With the President hyping it up on social media that the government’s acquisition of Intel stock will not be the last we see of its equity stake in Corporate America (see this Reuters article and this WSJ article about remarks from Kevin Hassett, the National Economic Council director), all eyes are on the first few companies who are striking deals. Yesterday, Intel filed this Form 8-K to disclose details of its agreement with the Department of Commerce – through which the US Government is becoming the company’s largest stockholder, with a 9.9% interest.
In addition to providing a description of the transaction, which I’m sure many folks are reading with interest, the 8-K updates the Company’s previously disclosed risk factors to reflect the deal’s conditions and impact. Here are a few that jumped out from the Item 8.01 disclosure:
•The transactions are dilutive to existing stockholders. The issuance of shares of common stock to the US Government at a discount to the current market price is dilutive to existing stockholders, and stockholders may suffer significant additional dilution if the conditions to the Warrant are triggered and the Warrant are exercised.
•The US Government’s equity position in the Company reduces the voting and other governance rights of stockholders and may limit potential future transactions that may be beneficial to stockholders. The transactions contemplated by the Purchase Agreement may result in the US Government becoming the Company’s largest stockholder. The US Government’s interests in the Company may not be the same as those of other stockholders. The Purchase Agreement requires the US Government to vote its shares of common stock as recommended by the Company’s board of directors, subject to applicable law and exceptions to protect the US Government’s interests. This will reduce the voting influence of other stockholders with respect to the selection of directors of the Company and proposals voted on by stockholders. The existence of a significant US Government equity interest in the Company, the voting of such shares either as directed by the Company’s board of directors or the US Government, and the US Government’s substantial additional powers with respect to the laws and regulations impacting the Company, may substantially limit the Company’s ability to pursue potential future strategic transactions that may be beneficial to stockholders, including by potentially limiting the willingness of other third parties to engage in such potential strategic transactions with the Company.
•The Company’s non-US business may be adversely impacted by the US Government being a significant stockholder. Sales outside the US accounted for 76% of the Company’s revenue for the fiscal year ended December 28, 2024. Having the US Government as a significant stockholder of the Company could subject the Company to additional regulations, obligations or restrictions, such as foreign subsidy laws or otherwise, in other countries.
As this NYT article notes, the government isn’t acting like a traditional hedge fund activist in the arrangements it has struck to-date – and the typical playbook doesn’t apply. One wrinkle is considering how director duties play out. This 2017 article discusses director duties in the context of the government ownership interests that resulted from TARP.
Public communications & disclosure may also need extra thought. Outside of its SEC filings, Intel is of course praising the deal, and its stock rose the day the deal was announced. While it’s not a novel concept to be enthused about a deal while also having to warn investors of the downsides, it’s less common to include quotes from other companies in the press release. And companies may need to take into account not only the threat of securities litigation from traditional stockholders, but also the pros & cons of this new flavor of “government backing” – and how their comments (or lack of comments) might impact the company’s ranking on the loyalty list.
They say that “good things come to those who wait.” I sure hope that’s the case when it comes to getting a Director in place for the SEC’s Division of Corporation Finance!
In an informal, anecdotal poll, nobody I talked to could remember it taking this long to get someone into the position. For the last two administration changes, the announcements landed in June of 2021 (Renee Jones) and May of 2017 (Bill Hinman) – but there are lots of factors that make things different this time around.
Last week, the SEC named a new Director for the Division of Enforcement, so maybe we’ll also hear soon about Corp Fin. Until then, it is good to know that Cicely LaMothe continues to serve well as Acting Director. And despite the other common saying about waiting – “a watched pot never boils” – I’ll continue to check the SEC’s newsroom each day…
You might recall that in the Macquarie case last year, SCOTUS said that a company’s “pure omission” to disclose information concerning known trends required by Item 303 of Regulation S-K could not serve as the basis for a private securities fraud claim. This was a big win for companies. But as John cautioned when the case came down, plaintiffs could potentially get creative with casting disclosures as “misleading half-truths” to get around the Macquarie limitation.
