It’s no surprise that the uncertainty surrounding Brexit continues to impact business – I blogged last month that it might be one of this year’s “top risks.” And in December, I wrote that the SEC is monitoring disclosure.
In remarks late last week, Corp Fin Director Bill Hinman reiterated that the UK’s withdrawal from the European Union may be material not just to UK- and EU-headquartered companies – but to any company with extensive international operations – and explained how companies should be applying the SEC’s “principles-based” disclosure rules to Brexit’s evolving business risks (he also touched on sustainability disclosure, as noted in this blog from Stinson Leonard Street).
Bill shared six topics for companies to consider as a starting point when assessing & drafting tailored Brexit disclosures. This Cooley blog highlights that these are the types of questions Corp Fin will be asking during their disclosure reviews. And this “D&O Diary” blog provides further analysis, along with an abbreviated “cheat sheet”:
1. Is the business exposed to new regulatory risk given the uncertainty of which set of laws and regulations will apply and whether transition agreements will be in place?
2. Are there significant supply chain risks due to the potential disruption to the U.K.’s access to free trade agreements with other nations and any resulting changes in tariffs to exports or imports?
3. Does the company face a material risk of losing customers, a decrease in sales or revenues or an increase in costs due to tariffs or other factors? Is the demand for the company’s product especially sensitive to exchange rates or changes in tariffs?
4. Does the company have exposure to currency devaluation, foreign currency exchange rate risk or other market risk?
5. What is the company’s exposure to contractual risk in the face of Brexit? Has the company undertaken a review of its existing contracts with counterparties in the U.K. or the EU to determine whether renegotiation or termination is necessary in light of contractual obligations?
6. Do Brexit-related issues affect financial statement recognition, measurement or disclosure items, such as inventory write-downs, impairments, collectability of receivables, assumptions underlying valuations, foreign currency matters, hedge accounting, or income taxes?
Glass Lewis announced that it will pilot a new Report Feedback Statement (RFS) service to a limited number of U.S. public companies and shareholder proponents during the 2019 proxy season. According to Glass Lewis, the purpose of the RFS service is to allow companies and shareholder proponents to “more fully and directly express their views on any differences of opinion they may have with Glass Lewis’ research.”
The RFS service is to be used to report on differences of opinion — not factual errors, which companies should continue to communicate to Glass Lewis. Companies and shareholder proponents may submit statements noting their differences of opinion with Glass Lewis’ analysis of their proposals to Glass Lewis’ research and engagement team. That team will then distribute the statements, without editing or modifying the content, directly to Glass Lewis’ 3,000+ investor clients along with Glass Lewis’ response to the RFS.
Participants may submit a request to subscribe to the RFS service; Glass Lewis will accept requests on a first-come-first-served basis. The maximum number of pilot participants will be 12 companies and/or shareholder proponents per week between March and May 2019 (subject to decrease if the statements received in any week are particularly long or complex).
Free CLE for In-House Lawyers
I recently noticed on LinkedIn that some of my in-house connections have been panelists for a new CLE provider -“In-House Focus.” IHF is focusing on including case studies from current in-house lawyers, and has committed to using diverse faculty. And according to this announcement, they’re offering nine free video programs as part of their launch. Topics include legal operations, privacy, IPOs and government investigations.
After Broc blogged last week about GE’s “Letter to Shareholders,” a few loyal readers reached out to gush about the proxy statement that was recently filed by Regions Financial. One person said it was “unreal – totally changes expectations around proxy disclosures.” And this comment explains why:
It’s like a proxy statement, proxy advisory data report on governance practices, consolidated sustainability report and review of every shareholder hot topic rolled into one. It’s worth checking out if you’re looking for sample proxy disclosure on virtually any topic – it was even cited by CII in its recent report on best practices for board evaluation disclosure.
This is not to comment on the merits of any of their programs or practices, which I haven’t reviewed, just the scope of disclosure. I do note they have enjoyed strong voting support, but clearly they aren’t resting on their laurels in that respect. And that’s a good lesson for every company, even if you don’t have the resources to prepare a proxy like Regions’.
Sustainability: How to Talk So Investors Will Listen
This PwC memo says the “safe zone” of ESG reports & communications is quickly disappearing as investors get more aligned in the type of info they’re looking for – and continue to integrate ESG criteria into decision-making by investment officers & PMs, rather than just the stewardship team.
