From a SPAC’s IPO through to its initial business combination with a target company and beyond, there are certain D&O insurance considerations that may not be top of mind for a SPAC management team. However, budgeting for and structuring D&O insurance plans is an essential part of attracting independent directors to a SPAC’s board and protecting the newly public company and its directors and officers post de-SPAC. Yelena Dunaevsky and Dan Berry of Woodruff Sawyer address the main components of SPAC-related D&O insurance plans, pricing, structuring and other considerations in Woodruff Sawyer’s “Meet the Experts” series.
Is today a Business Day? Good question, depends who you ask.
The SEC’s EDGAR filing system is closed today for the Juneteenth Holiday. Because today is a federal holiday, today will not count as a business day in the filing periods in Rule 424(b) under the Securities Act. This is also helpfully noted in the SEC’s announcement of an EDGAR filing holiday at: SEC.gov | EDGAR Will Be Closed Friday, June 18, 2021.
What about the time period between pricing and settlement of a debt security, such as a structured note issued off of a medium-term note program? This is usually 2-3 “business days,” as defined in the relevant indenture. A typical “business day” definition for a fixed rate debt security in an indenture reads “’business day’ means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in the City of New York.” Because today is a legal holiday, it will not be counted for purposes of the settlement period. We don’t have to reach the question of whether or not banks in New York City are open, as many banks are open today.
Issuers and underwriters closing a transaction pursuant to an underwriting agreement may not have an extra day. At least one bulge bracket bank holding company’s form of underwriting agreement defines a “New York Business Day,” which is used for settlement of the transaction, as “each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.” Because today is not a bank holiday in New York City, today is a New York Business Day under that formulation. We can assume that the drafters of that agreement thought that there would be sufficient advance notice of any federal or bank holiday. There was very little advance notice of this federal holiday.
In a comment letter to the Securities and Exchange Commission on June 11, seven well-known tech companies responded to SEC Acting Chair Allison Herren Lee’s March 2021 request for public input on climate change disclosures (see our related blog post). The letter expressed support for consistent reporting by public companies regarding climate-related matters.
With acknowledgement regarding the severity and urgency of addressing climate change issues, the letter mentions that the companies believe “…it is critical to regularly measure and report on progress towards climate commitments.” The letter notes the importance of sharing updates with investors and stakeholders, stating, “Investors need clear, comprehensive, high-quality information on the impacts of climate change for market participants.”
The letter addressed to Chair Gensler specifically outlined some climate disclosure suggestions for the SEC to consider, including:
- Relying on a flexible principles-based framework to align with agendas that already have, or will have, common support from investors, such as those of the Task Force on Climate-Related Financial Disclosures (TFCD);
- Leveraging existing SEC frameworks and standards for climate reporting in order to reduce companies’ “reporting burden,” while also implementing a comment period for the public in an effort to limit the need for frequent substantive deliberations;
- Including disclosure of greenhouse gas emissions information to divulge companies’ emissions footprint, thus allowing reflection on globalized standards; and
- Allowing separate reporting location, frequency, and timing, especially outside of the current boundaries of documents that are filed with the SEC annually and quarterly.
These companies are already taking measures to report on their environmental performance and would like to see a consistent standard set across the board.
Read the response letter in its entirety here.
June 29, 2021 Webinar
1:00pm – 2:00pm EDT
As many issuers continue to seek access to the capital markets in light of the pandemic-related downturn, our webcast will focus on convertible bonds. Converts have been among the most popular financing tools in recent months, and for good reason. Join Mayer Brown partners, Anna Pinedo and Remmelt Reigersman, as well as Raymond James’ Co-head of Equity-Linked Securities, Claude DeSouza-Lawrence, and Director, Peter Pergola, while they discuss the state of the market, and provide:
- A convertible bond overview;
- Simplified accounting treatment for issuers;
- Accompanying antidilutive strategies, including capped call and call/warrant structures;
- Tax considerations for the issuer;
- Addressing busted converts; and
- Other securities and disclosure considerations.
