By Danica Bennewies
Welcome back to the CBLB! We’ve made it through another week, which means its time for another round-up of the top five Friday Finds. This is the weekly series where we discuss five of the big corporate and securities law news stories that dominated the headlines this week. We’ve got a lot to talk about – from Bombardier, Boeing, and Uber, to the latest regulatory updates. So, before you start day-dreaming about your weekend plans, take five minutes to get caught up with us on this week’s news.
Back in November we discussed how the Supreme Court of Canada upheld the constitutionality of the proposed national securities regulator, the Cooperative Capital Markets Regulator (CCMR). At the time, only British Columbia, Ontario, Saskatchewan, New Brunswick, Prince Edward Island, and Yukon had agreed to the initiative. This week, Nova Scotia formally signed on to the project as well. However, Albert and Quebec are still two of the major holdouts, which could be problematic considering that both of these jurisdictions are home to an exchange and have significant capital market activity. Indeed, one of the big concerns with the CCMR that was raised by Anita Anand is how this national regulator will be structured given that not all of the provinces and territories have opted to be a part of it. In a statement released this week, the participating jurisdictions emphasised that they are committed to implementing the CCMR in such a way that is “respectful of non-participating jurisdictions”. However, there is still no set launch date for the project, which was initially planned for the summer of 2015. Rather, the jurisdictions are reviewing their timelines, with the goal of ensuring a smooth transition for all market participants.
In other regulatory news, this week the Ontario provincial government announced that it is moving forward with legislation to protect the use of the financial planner and advisor titles. In the provincial budget released on Thursday, the government reiterated concerns regarding the lack of requirements for industry titles and the resulting risk of receiving unqualified advice that investors face. While the government didn’t specify what the new legislative framework would be, it did state that it would introduce some sort of proficiency requirement aimed at enhancing investor protection while avoiding unnecessary regulatory burden. The budget also discussed how the government intends to boost confidence in Ontario’s capital markets. One initiative is the establishment of an Office of Economic Growth and Innovation within the Ontario Securities Commission (OSC) in order to increase innovation within the industry and promote the adoption of cost-reducing technology. The budget also referred to the OSC’s Burden Reduction Task Force and the leading role the securities regulator will play in improving the investor experience through greater use of “plain language” requirements and financial literacy initiatives. If you’re interested in reading what else the government has planned for the upcoming year, you can find the full budget here.
Let’s move now to this week’s industry news. Bombardier Inc. is facing pressure from shareholders to abolish its dual-class share structure, and this week two proxy advisory firms joined in the push. Médac, a Montreal-based investors rights’ group, put forward a shareholder proposal to end the capital structure and now both Institutional Shareholder Services and Glass Lewis have announced their support. Bombardier has had a dual-class share structure since 1980. Relatives and descendants of inventor Joseph-Armand Bombardier hold 50.9% of the company’s voting rights, and family members occupy four board seats despite only holding 12.2% of the equity. In its proposal, Médac claims that the controlling shareholders give little consideration to other stakeholders’ interests and the growing discrepancy between family and shareholder interests highlights the need for a change in control. Both proxy advisory firms agreed that the dual-class shares have outlived any usefulness. However, in a statement on Wednesday, Bombardier said that it is satisfied with its current share structure and has no plans to change the arrangement. All of this bodes well for an active debate at Bombardier’s upcoming annual meeting in May.
Speaking of aerospace companies, Boeing is also facing some shareholder troubles this week. Richard Seeks, a Boeing shareholder, is suing the company for allegedly hiding problems with its 737 Max jet in order to increase its share price. Seeks claims that rather than speaking optimistically about future sales and upholding the safety of the 737 Max, Boeing should have disclosed to investors the safety problems with its bestselling plane. Furthermore, Seeks argues that Boeing did not inform investors that the safety features on its Max jets were optional and also hid the fact that the authority to carry out safety checks on the planes had been delegated to the company by the US Federal Aviation Administration. The lawsuit alleges that by hiding this information, investors bought Boeing shares at artificially inflated prices. Seeks has also named Boeing’s CEO and CFO as defendants in the lawsuit, and is seeking class action status for all shareholders who bought Boeing stock between January 8 and March 21.
Lastly, lets talk about IPOs. First there was Levi’s, then Lyft, and now Uber is ready to make its public market debut. On Thursday, the ride-hailing company filed the paperwork to go public. It looks like it may be one of the biggest public offerings ever for a technology company, with Uber selling up to US$10-billion worth of stock. The IPO filing revealed a lot about Uber’s financial health as well. While its revenue was up 42% in 2018, the company still lost US$1.8-billion and its revenue growth is slowing, raising the question of whether Uber will ever turn a profit. This is similar to what we saw when Lyft filed its prospectus back in March, though Uber’s net loss is substantially larger. However, unlike Lyft, Uber will be going public with a one share, one vote capital structure. This is a marked difference from other technology companies such as Lyft, Snap, Facebook, and Alphabet, which all use a dual-class share structure. Uber made a big deal of its one share, one vote policy in the corporate governance section of its prospectus, potentially using this as way of differentiating itself from Lyft. Uber is expected to start its investor roadshow later in April, putting it on track to start trading in early May.
That wraps up our stories for this week! Thanks for getting caught up with us and be sure to come back to the CBLB next Friday for another round-up of the top corporate and securities law news.