You’re likely familiar with the “safe zone” – it’s sustainability reporting that calls out a ton of company accomplishments…but it doesn’t quantify their impact on the bottom line, and there’s no convincing link to business strategy. From an investor’s view, it’s a start – but it’s not going to ensure the company avoids the biggest global risks that are coming down the pike, or that it’s positioned to capture a competitive advantage. A recent 40-page report from Ceres offers some strategies to improve your positioning – and engagement – on this topic. Here’s one takeaway, as summarized in this Cooley blog:
Use language that investors understand and value. One goal of the IR team should be to “communicate the company’s values and strategies using language that investors understand” — including, where appropriate, financial terms such as margin and EPS, as well as business concepts such as risk mitigation, cost avoidance, revenue growth and competitive differentiation — thus positioning sustainability in the context of business performance.
To permit investors to incorporate sustainability into their valuations, companies should discuss sustainability investments, risks and benefits “through the prism of [practical business concerns such as] supply chain resilience, stranded asset avoidance, cost savings and efficiency, improved product performance, consumer acquisition and increased employee retention.” Notably, some asset managers do not position their questions as “sustainability” questions per se, but may instead frame them strictly as financial issues, such as supply chain stability.
According to Ceres, one “constant refrain” heard from investors is that “if a company is not talking about its sustainability strategy and performance, they may conclude the company does not have a story to tell or, even worse, it’s hiding something.”
Preparing for “CEO Activism”
There’s a perception that CEOs have become more willing in recent years to speak out on controversial social & political issues. It’s still pretty rare, but that doesn’t mean you shouldn’t prepare for the day when your company’s leader wants to take a stand. We’ve blogged about the public and investor reactions to this double-edged sword – and we’ve been posting even more resources in our “Crisis Management” Practice Area. In this WSJ article, two B-School profs offer tips on when CEOs should take a stand – and how to speak out effectively. Here’s the takeaways:
CEOs should take a stand when:
1. The nudge comes from their employees
2. Their corporate or personal values – and corporate practices – align with the issue at hand
3. The issue is “live”
CEOs who speak out should:
1. Set up a rapid response team
2. Anticipate backlash
3. Work with the communications team
I dig it, man! I don’t think of myself as someone that likes trivia games – nor do I commute since I work at home. But after playing “Drivetime” just once, I was hooked. Same with my wife. It’s a mobile app that you play while you drive (and you can also play when not driving if you’re so inclined).
Here’s five things to know:
1. Feels like a traditional “morning commute” radio show. Drivetime uses professional voice actors (with personality & humor) as their hosts, akin to radio show hosts. The Drivetime hosts – always two at a time as they verbally jab back & forth – provide interesting facts & color commentary as they deliver the trivia questions.
2. So here’s the twist on the traditional show format: you’re a participant (ie. interacting) in the show because you’re answering trivia questions that the hosts throw out.
3. You answer questions by talking to your phone (which can be resting on the seat next to you, etc.). Most questions are multiple-choice. But occasionally there are open-ended ones. You earn points along the way depending on how well you answer the questions (values increase as the questions become harder).
4. Each time you play Drivetime, you compete against someone else (actually, three other commuters because there are three segments on the show; you compete against a new person during each segment). Either the app chooses another commuter for you (“good luck next time, Jared”) – or you can adjust your settings to go head-to-head against your friends that also have downloaded the app. You’re told how you’re progressing in the competition as you go.
Love the British dude who indicates whether you’re winning, losing or in a tie. He’s a synthetic voice known as “Miles.”
5. The bottom line – the experience is a combination of entertainment & a game. Next level stuff.
Studies show that if you’re engaged mentally while driving, there’s less risk of being in an accident (if you’re doing so in a “hands-free” manner). So Drivetime arguably makes your drive safer. Learn more in this Voicebot podcast with Drivetime’s CEO Niko Vuori…
Transcript: “Audit Committees in Action – The Latest Developments”
We’ve posted the transcript for our recent webcast: “Audit Committees in Action – The Latest Developments.”
What If the SEC’s Adopting Releases Were in Video Format?
In this ‘Bass Berry’ blog, Jay Knight notes how the FASB recently released a video explaining a new accounting standard. He wonders if the SEC would consider doing something similar. Since the FASB video is only 90-seconds long, perhaps the SEC could – but would it be worth it?