June 21, 2021 Webinar
1:00pm – 2:00pm EDT
Under Securities and Exchange Commission Chair Jay Clayton’s leadership, the SEC focused on a number of areas that were collectively termed “good corporate hygiene.” These subsumed policies related to trading in a company’s stock, especially the use of Rule 10b5-1 trading plans and the use of such plans by insiders, as well as corporate policies, including corporate repurchase plans, Regulation FD policies, and policies relating to the handling of material nonpublic information. Various academic studies and some well-publicized sales by corporate executives made pursuant to 10b5-1 trading plans have drawn media scrutiny and attention from legislators, prompting calls for the SEC to take a closer look at the area. Also, despite the pandemic, share repurchase activity has remained high, and that has raised questions.
In the first of a two-part series addressing corporate hygiene, Mayer Brown will address topics relating to share trading and repurchases:
- Rule 10b5-1 best practices;
- Recent studies relating to sales practices;
- Rule 10b-18 programs;
- Accelerated share repurchase plans;
- Announcing repurchase plans;
- Activity by insiders in proximity to corporate repurchases, including controls related to insider trading and blackout conditions; and
- Handling material nonpublic information.
Today, the Office of Information and Regulatory Affairs released the Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions, which includes the Securities and Exchange Commission’s rulemaking agenda.
The rulemaking agenda identifies short-term and long-term actions to be taken by the SEC. There are a number of items that are noted in the final rulemaking stages that we have previously mentioned on this blog, including the following:
- Disclosure relating to climate risk
- Disclosure relating to corporate board diversity
- Short sale disclosure reform
- Share repurchase disclosure modernization
- Disclosure regarding beneficial ownership and swaps
- Rules relating to SPACs
- Amendments to Rule 10b5-1
- Changes to the exempt offering framework
In addition, the rulemaking agenda also lists as near-term the following:
- Market structure modernization within equity markets, treasury markets, and other fixed income markets
- Investment fund rules, including money market funds, private funds, and ESG funds
- Unfinished work directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including, among other things, securities-based swaps and related rules, incentive-based compensation arrangements, and conflicts of interest in securitizations
- Enhancing shareholder democracy
- Mandated electronic filings and transfer agents
You can access the agenda here.
During its meeting on June 10, the Securities and Exchange Commission’s Investor Advisory Committee held a panel discussion regarding 10b5-1 plans, welcoming three market participants and academics. As we previously blogged, SEC Chair Gary Gensler asked for recommendations for the Commission’s consideration on how to “freshen up Rule 10b5-1.”
Dr. Dan Taylor, Associate Professor at the Wharton School of the University of Pennsylvania, provided an academic primer to kick off the panel discussion. While covering the mechanics of Rule 10b5-1 plans, Dr. Taylor highlighted the ability for Rule 10b5-1 plans to be cancelled while a holder was in possession of material non-public information (MNPI), and noted that there are no requirements for insiders to disclose the adoption, modification, or cancellation of trading plans. Dr. Taylor argued that these attributes undermine investor confidence and prevent proactive risk assessments and policing, while also limiting access to information by institutional investors. Further, he shed light on the outdated filing procedures of Form 144, which can contain disclosure of trading plans.
Dr. Taylor suggested that policy recommendations need to balance the needs of executives for liquidity, the value of giving executives an affirmative defense against insider trading claims (which is the primary purpose of a Rule 10b5-1 plan), and investors’ access to information relating to executives’ trades. With regard to trades, he recommended requiring all companies, including foreign issuers, to disclose trades of officers and directors on EDGAR; making Form 144 filings electronic, as proposed by the SEC (see our blog post); and modifying Form 4 to require disclosure of trades made pursuant to 10b5-1 plans. With regard to trading plans themselves, Dr. Taylor proposed that the SEC require the disclosure of the number of shares covered by a trading plan for each named executive officer in a company’s annual proxy statement; requiring disclosure of the adoption, modification, and/or cancellation of trading plans by insiders on a Form 8-K; and adopting former SEC Chair Clayton’s suggested four to six month cooling off period.
