By Danica Bennewies
Its time for another installment of Friday Finds – the weekly series here on the CBLB where we share five of the top corporate and securities law news stories that dominated the headlines, as well as our conversations, over the past week. We’ve got an exciting round-up of stories today, including regulatory news from Ontario, Quebec, and the US. Let’s jump in!
First up, one of the big topics that’s been in the news recently and that we’ve been talking about here on the blog: regulatory burden reduction. You may recall that recently the Ontario Securities Commission (OSC) put together a task force to explore how regulatory burden can be reduced. This Wednesday, the OSC held a roundtable on the subject and then released an outline of its 2019-2020 priorities on Thursday. At the roundtable, OSC chair and CEO Maureen Jensen stated that the agency will address regulatory burden in stages and that the plan will involve short-, medium-, and long-term measures. Jensen said that the OSC intends to focus on “streamlining regulations to enhance the experience of those who invest and do business in Ontario.” While burden reduction sounds appealing, in a recent article for the Globe and Mail Anita Anand raised questions regarding what this reform would mean for investors: “…how does the OSC quantify consequences to investor welfare in a given instance? How can it weigh a reduction in issuer costs against potential consequences to investors?” The OSC has quite the to-do list for the coming year – its other priorities include promoting confidence in Ontario’s capital markets, facilitating financial innovation, and strengthening the OSC’s organizational foundation.
In Quebec, the L’Autorite des marches financiers (AMF) is facing a lawsuit. David Baazov, the former CEO of the online poker giant Amaya, launched a $2-million lawsuit against the AMF this week. Baazov alleges that the AMF was “abusive” and “malicious” in filing insider trading accusations against him back in 2016. The AMF’s original charges came out of a US$4.9-billion deal in 2014 for Amaya to acquire PokerStars, which lead to the formation of the world’s largest public online poker company. Among the charges, AMF alleged that Baazov influenced or attempted to influence the market price of Amaya’s securities (now renamed to the Stars Group Inc). Baazov plead not guilty to all counts and the trial came to a sudden end last summer when the presiding judge stayed the proceedings. An AMF spokesperson responded to the lawsuit, calling the claims “unfounded”.
In industry news, activist investors in TransAlta Corp. are attempting to shut down an investment in the company by Brookfield Renewable Partners LP. Three funds, seemingly led by the New York-based Mangrove Partners, are nominating five directors to TransAlta’s board at the upcoming annual shareholder’s meeting in late April. According to the terms of Brookfield’s investment agreement, if two or more persons who are not among the company’s recommended nominees get elected to the board then TransAlta has the right to terminate the Brookfield deal. In a press release on Tuesday, the three activist funds said that they had “insufficient time” to fully evaluate the Brookfield deal and they believe that there may be superior transactions available to TransAlta. As such, the funds want to maintain TransAlta’s ability to terminate the Brookfield Investment Agreement in order explore these so-called “superior transactions”. In response to the funds’ comments, TransAlta said that it “will review Mangrove’s notice, consider the suitability of its nominees and communicate more fully with its shareholders in due course.”
Let’s talk about what’s been going on in the US this week. It looks like the Securities and Exchange Commission’s (SEC) whistleblower program is being put to good use by investors. On Tuesday, the SEC announced that US$50-million in total awards is being paid out to two whistleblowers who provided high quality information that assisted the regulator in bringing a successful enforcement action. One whistleblower will receive $13-million, while the second will receive $37-million – the SEC’s third highest award to date. The Chief of the SEC’s Office of the Whistleblower highlighted the importance that these individuals play in enforcement actions, stating that they can often be “the source of ‘smoking gun’ evidence and indispensable assistance that strengthens the agency’s ability to protect investors and the capital markets.” The SEC started its whistleblower program in 2012 and has since made awards to 61 individuals, for a total of $376-million. The OSC started a similar program in 2016, though the awards are more limited and are capped at a total of CAD$5-million per individual. However, the OSC hadn’t issued its first award until this past February, when it paid out $7.5-million total to three whistleblowers that came forward with high quality tips.
Finally, today marks the kick-off of a series of tech company IPOs expected this year. Lyft Inc is making its stock market debut today, with a final IPO price of $72 per share set on Thursday night (though this is likely to quickly change once trading starts on Friday). The ride sharing company originally started out its IPO roadshow targeting between $62 to $68 per share, with a total of 31 million shares offered for sale. However, due to unexpectedly high demand, Lyft had to make adjustments and is now offering 32.5 million shares at $72 each, giving the company a total market valuation of US$24.3-billion. Lyft’s IPO is the first of a slew of tech company IPOs anticipated this year, however Uber isn’t too far behind. Lyft’s much larger rival is expected to make its stock market debut as soon as April, and its investment bankers said it could be valued at as much as $120-billion. Though there’s clearly a lot of excitement for Lyft’s IPO, some investors are skeptical given the company’s unprofitable history and dual class share structure. Those investors turned off by the supervoting shares may turn to Uber instead. Uber has apparently made major governance changes and will be going public with a “one share, one vote” structure.
Thanks for catching up on this week’s top securities and corporate law news stories. Join us back on the CBLB next week for another round-up of Friday Finds!