The week in GRC: Activist ups pressure on Nestlé, and IPO market springs into life
– The New York Times reported that investor Daniel Loeb called on Nestlé’s board to split the company into three divisions. In a letter, Loeb noted that his hedge fund firm, Third Point, had invested more than $3 billion in Nestlé, and called on the board to be ‘bolder’ and ‘faster’ in reimagining the company. He argued that Nestlé should be reorganized into three units: beverages, nutrition and groceries. Nestlé did not respond immediately to a request for comment.
– According to The Wall Street Journal, regulators are stepping up enforcement on the sale of private stakes in companies, following a WSJ investigation that found securities firms with unusually high numbers of troubled brokers selling tens of billions of dollars a year of these investments, often targeting seniors.
The Massachusetts chief financial regulator, William Galvin, announced a probe into a number of brokerage firms selling private placements. ‘Private placements are risky investments that reward the salesperson handsomely with high commissions,’ he said. The North American Securities Administrators Association said it plans to work even more closely with federal law enforcement to target bad actors.
– Rhode Island sued several major oil companies, accusing them of contributing to climate change that is damaging infrastructure and coastal communities in the state, Reuters reported. The lawsuit, announced by Rhode Island attorney general Peter Kilmartin, was the first by a state seeking to hold oil companies responsible for costs associated with climate change and followed similar cases by several local governments nationally. The lawsuit alleged that various oil companies had created a public nuisance in the state and failed to adequately warn customers, consumers and regulators about the risks posed by their products.
It named as defendants Exxon, BP, Royal Dutch Shell and Chevron, among other companies. In a statement, Shell said ‘lawsuits that masquerade as climate action and impede the collaboration needed for meaningful change’ were not the answer to climate change. The other companies did not respond to requests for comment.
– Bloomberg said that, according to the British Chambers of Commerce, the country’s companies are at ‘breaking point’ over the lack of clarity on Brexit, and are slowing down their investments as they await answers to key questions surrounding the UK’s departure from the EU. Business confidence and investment intentions will continue to deteriorate until Prime Minister Theresa May ends disagreements in her cabinet and delivers ‘urgent clarity on the practical, detailed issues that underpin trade,’ the Chambers of Commerce said.
– The SEC is looking into Facebook’s public disclosures about its data leak to Cambridge Analytica, the Financial Times reported. The agency is scrutinizing Facebook CEO Mark Zuckerberg’s testimony to US lawmakers as part of its investigation. The SEC joins the Federal Bureau of Investigation, the US Department of Justice and the Federal Trade Commission, which are already examining Facebook over the leak.
Facebook confirmed that it was responding to questions from all four US agencies. ’We are co-operating with officials in the US, the UK and beyond,’ Facebook said. ‘We’ve provided public testimony, answered questions and pledged to continue our assistance as their work continues.’
– Bloomberg reported that Barnes & Noble fired CEO Demos Parneros for violating company policies and said he’ll exit the post without severance. A spokesperson declined to say why he’d been terminated. The company said in a statement that it was ‘not due to any disagreement with the company regarding its financial reporting, policies or practices or any potential fraud.’ The company will now begin a search for a new CEO. In the meantime, it has appointed a leadership group to share the role’s duties until a new leader is named. Leonard Riggio remains executive chair.
– According to the FT, the directors of UK infrastructure company Stobart Group were granted a brief reprieve after an influential adviser called on shareholders to vote against attempts by former CEO Andrew Tinkler to shake up the board. Tinkler was fired as a director of the company in June after leading a campaign to unseat chair Iain Ferguson and replace him with retail entrepreneur Philip Day. Stobart said at the time it was issuing legal proceedings against Tinkler, alleging ‘breach of contract and breach of fiduciary duty’. Tinkler then launched defamation proceedings against Stobart’s board.
Glass Lewis this week called on investors to vote against Day’s election at a special meeting due to take place on July 16.
– The WSJ said the IPO market has returned to life in 2018, with companies raising public capital at a pace rarely seen in the past two decades. So far this year, 120 companies have used IPOs to raise $35.2 billion on US exchanges. That is the highest volume since 2014 and the fourth-busiest year to date on record, according to Dealogic, which has records going back to 1995.
Bankers say no single factor is pushing companies to tap the public markets for capital. The trend has been caused by a convergence of favorable business conditions, strong stock markets and investors’ interest in high-growth companies.
– The New York Times reported that more than $2.5 trillion in mergers were announced during the first half of the year. Four of the 10 biggest deals were made in part to fend off competition from the largest technology companies as the value of acquisitions announced during the first six months of the year increased 61 percent from the same period in 2017, according to data compiled by Thomson Reuters. That means mergers this year are on pace to exceed $5 trillion, which would top 2015 as the largest yearly total on record.
Deals involving companies based in different countries nearly doubled compared with the first half of last year, and accounted for more than 40 percent of all announced transactions.
– According to the FT, companies are being inundated with correspondence about their use of personal information, straining resources as they adapt to the new General Data Protection Regulation (GDPR). Companies – which face stiff penalties if they fall foul of GDPR – have reported a sharp increase in questions from customers.
Technology companies, media groups, retailers and banks are among those most heavily targeted because of the amounts of information they hold on customers. Some financial institutions, which are required to collect detailed customer information for anti-money-laundering, tax and accounting reasons, say the rules have proved onerous to implement alongside these other regulations.
– AP via CNBC reported that California lawmakers said they reached an agreement on legislation that would enshrine net neutrality provisions in state law after the Federal Communications Commission (FCC) dumped rules requiring an equal playing field on the internet. California’s bill is one of the nation’s most aggressive efforts to continue net neutrality.
The FCC last year repealed regulations that prevented internet companies from speeding up or slowing down the delivery of certain content. Net neutrality advocates worry that, without such rules, internet providers would be free to block political content, slow down websites from their competitors or drive consumers to their own content.
– According to the WSJ, top lawyers are moving to litigation-finance firms, which invest money in corporate legal disputes. Such firms are raising hundreds of millions of dollars and staffing up by attracting attorneys from elite law firms. Funders front money for corporate litigation in exchange for a cut of any possible return. The money backs plaintiffs with individual cases as well as portfolios of cases being pursued by a single law firm. Funders typically lose their entire investment if a plaintiff loses its case.