Keir Gumbs, Vice President, Deputy General Counsel and Deputy Corporate Secretary for Uber Technologies, provided a corporate and uniquely tech perspective on 10b5-1 plans. Mr. Gumbs argued that 10b5-1 plans are meant to provide clarity, rather than liquidity, for both companies and insiders. As information is more easily accessible and shared within emerging tech companies, Mr. Gumbs explained that more tech companies are instituting blackout periods for all employees, instead of just to executives and directors who have traditionally been subject to blackout periods. He also highlighted the increased equity exposure many employees are subject to, given the equity-heavy compensation structures primarily seen in tech companies. Adopting 10b5-1 plans allow for liquidity and regular payouts to employees that may need access for any number of reasons. Mr. Gumbs reiterated that adopting 10b5-1 plans allow companies and individuals to mitigate risks against insider trading charges. With regard to recommendations, Mr. Gumbs suggested that rulemaking relating to 10b5-1 plans should be data-driven.
Jeff Mahoney, General Counsel to the Council of Institutional Investors (the “Council”), echoed Dr. Taylor’s call for enhanced disclosure requirements. Strengthening the public disclosures would “lessen the overall lack of transparency in the plans,” according to Mr. Mahoney. Mr. Mahoney concluded by stating “…when insiders transact their own company stock through 10b5-1 plans, investors agree that the capital markets can become more eroded.”
Global funding for companies in the automotive and mobility sectors fell to $27.6 billion in 2020, a 5% decrease year-over-year, with 522 deals completed according to CB Insights’ recent report and webinar on the State of Mobility. While the first half of 2020 was particularly affected by the COVID-19 pandemic, the second half of 2020 saw more investor interest in the sector as companies addressed electrification and autonomous driving.
As demonstrated by the shift to later stage financings and the emergence of new automotive and mobility unicorns, automotive and mobility companies are remaining private longer. Globally, there are now 45 unicorns in the sector, collectively valued at over $226.8 billion.
In 2020, there were 107 auto and mobility company exits, which included 22 SPAC deals. Companies developing technology to support electric vehicles (EV) made up 58% of 2020’s total SPAC deals.
Highlighted below are the 2020 funding highlights for certain notable subsectors:
- EV companies raised $12.8 billion in 193 deals completed in 2020, with $8 billion of funding going to original equipment manufacturers (OEMs).
- Autonomous vehicle companies raised $7.3 billion in 105 deals, with the average deal rising 17% year-over-year to $104 million.
- Connected vehicle companies raised $1 billion, a decline from 2019’s $2.2 billion, with 70 completed in 2020. Analysts believe the shift to electrification and autonomous vehicles may have led to this steady decline.
As we continue to speed through 2021, particular focus continues to be placed on zero-emission transportation and commercial vehicle innovation, given the global focus on ESG. Due to the ripple effects of the pandemic on our daily lives, analysts expect to see the emergence of new mobility tech, including robotaxis, micromobility and personal electric vehicles, and digital car dealerships.
A new executive order (“EO”) signed by President Biden on June 3, 2021, amends existing prohibitions on US investments in companies that the US government has determined support the military of the People’s Republic of China (“PRC”). The EO, Executive Order 14032, builds on the national emergency declared in Executive Order 13959, signed by President Trump in November 2020, regarding threats from China’s military-industrial complex (see our previous Legal Update) and broadens it to include threats from the “use of Chinese surveillance technology outside the PRC and the development or use of Chinese surveillance technology to facilitate repression and serious human rights abuses.”
The new executive order prohibits US investment in the publicly traded securities of the targeted companies. This Legal Update summarizes key aspects of Executive Order 14032, including what has changed and what has stayed the same from Executive Order 13959.
June 18, 2021 Webinar
11:00am – 12:00pm EDT
Issuers in a range of industry sectors may now be evaluating potential liability management transactions, including debt repurchases and tenders or exchange offers. In some cases, no-action letter relief may provide issuers and their advisers with greater flexibility for tender offers for non-convertible debt securities, including non-investment grade debt securities.
During this webcast, Mayer Brown’s Eddie Best, John Berkery, and Brennan Young will speak alongside RBC Capital Markets’ Salim Mawani to address:
- Disclosure issues and handling material non-public information;
- Structuring repurchases to avoid the application of the tender offer rules;
- Repurchasing debt trading at a discount;
- Handling busted convertible notes;
- The tender offer rules;
- No-action letter relief for non-convertible debt securities;
- Consent solicitations; and
- Tax considerations.