As a non-litigator, I had not fully appreciated how this plays out procedurally. At the class certification stage, plaintiffs still want to show a case involves omissions, because in omissions-based class certifications, the plaintiffs don’t have to prove reliance and resulting damages. So, according to this Sullivan & Cromwell memo, it is more good news for companies that the 6th Circuit Court of Appeals recently narrowed the path to class certification for “mixed” cases that allege both omissions and misrepresentation.
In In re: FirstEnergy Corp Securities Litigation, the court held that plaintiffs have to show that the case “primarily” involved omissions in order to get the benefit of the easier certification standard. The court also articulated a narrow 4-part test to determine whether statements are “omissions” and whether the standard is met. Among other things, it also said that when a company doesn’t disclose misconduct but makes generic and aspirational statements about its ethics and governance, that’ll be considered a misrepresentation – which makes it harder for the class to be certified. The S&C memo explains what the case as a whole means for companies:
Defendants in securities fraud actions should carefully scrutinize whether a complaint truly alleges omissions under the factors the Sixth Circuit identified. Indeed, in light of the Supreme Court’s holding in Macquarie Infrastructure Corp. v. Moab Partners, L.P. that “pure omissions” are not cognizable under Section 10(b) of the Exchange Act and that plaintiffs instead must identify a statement that is false or misleading,[16] it is not clear how, if at all, the Affiliated Ute presumption could ever apply.
The decision also provides a critical defense in so-called event-driven securities litigation. In such cases, plaintiffs often try to transform any negative company event (such as a data breach) into securities fraud by pointing to generic statements touching on the subject of that negative event (such as committing to protect client data). Following the Supreme Court’s 2021 decision for S&C client Goldman Sachs in Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System,[17] which clarified that the “generic nature of a misrepresentation” is “important evidence of a lack of price impact” under the Basic presumption,[18] plaintiffs have tried to seek shelter under the Affiliated Ute presumption in event-driven cases. The Sixth Circuit’s decision cuts off that path.
The plaintiffs in this case will get another bite at the apple to move forward under the “misrepresentation” class certification standard – but the S&C memo points out that in several recent cases, defendants have succeeded in rebutting the Basic presumption by showing an absence of price impact. In other words, they’ve showed that the alleged misrepresentations did not actually impact the market price of the stock.
All that said, you do still need to think about “known trends” and potential “omissions” allegations when you’re drafting disclosure. As John blogged last year, the Macquarie decision didn’t affect the SEC’s ability to bring an enforcement action, and the class certification piece obviously doesn’t apply in that context either.
When the DOJ resumed foreign bribery investigations and released updated FCPA Enforcement Guidelines, the narrowed focus of enforcement on “matters that relate to U.S. strategic interests” caused the DOJ to close “nearly half of its foreign-bribery investigations to align with new guidelines.” Earlier this month, the DOJ unsealed its first FCPA enforcement action and issued its first declination since resuming enforcement. The updated guidelines directed FCPA investigations and enforcement actions to focus on a non-exhaustive list of four factors.
This WilmerHale alert notes that the “conduct involved in the indictment and in the declination does not appear to squarely fit into the four named factors, suggesting that the FCPA Unit will not be strictly confined by these factors in practice.” It describes the circumstances surrounding the indictment and the declination and then shares key takeaways for companies, a few of which are below:
– Given the DOJ’s stated prioritization of cartels and TCOs, the recent indictment may be an indication that conduct in Mexico and elsewhere in Latin America will receive greater scrutiny by U.S. law enforcement authorities. Companies should ensure that appropriate compliance resources are devoted to their activities in the region.
– Interestingly, there is no explicit indication in the indictment that the relevant companies were competing with U.S. companies or that U.S. companies were harmed in any way, despite the June Guidelines’ emphasis on limiting undue burdens on American companies that operate abroad. And, as noted above, any alleged connections to cartels seem unrelated to the conduct at issue.