Here’s an anonymous poll so you can provide your thoughts:
Last summer, Liz blogged that Broadridge was redesigning its “Vote Instruction Form” in response to Corp Fin feedback and to provide a better user experience. The new design is now in effect – and available along with other resources on Broadridge’s website. Here’s the enhancements:
– Company name more prominent
– Larger, more identifiable control number
– Voting instructions specific to agenda
– Voting section separated for clarity
– No abbreviations of shareholder proposals
Second Circuit Holds “General Statements of Regulatory Compliance” Not Actionable
As noted in this ‘Cleary Gottlieb’ memo, the Second Circuit – in Singh v. Cigna – issued yet another strong decision rejecting the tactic of a company being sued after it announced bad news or corporate mismanagement based on general statements made by the company about its compliance with regulatory requirements or its own ethics policies and procedures.
Transcript: “Conflict Minerals – Tackling Your Next Form SD”
We have posted the transcript for our recent webcast: “Conflict Minerals – Tackling Your Next Form SD.”
Here’s something that Liz blogged about on CompensationStandards.com: One of the most frequent questions we get about this year’s pay ratio disclosure is, “How much detail is necessary if you’re not rerunning the ‘median employee’ calculation?” In other words, you’re either using the same median employee – or one of the alternates – that you identified last year. A timely blog from Stinson Leonard Street’s Steve Quinlivan provides examples from four recent filers.
You’ll see that the companies didn’t get too elaborate. All of them basically parrot Instruction 2 to Item 402(u) – i.e. they say they used the same median employee (or an alternate) since there was no change in the employee population or employee compensation arrangements that they believed would significantly change the pay ratio disclosure. And since Steve notes in this blog that he’s found zero Corp Fin comments so far on pay ratio disclosures, that’s probably just fine.
Tomorrow’s Webcast: “The Top Compensation Consultants Speak”
Tune in tomorrow for the CompensationStandards.com webcast — “The Top Compensation Consultants Speak” — to hear Mike Kesner of Deloitte Consulting, Blair Jones of Semler Brossy and Ira Kay of Pay Governance discuss these topics:
– Second year of pay ratio
– Evolution of clawbacks
– Adjustments to incentive plan actual performance or goals & goal-setting plans
– Incorporating E&S metrics into plans
– How to handle pay equity & gender/ethnicity pay gaps
– The changing role of the compensation committee
“Valley of the Boom”: Loved It
Have you seen the 6-part miniseries from National Geographic called “The Valley of the Boom“? Very well done (I don’t know why the ratings on Metacritic aren’t higher). Brought back lots of memories from the mid-90s when I earned my stripes as the “Internet guy” in Corp Fin.
It’s the most entertaining thing I’ve seen on the Internet boom. A mix of a documentary and a reenactment of how things played out at Netscape, TheGlobe.com (which was Facebook before Facebook) and a scam artist who actually had high quality video streaming before anyone else. The documentary part has remarks from those who were at Netscape & Microsoft (remember the “browser wars”?), as well as commentary from celebrities like Mark Cuban and Arianna Huffington…
We’ve been blogging about the bills in Congress seeking to change stock buybacks practices (here’s the latest). Expounding on prior research he conducted last summer, SEC Commissioner Robert Jackson sent this letter to the Senate last week providing further evidence to show that corporate insiders are using buybacks to cash out.
Here’s a MarketWatch article noting that, at a Senate Banking Committee hearing, SEC Chair Jay Clayton said that he thought Jackson’s results may be coincidental, since that timeframe may coincide with when companies open their trading window for insiders. To investigate Clayton’s comment about it being potentially coincidental, Jackson extracted data on all buybacks for a two-year period – estimating the length of pre-announcement trading blackouts, since companies have different policies.
But even after taking pre-announcement differences into account, Jackson found that, on average, executives sell more stock after they announce a buyback than on an ordinary day. 38% of the companies conducting buybacks had no trading in the 30 days prior to their buyback announcement date – but a majority had insiders making their own transactions during the eight days after a buyback was announced.
More on “SEC Seeks Contempt Order for Tesla’s Musk Over New Tweet”
Recently, Liz blogged about Tesla’s Elon Musk tweeting some production stats without getting internal pre-approval and the SEC subsequently filing a motion for contempt. This CNBC article contains some analysis of how the court may rule. Yesterday, Musk’s responded that the SEC is infringing on his 1st Amendment “freedom of speech” rights and that his tweets didn’t violate his settlement agreement with the SEC (here’s his court filing). I imagine we will get a court ruling soon.
