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.
Yesterday, the SEC announced that Judge Margaret “Meg” Ryan has been named Director of the Division of Enforcement, effective September 2nd. Judge Ryan is a senior judge of the United States Court of Appeals for the Armed Forces and a lecturer on military law and justice at Harvard University Law School. Acting Director of Enforcement Sam Waldon will continue in his previous role as Chief Counsel for the Division.
It’s been over two years since we last discussed a fraud case the government described as its “first crypto insider trading case.” The case involved the employee of OpenSea, the largest online market for NFTs, who was responsible for selecting NFTs to be featured on OpenSea’s homepage, allegedly purchasing those NFTs in advance and selling shortly after they were featured, at a substantial gain. The defendant was convicted of wire fraud and money laundering charges — which the U.S. Attorney’s Office opted to bring rather than securities or commodities fraud charges — after a jury trial.
The Second Circuit has just vacated those convictions, finding that two jury instructions — “that property protected by the wire fraud statute need not have commercial value, and the defendant could be convicted of wire fraud by failing to abide by societal mores” — were prejudicial error that warranted a new trial. This Sheppard Mullin blog explains the Second Circuit’s issues with the jury instructions as follows:
The Court held that property must be shown to have commercial value to satisfy the federal wire fraud statute . . . OpenSea did not charge for its NFT feature information and evidence submitted by the government suggested that the information was merely tangential to OpenSea’s business. Since the jury could have ignored such evidence under the district court’s erroneous instruction, the Second Circuit held that Chastain was prejudiced by the instruction and entitled to a new trial.
The Court also considered if the instruction that the jury could convict if Chastain “conducted himself in a manner that departed from traditional notions of fundamental honesty and fair play in the general and business life of society” was prejudicial error. In concluding that it was, the court held that the legal standard was incorrect and allowed the jury to improperly convict based on the government’s “view of integrity” in business conduct rather than the misappropriation of “property rights only.” It added that under such a standard, “‘almost any deceptive act could be criminal.’”
The blog says that Chastain follows SCOTUS’s lead in Kelly v. United States, 590 U.S. 391 (2020) and Ciminelli v. United States, 598 U.S. 306, 314 (2023), imposing limitations on prosecutors’ use of the federal wire fraud statute, and has important implications for the crypto industry.
Some experts hypothesized that prosecutors would turn to the federal wire fraud statute to crack down on insider trading in the space since United States Department of Justice policy now directs prosecutors not to pursue securities or commodities fraud charges that would require litigating whether the digital asset is a security or a commodity and the Securities and Exchange Commission embarks on its ambitious “Project Crypto” to develop a new regulatory framework. Chastain serves as another check on prosecutorial creativity when using the federal wire fraud statute to police crypto.
The transcript for our recent “Securities Offerings During Blackout Periods” webcast is now available. Willkie Farr’s Eddie Best, O’Melveny’s Ryan Coombs, Perkins Coie’s Allison Handy and Jones Day’s Michael Solecki discussed all the things issuers considering tapping the capital markets during a “blackout period” have to think about. Topics addressed include:
– Challenges blackout periods present for capital raising
– Factors to consider in deciding whether to offer securities during a blackout period
– Issues surrounding use and content of “flash numbers” in a prospectus
– SEC staff and judicial views on flash numbers
– Perspective of underwriters & their counsel
– Differences between recently completed quarter and one in-process
– Due diligence and comfort letter issues
– Offering-specific issues
– Process of updating prospectus disclosure
Don’t forget that you may be able to earn CLE credit for watching this webcast replay as well!
If you’re not yet a member of TheCorporateCounsel.net, try a no-risk trial now. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.
Last month, Liz blogged about the “crypto treasury / SPAC” play. She also shared that more than 70 public companies around the world currently hold over $67 billion worth of bitcoin. And earlier this month, John blogged about Figma’s “blockchain common stock.”
