Over on CompensationStandards.com, I recently highlighted an interesting trend identified by Exequity: ISS’s adverse say-on-pay recommendations tend to spike in June. Exequity has now published additional data that shows this “June Phenomenon” also applies to director elections. Here’s an excerpt:
But the June Phenomenon for directors has an added twist: The trend of adverse recommendations in June appears to be increasing over time, whereas with say on pay the “Against” rate has been stable. In 2015 and 2016, the average rate in June was below 15%, and beginning in 2018, the recommendations “Against” have been above 20%. It is unclear what has caused the increase in “Against” recommendations during this time. Recommendations “Against” in other months have trickled up slightly, from 8% to 10%.
Unlike say on pay, votes for directors are not advisory and over the past 10 years, less than 0.1% of director nominations have failed. Failures in June appear equally likely as in other months, and Exequity finds no discernible trend in the number of companies with directors failing to be re-elected.
On average since 2015, directors have received 96% support when ISS recommends “For” and 83% when “Against.” Average support for directors when ISS recommends “Against” has trickled 1.7% higher since 2015 (from 82.4% in 2015 to 84.2% in 2025), but average support when ISS recommends “For” trickled down by 1.6% (from 97.6% in 2015 to 96.0% in 2024).
The cause of the June spike isn’t clear – and it’s probably not worth getting too neurotic over it. But with June being a popular time for annual shareholder meetings, a significant number of companies could be affected. Those with meetings this month may want to pay extra attention to proxy advisor expectations – if for no other reason than to avoid surprises.
As you may have seen, Donna Anderson is soon leaving her position as T. Rowe’s Global Head of Corporate Governance. Courtney Kamlet & I were lucky enough to catch up with her for the latest episode of “Women Governance Trailblazers” podcast before she moves on to her next chapter. With such a lengthy and impactful career in the corporate governance world, Donna had a lot of insights to share! In this 34-minute episode, we discussed:
1. Donna’s career path, including pivotal moments that led to her leading Corporate Governance at T. Rowe Price, and her compass for decision-making along the way.
2. What has changed the most – and what has stayed the same – over the time that Donna has been involved in the investment and corporate governance world.
3. Predictions for the future of corporate governance.
4. Donna’s favorite part of leading T. Rowe’s proxy voting and engagement process.
5. The types of ongoing engagement interactions that can help if a company is targeted by an activist.
6. Advice for the next generation of women governance trailblazers.
To listen to any of our prior episodes of Women Governance Trailblazers, visit the podcast page on TheCorporateCounsel.net or use your favorite podcast app. If there are governance trailblazers whose career paths and perspectives you’d like to hear more about, Courtney and I always appreciate recommendations! Drop me an email at liz@thecorporatecounsel.net.
The transition to EDGAR Next began in late March. I’ve talked to a few people who said the transition was easier than they expected. For others, the transition has been “truly horrendous” – an actual quote from our Q&A Forum (#12,717). Here’s the question that prompted that response:
Is anyone else having serious issues transitioning to EDGAR Next? For some of our submissions, it’s taking multiple weeks for processing to occur and we’ve actually had clients be locked out of filing. Sytsems going down, getting locked out, resets taking an inordinately long time and staff generally communicating being overwhelmed.
To date, no one has missed a filing that would have cost them S-3 eligibility, but we’re telling clients to try to plan to transition at a time when they don’t think they will need to file anything on EDGAR for a couple weeks (which is sometimes just beyond the client’s control). I have to imagine that if someone did have to request an S-3 waiver as a result of being unable to file that the staff would grant the waiver if you could show the communications and submission materials and related issues. Not sure what you do about a plaintiff suit if something just can’t be disclosed for that period of time. I guess one could still do press releases though that seems a bit odd/potentially an FD issue.
Just curious if we are the only ones having these issues and if anyone is aware of anything being done to address this at the SEC. Maybe they’ve just lost too many people?
It sounds like finding a quiet two-week window is good advice. Here are some other tips that members have shared – please feel free to email Meredith, John or me with any other processes that are working well for you (mervine@ccrcorp.com, john@thecorporatecounsel.net, liz@thecorporatecounsel.net):
1. Promptly reset the CCC to match the code used on the old platform
2. Take the lead for directors who have additional directorships
3. Handle insiders one by one at a time when they don’t expect upcoming filings
Check out our March Section16.net/NASPP webcast – “How to Prepare for EDGAR Next” – for additional info & suggestions, as well as our “Q&A Forum” on this site where we and other members of the community are continuing to receive and respond to questions.
