The week in GRC: SEC proposes easing curbs on pre-IPO talks, and stock buybacks continue at speedy pace
– Reuters reported that senior Santander banker José Manuel Campa has been nominated to head the European Banking Authority (EBA) as it leaves its London base due to Brexit and moves to Paris. Campa, who is now global head of regulatory affairs at Santander, is being nominated for a renewable five-year term. He would replace Andrea Enria, who left the EBA to head the European Central Bank’s banking supervisory arm.
The EBA writes rules to implement banking laws approved by the EU and co-ordinates a regular stress test of leading lenders in the bloc. It is also trying to carve out an extended role for itself by ensuring that anti-money-laundering rules are being applied properly.
– CNBC looked at the results of a study by Equileap on gender equality at the biggest US companies. General Motors (GM), Bank of America and Johnson & Johnson were awarded top marks across 19 criteria, including gender balance in the workforce (senior management and the board), as well as pay equity, parental leave and non-discriminatory hiring practices.
For investors and consumers looking for companies working to close the gender gap, the new ranking provides some guidance, Equileap CEO and co-founder Diana van Maasdijk said. GM was awarded a B+ and received the top score of 71 percent. The company, which recently appointed CFO Dhivya Suryadevara to join CEO Mary Barra in the C-suite, is the only company with a pay gap between men and women of less than 3 percent.
GM is also one of four firms in the index with a gender-balanced board. The others are Starbucks, Wells Fargo and ConocoPhillips.
– According to The New York Times, Tesla said that its general counsel was leaving the company after just two months on the job. The company said Dane Butswinkas had decided to return to his law firm. ‘I’m grateful for the opportunity over the past seven months to have worked with both Elon [Musk] and Tesla, first as outside counsel and most recently as general counsel,’ Butswinkas said in a statement. He added that he would continue working with the company as an outside counsel. Tesla said Jonathan Chang, the company’s vice president, legal, would take over as general counsel.
– Bristol-Myers Squibb confirmed that activist hedge fund firm Starboard Value owns a 1 million share stake in the company and said separately that its $74 billion deal to acquire cancer drug-maker Celgene is ‘on track’ to close during the third quarter, CNBC reported. Starboard's stake is just a fraction of Bristol-Myers Squibb's 1.63 billion shares outstanding, but it has filed with regulators for the ability to buy more shares. The fund also has held meetings with management, Bristol-Myers Squibb said.
Starboard has nominated for the Bristol-Myers board Starboard CEO and co-founder, Jeffrey Smith, as well as John Leonard, James Tyree, Steven Shulman and Janet Vergis. Bristol-Myers Squibb's annual shareholder meeting is not yet scheduled, but it will occur after its special meeting to vote on the Celgene acquisition on April 12. Starboard did not respond immediately to a request for comment.
– Caesars Entertainment Corp said it will continue to look at options for the company, a day after activist investor Carl Icahn urged the casino operator to consider selling itself, according to Reuters. Icahn is also seeking board representation. ‘The board and management have engaged in discussions with Mr Icahn and expect to continue a constructive dialogue,’ Caesars said in a statement. ‘The board remains open to all reasonable alternatives to enhance value for Caesars’ stockholders and has and will continue to evaluate strategic alternatives presented to it.’
– The Wall Street Journal reported that any company exploring whether to go public would get greater leeway to discuss its plans privately with potential investors before announcing an IPO under a new SEC proposal. In an effort to increase the number of public companies, the SEC has proposed letting all companies ‘test the waters’ before deciding whether to seek an IPO. The agency had previously allowed only smaller, emerging companies to talk to investors privately.
Currently, large companies must publicly file their securities offering documents to regulators before gauging investor interest. Under the proposal, firms would be able to discuss securities offerings with sophisticated investors, including institutional firms such as asset managers and other accredited investors. The conversations would allow companies to identify information that is important to investors and to gauge market interest before formally announcing a public offering.