– Similarly, the declination bolsters the conclusion that the DOJ will continue to pursue enforcement actions for conduct that falls outside the factors outlined in the June Guidelines.
– Finally, the declination demonstrates that the DOJ will continue to issue declinations under the CEP for companies that self-disclose potential FCPA violations, fully cooperate, remediate and disgorge profits relating to the improper conduct.
When it comes to resolutions for personal improvement, it is a toss-up for me whether I’m most ambitious around New Year’s Day or Labor Day. I’ve never really shaken that “back to school” feeling of September being the start of a “new year” – with all of the new & improved routines that entails. With that in mind, the latest episode of the “Mentorship Matters with Dave & Liz” podcast is very well-timed for anyone who is recommitting to “business development” improvements this fall.
In it, Dave and I had a helpful conversation with Stefanie Marrone – who is a Client Development Director at Goodwin and runs The Social Media Butterfly blog – about “building your network & personal brand.” Let me tell you, I have a lot of room for improvement on this topic! But Stefanie breaks it down to be fun and manageable. In this 37-minute episode, we discussed:
1. How mentors have shaped Stefanie’s career, including her views on building a personal brand and the power of social media.
2. Why it is important for attorneys to focus on building a personal brand, and key brand-building steps to take at any stage of their career.
3. How to use LinkedIn and other forms of social media to build a personal brand and develop business as an attorney.
4. Common mistakes that lawyers make on LinkedIn, and how can they fix those mistakes to become “power users.”
5. Steps young lawyers can take to build their professional network in a way that will ultimately be useful to them for business development as a more senior lawyer.
6. How Stefanie’s LinkedIn presence has changed her life and career, and key lessons we can learn from her success with social media.
Thank you to everyone who has been listening to the podcast and sending feedback, and thanks to the terrific guests who have joined us so far! If you have a topic that your think we should cover or guest who you think would be great for the podcast, feel free to contact Dave or me by LinkedIn or email.
Also remember that members can listen to all of the podcasts from TheCorporateCounsel.net team & friends on our archives page! We’ve posted over two dozen episodes this year – and there are a lot of timeless classics to revisit from prior years as well.
That was fast. Yesterday, in response to the Working Group recommendations from mid-week, SEC Chair Paul Atkins unveiled the launch of the Commission’s “Project Crypto” during a speech to the “America First Policy Institute.” The initiative directs the SEC’s policy divisions to work with the existing Crypto Task Force led by Commissioner Hester Peirce, to “swiftly” develop proposals to implement the Working Group recommendations. But it sounds like those in the crypto ecosphere will be able to break through previous roadblocks even before final rules are on the books:
In accord with the PWG Report’s recommendations, I have directed the Commission staff to draft clear and simple rules of the road for crypto asset distributions, custody, and trading for public notice and comment. While the Commission staff works to finalize these regulations, the Commission and its staff will in the coming months consider using interpretative, exemptive, and other authorities to make sure that archaic rules and regulations do not smother innovation and entrepreneurship in America.
Here’s more detail on what Chair Atkins is thinking for some aspects of the new regulatory framework:
I have directed the Commission staff to work to develop clear guidelines that market participants can use to determine whether a crypto asset is a security or subject to an investment contract. Our goal is to help market participants to slot crypto assets into categories, such as digital collectibles, digital commodities, or stablecoins, and assess the economic realities of a transaction. This approach can allow market participants to determine, based upon clear guidelines, whether any outstanding promises or commitments of the issuer cause the crypto asset to be subject to an investment contract.