Meanwhile, institutional investors have filed a lawsuit in the Delaware Court of Chancery seeking a declaratory judgment against Elon and Tesla’s board for violation of their fiduciary duty, injunctive relief relating to the Twitter use and monetary damages…
– Two Recent Delaware Decisions Provide Practical Transaction Guidance
– Antitrust Merger Review: The Worst Case is Worse Than You Think
– Cross-Border Carve-Out Transactions: Due Diligence and Purchase & Sale
– Shareholder Activism: Nine Lessons Learned
– The Couple in the Conference Room
Remember that – as a “thank you” to those that subscribe to both DealLawyers.com & our Deal Lawyers print newsletter – we are making all issues of the Deal Lawyers print newsletter available online. There is a big blue tab called “Back Issues” near the top of DealLawyers.com – 3rd from the end of the row of tabs. This tab leads to all of our issues, including the most recent one.
And a bonus is that even if only one person in your firm is a subscriber to the Deal Lawyers print newsletter, anyone who has access to DealLawyers.com will be able to gain access to the Deal Lawyers print newsletter. For example, if your firm has a firmwide license to DealLawyers.com – and only one person subscribes to the print newsletter – everybody in your firm will be able to access the online issues of the print newsletter. That is real value. Here are FAQs about the Deal Lawyers print newsletter including how to access the issues online.
As this season’s batch of proxy materials roll in, we highlight some of the notables as we always do. We often cover developments from General Electric (see this video about GE’s ’14 proxy, with 1400 views) – and this year is no exception. GE has simplified its glossy annual report. The first “Letter to Shareholders” from new CEO/Chair Larry Culp includes these refinements:
– The first “Letter to Shareholders” from new CEO/Chair Larry Culp is much more concise than in prior years, honing on GE’s two priorities
– The future focus continues with an infographic that presents innovations yielded from investments in the GE’s high-tech healthcare, power, renewable energy & aviation businesses
– On page 6, an infographic presents GE’s businesses and their leadership positions, and also presents the company’s “extended industries”
– On page 8, GE uses a single ‘easy-to-read’ page to highlight segment performance, alongside a brief description of each segment’s mission and business units
People seem to like it. This CNBC article contains a quote about “In our view, the filing marked another step forward in GE’s journey towards increased transparency, simplified reporting, and clearer communications to investors.” And here’s a WSJ article. Plus here’s an excerpt of a (poorly made) transcription of Jim Cramer’s comment about it:
General electric ceo annual letter came out last night, hopefully his first of many. it is honest it is straightforward. in short it’s the most un-ge piece of correspondence i have ever seen. you want to understand it was the most complex where you could never figure out how to do it. the numbers were borderline incomprehensible i had to search for a glossary it explained how many divisions were holding up.
How Do We Fix Congress’ Approach to Changing the Securities Laws?
I’m digging this blog by my friend Bob Lamm of Gunster about how Congress might be floating as many as 20 bills at a time in the securities law & governance area – and how this scattered approach might not be the best way to make applesauce…
Tune in tomorrow for the DealLawyers.com webcast – “Activist Profiles & Playbooks” – to hear Anne Chapman of Joele Frank, Bruce Goldfarb of Okapi Partners, Tom Johnson of Abernathy MacGregor and Damien Park of Spotlight Advisors identify who the activists are – and what makes them tick.
Over on the “Business Law Prof Blog,” Prof. Haskell Murray flagged this Fordham study on pre-Securities Act prospectuses. It’s interesting for a number of reasons – not the least of which is that it includes as an appendix a copy of a Coca-Cola prospectus from 1919. Check it out!
Exempting The Crypto? The “Token Taxonomy Act”
Last month, I blogged about Commissioner Peirce’s comments calling for a lighter touch when it comes to regulating “decentralized” tokens. She’s got company in Congress. Late last year, Reps. Warren Davidson (R-Ohio) & Darren Soto (D-Fla.) introduced the “Token Taxonomy Act” – which would exempt “digital tokens” from key provisions of the federal securities laws.
This CoinDesk article notes that the legislation would carve out an exemption for the kind of digital assets to which Peirce advocated applying the Howey test with a lighter touch:
According to the text, the bill – among other items – seeks to exclude “digital tokens” from being defined as securities, amending both the Securities Act of 1933 and the Securities Exchange Act of 1934.
That definition has several components, all of which center around a degree of decentralization in which no one person or entity has control over an asset’s development or operation. This ostensibly would clear the way for cryptocurrencies that don’t have a central controller to be spared a securities designation.