‘Extending the test-the-waters reform to a broader range of issuers is designed to enhance their ability to conduct successful public securities offerings and lower their cost of capital, and ultimately to provide investors with more opportunities,’ SEC chair Jay Clayton said in a statement.
– The New York Times reported that the US Department of Justice and SEC are investigating Johnson & Johnson over concerns about possible asbestos contamination of its popular baby powder and other talc-based products. In a securities filing, Johnson & Johnson said it was ‘co-operating with these government inquiries and will be producing documents in response’ to subpoenas it had received. In a separate statement, the company said that ‘the inquiries are related to news reports’ about lawsuits it faces from consumers who claim its talc products caused cancers.
Johnson & Johnson has stood by the safety of its products. It said on Wednesday that ‘decades of independent tests by regulators and the world’s leading labs prove Johnson & Johnson’s baby powder is safe and asbestos-free, and does not cause cancer.’
– According to the WSJ, Lyft is preparing to list its shares on Nasdaq around the end of March. The company, which submitted its IPO paperwork confidentially with the SEC late last year, is expected to make the filing public as early as next week, according to people familiar with the matter. The filing is expected to name Nasdaq as the exchange for Lyft shares, they said.
The recent partial government shutdown, which hampered the SEC’s ability to approve listings, put a number of companies’ plans on hold. But the pace with which Lyft is proceeding shows it may not have a lasting impact on the new-issue market. Several advisers to companies in the pipeline say that since the shutdown ended, the SEC has been working through IPO filings in record time.
– Reuters said that Carl Liebert will succeed longtime CEO Mike Jackson at AutoNation, the largest US auto retail chain. Jackson said last September that he will step down as CEO and will stay on as executive chair of the board until 2021. Liebert is at present COO at financial services company USAA and will assume charge on March 11.
– The WSJ reported that, according to people familiar with the matter, Newell Brands CEO Michael Polk is under pressure from the company’s board of directors to prove his turnaround is working following disappointing quarters of sales. The company’s board, composed mainly of directors selected by activist investors, has discussed replacing Polk while also dangling new financial incentives for him should the company rebound, the people said.
Newell declined to comment on any board discussions. In a statement, Polk said the company ‘has taken a series of very decisive actions to set up the business for long-term success.’ He said Newell has realized core sales growth and that the bankruptcy of Toys ‘R’ Us, a critical retailer for Newell, has delayed progress.
– CNN reported that Kraft Heinz announced its accounting practices are under investigation by the SEC. The company revealed that regulators are looking into matters ‘including, but not limited to, agreements, side agreements and changes or modifications to its agreements with its vendors.’ The SEC sent a subpoena related to the matter in October 2018.
The company said it ‘continues to co-operate fully with the probe’ and said it launched an independent review of its procurement practices after it received the subpoena. ‘At this time the company does not expect matters subject to the investigation to be material’ to its bottom line, Kraft Heinz said in a statement. The SEC declined to comment.
– According to the WSJ, Pinterest has confidentially filed paperwork with the SEC for an IPO that is expected to value the company at $12 billion or more as it joins a list of hot tech startups planning share debuts in 2019. Such companies had for years shied away from public markets, but in recent months the tide has turned. The shift appears to come from the outsize gains new tech stocks have enjoyed of late. As of this week, shares of US-listed technology and internet companies that went public in 2018 are up roughly 33 percent on average, according to Dealogic.
– Despite criticisms from politicians in Washington, DC, stock buybacks continue to be popular among large companies, according to CNN. Buybacks by corporate clients of Bank of America Merrill Lynch have jumped 91 percent to $12.2 billion so far this year, the firm said. Taken together, Bank of America said buybacks are ‘on pace for another record year’ in 2019. Corporations, not retail investors or large institutions, appear to be the driving force behind the trend.
Buybacks are continuing despite the political backlash against the tactic. Many Democrats and at least one major Republican have expressed concern that US companies aren't investing enough of their windfall from the 2017 tax cut into job-creating investments.