In addition, it should not be a scarlet letter to be deemed a security. We need a regulatory framework for crypto asset securities that allows these products to flourish within American markets. Many issuers will prefer the flexibility in product design that the securities laws afford, and investors will benefit from the opportunity to earn distributions, voting rights, and other features typical of securities. Projects should not be forced to establish decentralized autonomous organizations and offshore foundations or decentralize too early if this is not their desired plan of action. I am excited to see new use cases for crypto asset securities in commerce, such as the ability to participate in blockchain network consensus with tokenized equities.
Thus, for those crypto asset transactions that are subject to the securities laws, I have asked staff to propose purpose-fit disclosures, exemptions, and safe harbors, including for so-called “initial coin offerings,” “airdrops,” and network rewards. Regarding these sorts of transactions, our goal should be that issuers no longer exclude Americans from their distributions to avoid legal complexity and lawsuits,[14] but instead choose to include Americans to enjoy legal certainty and an accommodating regulatory environment. It is my view that a Cambrian explosion in innovation could occur if we stay true to this course.
The speech also indicates that the Commission is open to working with companies that want to “tokenize” securities – and engage in other yet-to-be-known types of innovation:
While the Commission is actively considering industry requests that could jumpstart innovative activity, we are also contemplating an innovation exemption that would allow registrants and non-registrants to quickly go to market with new business models and services that do not neatly fit within our existing rules and regulations. The Commission will continue to ensure that market participants adhere to certain conditions and requirements designed to achieve the policy aims of the federal securities laws.
Under my vision for an innovation exemption, innovators and visionaries will be able to immediately enter the market with new technologies and business models but will not be required to comply with incompatible or burdensome prescriptive regulatory requirements that hinder productive economic activity. Instead, they will be able to comply with certain principles-based conditions designed to achieve the core policy aims of the federal securities laws. These conditions may include, for example, a commitment to make periodic reports to the Commission, incorporate whitelisting or “verified pool” functionality, and restrict tokenized securities that do not adhere to a token standard that incorporates compliance features, such as ERC3643.[22] I encourage market participants and SEC staff alike to have an eye towards commercial viability when contemplating what various models could look like.
In his speech, Chair Atkins analogized the current need for innovation to the one facing the SEC in the 1960s, when the market transitioned from paper stock certificates to electronic DTC entries. I do wonder whether that was as polarizing at the time as crypto is now. My guess is, probably! Whatever your views on the merits of crypto becoming mainstream, you can’t argue with the fact that the market appears to be poised for some big changes right now.
The question of what Congress will fund next year is still a very open one, since our lawmakers sprinted out of Washington before making much progress on the appropriations bills. Just the same, some of the early activity can give us a sense of what type of budget the SEC will be working with, and which enforcement and rulemaking priorities will get those precious dollars.
As Meredith blogged in June, the SEC had requested that its funding level not change from last year. It’s not too surprising to see that the current subcommittee version of the House appropriations bill would actually reduce the Commission’s funding by about 7% compared to last year. What may be more interesting is the laundry list of items that the bill would “defund” (i.e., the SEC wouldn’t be able to use the appropriated funds for these items):
– SEC. 527. None of the funds made available by this Act may be used to compel a private company to make a public offering under the Securities Act of 1933 by amending the ‘‘held of record’’ definition under section 12(g)(1) of the Securities Exchange Act of 1934.
– SEC. 528. None of the funds made available by this Act may be used to implement any program that requires a national securities exchange, a national securities association, or a member of such an exchange or association to collect and provide personally identifiable information with respect to a retail market participant to meet the requirements relating to an order or a reportable event under section 242.613(c)(7) of title 17, Code of Federal Regulations, or any successor regulations thereof.
– SEC. 529. None of the funds made available by this Act may be used to review or approve the budget for the Financial Accounting Standards Board (FASB) as described in 15 U.S.C. 7219, until the FASB withdraws the Accounting Standards Update on Income Tax Disclosures issued in December 2023 (No. 2023-09).
– SEC. 530. None of the funds made available by this Act may be used to develop, promulgate, finalize, implement, or enforce rulemaking that would, directly or indirectly, create new disclosure requirements under Regulation D or lower the amount of money an issuer can raise through Regulation D.