The bill defines “digital tokens” as “digital units created… in response to the verification or collection of proposed transactions” (mining, basically) or “as an initial allocation of digital units that will otherwise be created” (as in a pre-mine). These tokens must be governed by “rules for the digital unit’s creation and supply that cannot be altered by a single person or group of persons under common control.”
Sorry if I come off like a digital Luddite – but is a broad statutory exemption from the securities laws really the best approach to an emerging asset category that few people understand, that’s been hyped relentlessly, and that’s rife with fraud?
IPOs: The Media Discovers “Cheap Stock” (Again)
Hey everybody – the media’s discovered “cheap stock” again. I know it’s been an issue in IPOs since Martin Van Buren was president, but for some reason it’s always huge news to the media when they stumble upon it. A couple of years ago, it was the NYT that breathlessly exposed the disparity between the valuation of equity awards made in advance of an IPO & the offering price. This time, it’s the WSJ that breaks the shocking news that private & public valuations are different:
A Wall Street Journal analysis of recent initial public offerings identified 68 companies that gave employees options to buy about $1.5 billion worth of shares in the 12-month run-up to their market debut. But the value of those shares was much higher based on a valuation model developed by academics—an estimated $2.2 billion, the equivalent of employees getting a 32% discount on the shares.
“The Journal’s findings show that the valuations being reported by companies are significantly below what the shares are really worth—the price that investors would pay for them,” said Will Gornall, an assistant finance professor at the University of British Columbia, in Vancouver.
What’s not clear from the WSJ’s article is whether it’s really comparing apples to apples in coming up with what the price “should” be for employee equity awards. The study seems to have just looked at the discount to the IPO price – the so-called “private company” discount. But pre-IPO equity awards usually have a lot of strings attached to them, such as vesting provisions and often onerous restrictions on transfer, and that affects their value too.
Here are the results of our recent survey on the use of board portals:
1. When it comes to board portals, our company:
– Doesn’t have one and isn’t considering using one in the near future – 3%
– Doesn’t have one but is considering whether to use one – 3%
– Adopted one within the past two years – 9%
– Adopted one more than two years ago – 84%
2. For those with board portals, our company:
– Licensed an off-the-shelf portal – 100%
– Built it in-house – 0%
– Hired a service provider to build a custom portal – 0%
3. For those with off-the-shelf board portals, we have:
– Asked whether our vendor has ever had a security breach – 24%
– Investigated our vendor’s security – 48%
– Plan to investigate our vendor’s security in the near future – 14%
– Not worried about our vendor’s security – 14%
Please take a moment to participate anonymously in these surveys:
Corporate Lonely Hearts: Public Shell Seeks Reverse Merger Partner
I think Jane Austen put it best when she said, “it is a truth universally acknowledged, that a private company in possession of a good fortune must be in want of a public shell to reverse merge with.” Well, she said something like that anyway. . .
However, finding your corporate soul mate isn’t always an easy process – and maybe that’s why one lonely public shell decided to take out a personals ad to let prospective suitors know it was available. The ad wasn’t shy about letting those suitors know that this shell had a lot to offer:
OTCQB Ready Fully Reporting Pink Trading Public Shell For Sale
– Selling control block (30,000,000 restricted shares)
– Has symbol, trading and quoted on the OTC Pink w/piggyback status OTCQB READY!
– FULLY REPORTING – FULLY AUDITED BY PCAOB ACCOUNTING FIRM
Other attributes included “DTC Eligible!” and “No regulatory issues.” Of course, as Madonna noted, “we are living in a material world,” so a suitor wasn’t going to get all this for free. So what was the price? “Cash & Carry – Ask $349,500.00.” The big question is – did true love prevail? Based on my sleuthing, it appears that the answer is yes. Our public shell – “China Grand Resorts” – seems to have found Jacksam Corporation, a maker of cannabis vaporizers for medical marijuana. The couple reverse merged last September & gave birth to a bouncing baby S-1 earlier this month.
Transcript: “Controlling Shareholders – The Latest Developments”
We have posted the transcript for the recent Deallawyers.com webcast: “Controlling Shareholders: The Latest Developments.”
In January, I blogged about the SEC’s enforcement proceedings against four companies that were unable to get their acts together when it came to ICFR. The SEC’s action was a shot across the bow of other companies that might have thought that full disclosure of a material weakness was sufficient. The SEC’s action delivered a clear message that when you’ve got an internal controls problem, you’ve got to fix it.