If you’ve started transitioning your company and/or directors to EDGAR Next, how’s it going? Please participate in this anonymous poll to share your experience:
Check out John’s latest “Timely Takes” podcast – featuring Cleary’s J.T. Ho and his monthly update on securities & governance developments. In this 22-minute installment, J.T. reviews:
1. Rule 10b5-1 CDIs
2. Clawback “checkbox” CDIs
3. Tariff disclosure implications
4. Mid-season proxy trends
5. DOJ enforcement priorities
6. Latest SEC happenings
As always, if you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share in a podcast, we’d love to hear from you. You can email John and/or Meredith at john@thecorporatecounsel.net or mervine@ccrcorp.com.
In Q1 2025, the US IPO market saw a 55% uptick in the number of deals and a modest increase in total proceeds. The health care and technology sectors led the activity, while significant deals across various industries pointed to broader market interest.
That’s from an EY recap of Q1 IPO stats. However, momentum is choppy at best, and as this WSJ article points out, few venture-backed tech companies are rushing to market:
Just nine venture-backed companies went public in the US this year, including several biotechs and a couple of Chinese financial and consumer companies, according to Renaissance. That is fewer than the 11 that began trading in the same period last year.
No American tech company with a large ownership by venture investors has gone public this year yet.
One reason for pause is that new IPOs are likely to be a down-round for VCs who invested at sky-high valuations. A recent article from The Information says that’s been the case for every venture-backed IPO for the past 12 months! Even so, some of those investors may be willing to patiently recover their capital in the public markets. The WSJ notes:
“For many VC-backed names, it’s not a matter of avoiding a down round entirely,” Kennedy said, “as much as mitigating it.”
Companies go public to raise capital and provide liquidity to their investors. And a down-round IPO isn’t destiny—shares can rebound and soar over the longer term. Venture-backed ServiceTitan, for example, went public in December at $71 a share, well below the $118.96 paid by investors for its Series G stock in 2021. At $126.71 at Tuesday’s close, the company’s share price is up almost 80% since the IPO.
So, take heart, set expectations, and be ready to gear up if the IPO window really does open!
If you’re looking for a treasure trove of IPO data, check out these stats from Professor Jay Ritter at the University of Florida. Maybe some of you are already familiar with his work – as his data informs a lot of financial reporting – but I had not done a deep dive.
This particular set looks at info from initial public offerings from 1980 to 2024 – 44 years! – including the type of backing the companies had at the time they went public, age and profitability, and first-day and three-year returns by lead underwriter. We all hear the common refrains that the volume of IPOs has been lower lately and that companies have been waiting longer to go public – but seeing the data puts things in perspective:
1. The median number of IPOs from 1980-2019 was 158 – well above the 72 IPOs last year, 54 in 2023, and 38 in 2022.
2. The average age of companies going public was 9.5 years from 1980-2019, but it’s been ticking up the past several years – from 8 in 2022, to 10 in 2023, to 14 years in 2024.
3. For tech IPOs, valuations at IPO are higher – and IPO profitability is lower. For example, in 2024, the median price-to-sales ratio was about $9-$11, compared to about $3-$4 in 1980. But that’s nothing compared to the dot-com bubble, which reached a height of $49.5!
If you’re interested in these trends, make sure to check out Jay’s page, where you’ll find info on direct listings, SPACs, industry trends, and more.
The Center for Audit Quality (CAQ) SEC Regulations Committee recently published notes from the Committee’s March 5th meeting with the SEC Staff from Corp Fin and the Office of the Chief Accountant. John shared an update from this meeting a couple weeks ago – that segment disclosures (and AI disclosures) rank high on the Staff’s agenda.
Additionally, the meeting involved a discussion about how to apply the “investment test” under Reg S-X Rule 1-02(w)(1)(i)(A)(1) – for purposes of determining the significance of business acquisitions pursuant to Regulation S-X Rule 3-05 – when consideration includes repurchase of the acquiror’s own shares. Here’s an excerpt:
The staff did not analogize to Financial Reporting Manual section 2015.11 in responding as they noted that current Rule 1-02(w) requires adjustments for intercompany eliminations for both the asset and income tests but does not include adjustments for intercompany eliminations for the investment test, including in circumstances when total assets should be used instead of aggregate worldwide market value (i.e., when a company does not have AWMV).
With respect to the use of AWMV in the denominator of the investment test, the staff indicated that because Rule 1-02(w) does not include any adjustments in the investment test for intercompany transactions as the other tests do, there does not appear to be a basis to exclude the repurchase of a registrant’s own shares.