– SEC. 531. None of the funds made available by this Act may be used to implement or enforce the final rule entitled ‘‘Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure’’ (88 Fed. Reg. 51896 (August 4, 2023)).
The tax and cybersecurity disclosure restrictions are interesting, since some companies have been wondering whether they need to worry about these rules anymore under the current regime. For cyber, it’s worth remembering that even though Commissioners Peirce and Uyeda objected to the cybersecurity disclosure rules when they were adopted, it was in part because they believed the preexisting rules and guidance already required disclosure of material cybersecurity risks and incidents. That suggests we will still need to keep principles-based disclosures in mind for these issues. Plus, the laws are still on the books (for now) and enforcement could resume after a regime change. All that said, it does seem that when it comes to obsessing over the finest, most technical disclosure points, we may get a little breathing room for the time being – especially if the spending prohibition makes it into the final appropriations bill.
A new report from Cornerstone Research shows that securities class action filing activity has held steady for the first half of this year – but the dollar values are higher and “AI washing” is showing up in more claims. Here are a few other takeaways:
– 12 cases filed in the first half of 2025 related to artificial intelligence disclosures, putting this category on track to surpass the 2024 yearly total of 15.
– Cryptocurrency-related filings are poised to increase, while COVID-19-related filings are on pace to decline sharply.
– The annualized number of SPAC-related filings is on pace to nearly match that of 2024.
– The number of filings in the Consumer Non-Cyclical sector increased by 31% in 2025 H1 relative to 2024 H2, largely driven by a surge in Biotechnology and Pharmaceutical filings.
– Mega filings accounted for the vast majority of total MDL and total DDL (91% and 83%, respectively), significantly above the 1997–2024 semiannual averages.
– The count of mega DDL filings (15) in 2025 H1 was three times the 1997–2024 semiannual average (five) and between the number of mega DDL filings in 2024 H2 (17) and 2024 H1 (10).
A report from NERA Economic Consulting reached similar conclusions, while also showing that plaintiffs remain interested in “bread & butter” claims. Here’s more detail on that one:
– A total of 108 new federal securities class action suits were filed in the first half of 2025. The bulk of these (99 cases) were standard cases containing alleged violations of Rule 10b-5, Section 11, and/or Section 12. If this pace continues, 2025 will see approximately 216 cases, a slight decline from 2024 levels.
– The electronic technology and technology services and the health technology and services sectors together accounted for 59% of filings. However, suits in the finance sector declined to 7%.
– A significant number of standard case filings included allegations related to missed earnings guidance (44%) and allegations related to misled future performance (33%).
Yesterday, the “President’s Working Group on Digital Asset Markets” – which was established by Executive Order back in January – released a 166-page, multi-agency report that is intended to provide a framework for regulatory oversight and allow more people to access “digital asset markets.”
Page 44 of the report summarizes in a handy bullet-point list all of the actions the SEC and CFTC have already taken this year on crypto issues. In addition to recommending that Congress pass legislation for a crypto regulatory framework, which would build on the legislation that was recently adopted for stablecoins, the working group recommends that the agencies coordinate together and do even more. For example, for the SEC, the report recommends that it consider using its rulemaking & exemptive authority to:
• Establish a fit-for-purpose exemption from registration under Section 5 of the Securities Act for securities distributions involving digital assets.
• Establish a time-limited safe harbor or exemption from certain securities law requirements for transactions involving digital assets that may be subject to an investment contract because they are not yet fully functional or associated with a sufficiently decentralized network to allow for progressive functionality or decentralization.
• Establish a safe harbor for certain airdrops from characterization as “sales” under Section 2(a)(3) of the Securities Act or an exemption from the corresponding registration requirements under Section 5 of the Securities Act. Consider also an exemption for distributions of digital assets by decentralized physical infrastructure (DePIN) providers in securities transactions for purposes of rewarding participation in DePIN networks, as well as distributions of certain offerings.