But at the same time, lots of companies have ICFR issues – and many material weaknesses can’t be fixed overnight. So which companies should be concerned that SEC Enforcement might soon be knocking at their doors? This ‘Audit Analytics’ blog may help companies assess their risk of being subject to an enforcement proceeding. It reviewed data on material weakness disclosures during the period from 2007-2017, and it concludes that the 4 companies targeted by the SEC in these proceedings all involved extreme cases of non-compliance:
When it comes to poor internal controls, these companies are some of the worst offenders, as the problems were allowed to linger for years. Looking at data from 2007 and 2018, 3.4% of registrants with any ineffective ICFR report had seven ineffective management ICFR reports, comparable to Digital Turbine. This percentage decreases to 1.9% for registrants such as LifeWay and CytoDyn that had nine ineffective ICFR reports. Overall, less than 10% of registrants with any ineffective ICFR management ICFR report had seven or more ineffective reports.
As the biggest of the four registrants, Grupo Simec is noteworthy, being one of only 72 companies traded on NYSE that had ineffective independent auditor’s reports on internal controls in 2017 and one of only two companies that has had ten ineffective audited reports since 2007.
While companies may take some solace in the fact that these 4 targets were outliers, the blog cautions that other firms with multiple ineffective ICFR reports but only minimal remedial actions could also be at risk.
Buffett to GAAP: “Get Off My Lawn!”
Last week, Warren Buffett’s annual letter to Berkshire-Hathaway shareholders landed – and while it had its usual on-brand mix of folksy humor and provocative statements (e.g., deals are too pricy & federal debt doesn’t matter), the Oracle of Omaha led off with a jeremiad against GAAP’s new “mark-to-market” requirement for unrealized securities gains & losses:
Berkshire earned $4.0 billion in 2018 utilizing generally accepted accounting principles (commonly called “GAAP”). The components of that figure are $24.8 billion in operating earnings, a $3.0 billion non-cash loss from an impairment of intangible assets (arising almost entirely from our equity interest in Kraft Heinz), $2.8 billion in realized capital gains from the sale of investment securities and a $20.6 billion loss from a reduction in the amount of unrealized capital gains that existed in our investment holdings.
A new GAAP rule requires us to include that last item in earnings. As I emphasized in the 2017 annual report, neither Berkshire’s Vice Chairman, Charlie Munger, nor I believe that rule to be sensible. Rather, both of us have consistently thought that at Berkshire this mark-to-market change would produce what I described as “wild and capricious swings in our bottom line.”
If Warren sounds grumpy, well, you would be too if you lost $25 billion in a single quarter, like Berkshire did due to Q4 mark-to-market adjustments. But he should take some consolation in the fact that Berkshire’s by no means alone in dealing with the increased volatility resulting from the new standard.
The mark-to-market requirement was expected to have a big impact on earnings for many companies, and it appears to be living up to its advance billing. For example, this recent Reuters article notes that the new standard’s effect on publicly traded PE funds such as Blackstone, Carlyle & KKR has been so significant that they’ve opted to deemphasize the traditional “economic net income” metric – which reflects mark-to-market adjustments – in favor of “distributable earnings,” which represents the actual cash available for paying dividends.
Delaware Chancery: Choosing Venezuela’s President Since 2019?
The Delaware Chancery Court has long played an outsized role in shaping the destiny of some of the world’s largest businesses. Now, this Bloomberg story says that the court may be called upon to weigh-in on the fate of a nation – because it may have to determine who is Venezuela’s lawful president as part of a battle for control over Citgo. Here’s an excerpt:
The leadership crisis in Venezuela could lead to an odd legal situation in the U.S. — a Delaware judge may be asked to decide who is the legitimate president of the South American country.
The issue could arise in the U.S. because of the power struggle over Citgo Petroleum Corp., the Houston-based refiner owned by Venezuela oil giant Petroleos de Venezuela SA. Last week, Juan Guaido, the U.S.-backed head of Venezuela’s National Assembly, named new directors to Citgo and PDVSA, a critical part of his strategy to seize oil assets and oust the regime headed by autocrat Nicolas Maduro, who remains in control of the military and other key parts of the government.
Venezuela’s president is the controlling shareholder of PDVSA, and the article speculates that lawyers for the U.S.-backed Guaido may set up a Chancery Court contest centering on who is Venezuela’s president by trying to remove Maduro’s directors and replacing them with his slate.