But what does corporate adoption of crypto look like generally? Deloitte asked about this in the second quarter 2025 North American CFO Signals survey, which polled 200 North American finance chiefs working at companies with at least $1 billion in revenues, and the results may surprise you.
37% of respondents said they have already had discussions with their boards about the use of cryptocurrencies in their organizations; 41% indicated they’d spoken to their CIOs about it; 34% said they’d discussed crypto with their banks or lenders; and only 2% said they have not had any conversations about cryptocurrency with key stakeholders.
Only 1% said they did not envision using cryptocurrency for business functions in the long term.
23% said their treasury departments will utilize crypto for either investments or payments within the next two years. That percentage is closer to 40% organizations with $10 billion in revenues and up.
15% believe their treasury departments will likely purchase non-stable cryptocurrencies as part of their investment strategies over the next 24 months. Respondents at organizations with revenues of $10 billion and up were even more likely to tick the box. 24% said their finance departments will likely invest in non-stable cryptocurrencies over the next two years.
15% say that, within two years, their organizations will likely accept stablecoin as payment. 24% for organizations with at least $10 billion in revenues.
52% indicated they anticipate using non-stable cryptocurrency for supply chain tracking. 48% said the same for stablecoin.
The article notes some potential advantages to these adoptions:
Non-stable cryptocurrencies can help diversify an organization’s investment portfolio.
Despite price fluctuations, non-stable crypto investments offer the possibility of substantial price appreciation—gains that can far outweigh returns on assets like Treasurys.
Stablecoins tied to the US dollar can—in some cases—serve as a hedge against changes in foreign exchange rates.
45% cited enhanced protection of customer privacy as the top reason to conduct transactions with stablecoin. Improved facilitation of cross-border transactions followed at 39%. Transactions conducted in crypto do not require intermediaries like banks, thus reducing costs and speeding up settlement.
Payment in crypto transactions can greatly reduce the need to reconcile payment information between buyer and seller that doesn’t match. Equally beneficial, crypto transactions are conducted and recorded quickly on the blockchain—a digital public ledger that serves as the foundation for cryptocurrency.
But CFOs also shared a few concerns:
When asked about their biggest worries related to investing in cryptocurrency, 43% of CFOs cited price volatility.
Complexities in accounting and controls (42%) were next on the list, followed by lack of industry regulation (40%).
When I read this Mayer Brown alert — focused on debt reopenings — that shares background info about CUSIPs, I was surprised that I’d either forgotten or never learned some of the basics. We all know the term. We know that CUSIPs are codes used in the US and Canada to identify securities. Here are some things that you may or may not know (or remember if it’s been a while since you’ve dealt directly with obtaining CUSIPs).
CUSIP stands for “Committee on Uniform Security Identification Procedures.”
A CUSIP consists of nine digits; the first six digits identify the issuer and are assigned to issuers in alphabetic sequence (also known as the base or CUSIP-6), and the next two characters (alphabetic or numeric) identify the issue. The ninth digit is a check digit to ensure the CUSIP’s accuracy.
CUSIP Global Services (CGS), which assigns CUSIPs, is managed on behalf of the American Bankers Association by S&P Global Market Intelligence, a division of S&P Global.
Certain corporate actions — like a debt reopening or an A-B exchange offer — require a temporary or contra CUSIP used to identify and segregate tendered from un-tendered securities.
Obviously, offering a new class of securities requires a new CUSIP number. But other corporate actions — like a stock split or name change — may require a new CUSIP. My understanding is that they can be obtained relatively quickly, but that DTC’s approval process to declare a CUSIP as “eligible” on its system may not be. Plus, certain advance notice requirements may require the new CUSIP, so advance planning is key.
Are there other terms, tools, industry players we use or reference all the time but may have forgotten these sorts of details about? Terms associates hear thrown around but may not fully appreciate? Perhaps a series of “getting to know X” blogs are in order. If you have any suggestions, please reach out at mervine@ccrcorp.com.