The report also envisions a tailored disclosure regime for digital asset issuers:
Issuers of digital asset securities, and of securities involving digital assets, should be subject to disclosure requirements that are appropriately tailored to address the novel characteristics of digital assets and blockchain technology. Digital asset trading platforms, brokers, dealers, and other CFTC registered intermediaries that make available non-security digital assets should be required to disclose any such information that the CFTC determines to be appropriate for non-security digital assets.
Further, these parties should not be subject to ongoing disclosure requirements other than those required by Congress in future legislation or by the relevant market regulator. Furthermore, any such ongoing disclosures should be fit-for-purpose and guided by publicly available information, such as open-source code, whenever possible.
The report’s other themes are summarized in this fact sheet, and SEC Chair Paul Atkins issued this statement applauding the recommendations. Buckle up!
The bitcoin treasury strategy pioneered by billionaire Michael Saylor’s MicroStrategy, which now calls itself Strategy, remains dominant: more than 70 public companies around the world currently hold over $67 billion worth of the asset. But the sheer velocity of capital deployment for crypto treasuries at large is jaw-dropping. Since April, more than 30 public companies have announced plans to adopt similar strategies, targeting about $19 billion in capital raises, according to Elliot Chun of Architect Partners, a Palo Alto-based financial advisory firm.
That’s from a Forbes article published earlier this month – so the number is higher now, and it’s hard to visit any news site that is even tangentially related to business or finance and not run into an article about the “crypto treasury” craze. (I say “crypto” here because in the time since that Forbes article was written, there have been deals that focused on currencies other than bitcoin.) This newsletter from Bloomberg’s Matt Levine explains how the “path to public” for the crypto entrepreneurs involves – what else? – SPACs:
…we talk a lot around here about small public companies that get gobbled up by crypto entrepreneurs so they can pivot to being crypto treasury companies. But this is inefficient and haphazard: If you want to take a pot of crypto public on the stock exchange, why should you have to find some defunct public biotech company, negotiate with its executives, strike a deal, lay off the biotech researchers, etc.? Why shouldn’t an investment bank just be in the business of supplying pristine public listings, so instead of pivoting some biotech/toy/liquor/whatever company to crypto, you can just start with a blank slate?
Of course banks are in this business. This business — the business of supplying a publicly listed shell company — is the SPAC business (special purpose acquisition companies).
If you’re working on these deals, you may be having déjà vu from the SPAC heyday. Lucky you! Of course, there may be a couple differences this time around. For one, you’ll need to consider the SPAC disclosure rules that went into effect last summer – with the aim to make SPAC/de-SPAC deals more akin to traditional IPOs. But there are a couple of potentially mitigating factors there:
– Some deal teams had baked in some of these requirements already as a matter of practice.
– SEC leadership has changed! I haven’t heard too much specifically on how the Staff proceeds on SPAC-related reviews under the new regime, but with the crypto angle, it wouldn’t be surprising if this falls under the directive in yesterday’s Working Group Report to encourage SEC registrants to “engage in innovative new business models.”
The other thing that adds new wrinkles is that for many of the “crypto treasury” companies, in addition to not being a traditional business in the first place, this isn’t a buy & hold strategy for the crypto. This Bloomberg article explains how the new players are “chasing yield.” That sounds complicated to explain to some investors and various regulators – maybe even to some of the company’s directors! The companies are including a whole new category of risk factors, which I imagine were fun for the first few trailblazers to draft and continue to require careful reading for each company’s circumstances.
Lastly, some people are questioning how long the “crypto treasury / SPAC” play can last. “How is the market not already saturated?” I am not sure whether that’s a distinguishing feature of this new twist, or something that makes it just like the last round, where very similar questions seemed to spark a level of FOMO that only prolonged the trend.
