By Danica Bennewies
Happy Friday! Kick your weekend off with another round of Top Five Friday Finds – the weekly series in which we share five of the corporate and securities law news stories that dominated the papers (and our conversations) this week.
CIBC’s week took a turn for the worse on Wednesday when Siskinds LLP and Bates Barristers PC filed a $200-million class-action lawsuit against the bank’s investment management arm. The lawsuit alleges that trailing commissions paid on Series A funds intended to go to financial advisors were actually paid to discount brokers who did not provide investors with financial advice. CIBC hasn’t commented on the lawsuit. The CSA’s embedded commission proposal would have banned the practice of paying trailing commissions to discount brokers, however the reforms have been delayed by the Government of Ontario’s opposition. Contrary to historical practice, the Government of Ontario issued a statement last week stating their disagreement with the CSA’s proposal and promising to work with the provinces, territories, and other stakeholders to find an acceptable alternative. Professor Anita Anand commented on the effect of this opposition: “…everyone is now uncertain about the direction in which this proposal will travel…Uncertainty in the capital markets is not something that should be fuelled by the government of the day – no one benefits from it.”
Let’s take a look at a few reports that were released this week.
First, Kingsdale Advisors released their 2018 Proxy Season Review. Kingsdale’s report found that proxy battles have been rising in Canada in 2018. There have been 29 proxy contests this year to date compared to 21 contests at the same time last year. However, activist success in these battles has been declining, with only 50% of contests achieving the activists’ objectives, compared to 62% last year. This is also below the U.S. activist win rate of 72%. In part, Kingsdale attributes this decline to many directors of public companies becoming more experienced with proxy contests and in dealing with activists.
The Organization for Economic Cooperation and Development (OCED) delivered its September outlook on Thursday. The organization found that global economic growth is plateauing, largely due to tensions between countries and protectionist attitudes restricting global trade. Canada specifically is facing slowing productivity and growth, according to a report released by Deloitte this week. The report assessed Canada’s competitive landscape and found that 16% of companies on the TSX and TSXV are “zombie” companies. A term coined by the OECD, a “zombie” company refers to a mature business with insufficient earnings to cover its interest payments on debt. Such companies are considered a drain on productivity. The report also contained recommendations for combating this zombie invasion and setting Canada’s economy up for lasting success.
Moving our focus to the U.S. now, let’s check in with Tesla. Tesla announced on Tuesday that the U.S. Justice Department was investigating Elon Musk’s comments made back in August about taking Tesla private. This is on top of the Securities and Exchange Commission’s investigation already underway. Tesla has said that they are co-operating with the investigation and have handed over requested documents. The car manufacturer’s share price dropped on Tuesday in response to the news.
Finally, all eyes have been on cannabis stocks this week, particularly Tilray Inc. Tilray’s share price has grown 1600% since it came on the market in July, and it’s currently the most valuable cannabis company in the world. Tilray shares experienced a roller-coaster of a week, surging 90% on Wednesday and then abruptly falling to negative values before ultimately rebounding. But it’s not just cannabis stocks experiencing volatility. The S&P Dow Jones Indices will be reorganizing some sectors after market close today, replacing the telecommunications index with a new communication services sector. This reorganization involves moving major companies, such as Facebook, Twitter, and Google, from the technology to the communications sector, which will have a major impact on how these sectors are weighted. Analysts expect that this anticipated reshuffling will increase the volume and volatility of trading today. Hold on to your hats, it’s going to be a wild ride.
Those are your top finds for the week. We’ll see you next Friday with more of the latest news.