Further, S-X 1-02(w) uses the term “consideration transferred” to determine the numerator of the investment test. The staff notes that “consideration transferred” is a concept in US GAAP (ASC 805) and IFRS. Therefore, if the company includes the value of the shares repurchased in determining the “consideration transferred” under US GAAP or IFRS, the staff believes the full amount of the “consideration transferred” should be reflected in the numerator and there does not appear to be a basis to exclude a portion of the consideration related to the repurchase of shares for the purposes of the investment test.
The usual caveats apply to these notes – they are a summary of discussions, not authoritative, and not an official statement of the Staff. That said, they shed some light on how the Staff views various accounting-related topics. The next Joint Meeting of the Committee and the Staff is set for June 26, 2025.
Yesterday, the SEC announced that it had settled the civil enforcement action that it filed against Ripple Labs and two of its executives back in December 2020, which had resulted in an injunction and penalty last summer. Here’s an excerpt from the SEC’s announcement:
The settlement agreement provides, among other things, that the Commission and Ripple would jointly request the district court to issue an indicative ruling as to whether it would dissolve the injunction against Ripple in the district court’s August 7, 2024 final judgment and order the escrow account holding the $125,035,150 civil penalty imposed by the final judgment be released, with $50 million paid to the Commission in full satisfaction of that penalty and the remainder paid to Ripple.
The Settlement Agreement further provides that, following an indication from the district court that it would dissolve the injunction and release the escrowed penalty amounts as requested, the Commission and Ripple will seek a limited remand to the district court for that relief, after which they would move to dismiss their respective appeals from the final judgment, which are currently pending in the United States Court of Appeals for the Second Circuit. The Commission and the defendants filed the settlement agreement with the district court as part of their joint request for an indictive ruling.
The Commission’s decision to exercise its discretion and seek a resolution of this pending enforcement action rests on its judgment that such resolution will facilitate the Commission’s ongoing efforts to reform and renew its regulatory approach to the crypto industry, not on any assessment of the merits of the claims alleged in the action. Furthermore, the Commission’s decision to resolve this enforcement action does not necessarily reflect the Commission’s position on any other case.
The 2020 case alleged that Ripple’s digital token was a “security” and that the company had conducted an unregistered public offering. The 2024 court decision awarded the Commission a fraction of the nearly $2 billion in penalties that the SEC had pursued, but it is still significant that the SEC is relinquishing its limited win. Commissioner Crenshaw issued this dissenting statement arguing that the settlement undermines the court’s order and the SEC’s credibility and is not in the interest of investors. Here’s an excerpt:
This settlement is part of a broader, programmatic shift to dismiss our registration cases in the crypto context.[5] In remodeling our legal stance in this area, we have pointed to a new “regulatory path,” that the agency will purportedly pursue based on the work of the SEC’s Crypto Task Force.[6] But, even if the Crypto Task Force re-writes registration rules for crypto securities in the future, that does not somehow alter the rules that were in place at the time that Ripple violated them. Further, we have no hint of what those future rules might look like or how long it will take to put them in place—if ever. So, we are today accepting a diluted settlement, that erases the investor protections we already won, based on a non-existent framework that may or may not come to fruition potentially years from now, on the basis that the current framework in place—of applying the facts to the law—was not industry or innovation-friendly.
It’s true that the SEC has done a 180 on crypto over the past few months – taking several steps to provide support and guidance to the fintech industry, which aligns with January’s Executive Order on digital assets. From the highlight reel:
I’ve probably even missed a few! This settlement shows that the SEC is not only making a concerted effort to act quickly on this topic – it is also putting its money where its mouth is.
The well-timed trades by certain lawmakers during April have once again drawn attention to the issue that – unlike most of us who are involved with public companies – some members of Congress have few qualms about appearing to use confidential information to their advantage. This time, their windfalls have sparked renewed interest in the “Transparent Representation Upholding Service and Trust in Congress Act” – cleverly nicknamed the “TRUST in Congress Act.”
Rep. Seth Magaziner (D-RI) reintroduced the bill in the House this past January with Senator Josh Hawley (R-MO) introducing a companion bill in the Senate (that one’s called the “PELOSI” Act). This legislation would go beyond the STOCK Act that already exists – which we’ve covered from time to time. Instead of simply requiring disclosure of trades, it would aim to prevent insider trading by members of Congress by requiring them to use a blind trust – specifically:
such individual and any spouse or dependent child of such individual shall place any covered investment owned by such individual, spouse, or dependent child into a qualified blind trust.
Even though the bill has some bipartisan support, its prior iterations haven’t made it to the finish line – and GovTrack gives this version a 9% chance of becoming law. With those odds, I’m not planning to trust Congress any time soon.
