have the ability to determine the outcome of all close votes.” These blogs certainly suggest that BlackRock is worried about the potential for regulatory intervention. But I don’t think they’re helping themselves by putting forward arguments that are so specious you can practically see beads of sweat forming on their upper lip.
– John Jenkins