By Danica Bennewies
Happy Friday, CBLB readers! Welcome back to Friday Finds, the weekly series where we share five of the top corporate and securities law headlines that grabbed our attention over the week. While Canadians were pretty focused on the federal election this week, a lot happened on the corporate and securities law front as well, including changes to British Columbia’s securities laws, developments in the Hudson Bay Company’s privatization plans, and more. Curious? Keep reading to get caught up!
On Monday, British Columbia’s (BC) provincial government announced substantial changes to the Securities Act (British Columbia) that gives the British Columbia Securities Commission (BCSC) some of the strongest enforcement powers in the country. Among other things, the changes expand the BCSC’s investigative powers and improve its ability to seize or freeze property that fraudsters have transferred to others. The amendments also introduce mandatory minimum jail sentences for certain types of fraud, increase penalties on specific offences, and broaden the commission’s ability to collect financial sanctions. In Monday’s press release, BC’s Minister of Finance, Carole James, said that the changes give the BCSC powerful tools to help crack down on white collar crime and better protect investors. It will be interesting to see whether other provinces follow suit and similarly expand the powers of their respective securities commissions.
We also have news from the Canadian Securities Administrators (CSA) this week. On Thursday, the CSA announced that it intends to do a review of Automatic Securities Disposition Plans (ASDPs). For those who are unfamiliar with ASDPs, these plans allow insiders in a company to make preplanned sales of securities through an arms-length administrator, so long as they have followed the pre-set instructions. An insider trading defence is available for trades made under ASDPs under current provincial and territorial securities laws, however, there is currently no national framework to govern these plans. The CSA’s review will look into whether there should be a harmonized regulatory framework for ASDPs and whether the plans are providing appropriate constraints on insider trading activity. The CSA will also look to international developments in ASDPs to inform its review and recommendations. According to CSA Chair Louis Morisset, the ultimate aim of the review is to “…ensure that ASDPs remain a legitimate mechanism of trading by corporate insiders and do not undermine the fairness of our capital markets.” Stay tuned to the CBLB for updates!
Moving to industry news, back in July we discussed Hudson Bay Company’s (HBC) executive chairman, Richard Baker, and his attempt to take the retailer private. Baker and a group of private equity funds originally made a bid of $9.45 per share for the retailer and faced opposition from its shareholders. This week, they sweetened the deal by 43%. On Monday, the group increased its bid to $10.30 per share, an offer that values the total company at $2.6-billion. This new offer was endorsed by the special committee of independent HBC directors appointed to review the bid. To succeed, the bid still needs the approval of a majority of HBC’s minority shareholders as well as 75% of shareholders who will vote at an upcoming special meeting about the offer in December. However, its not clear whether Baker et al will get this approval. A number of minority shareholders opposed the original offer, and the structure of the bid (a purchase of HBC shares for cancellation) could have negative tax consequences for certain HBC shareholders. As the date of the special meeting approaches, we’ll keep you updated on how shareholders are responding to the new bid.
Let’s talk about another story that we haven’t discussed in a while – ExxonMobil. Around this time last year, we talked about a lawsuit brought by the New York attorney general against ExxonMobil alleging that the energy company misled investors by minimizing the risks it faced from climate change regulations. The trial for this suit finally began on Tuesday of this week. While oil companies are no strangers to climate-related lawsuits, the ExxonMobil suit is a bit different because it focuses on investor fraud. The New York attorney general’s allegations claim that ExxonMobil publicly assigned a price to carbon to calculate how climate change regulation would affect its business, but then used a much lower number internally. This allegedly allowed the company to make carbon-heavy investments that otherwise would have appeared unprofitable. The attorney general’s office claims that this cost investors up to US$1.6-billion. ExxonMobil disputes the allegations, saying that the internal and external carbon prices represent aspects of climate change with different financial consequences. We’ll keep you posted with updates as the trial unfolds.
Finally, we have an update on the WeWork’s rescue plan. Last week, we discussed how WeWork was considering two alternative financial rescue plans ̶ one from SoftBank and one from JPMorgan Chase. On Wednesday, SoftBank confirmed that it will be moving ahead with its multi-billion-dollar rescue plan for the real estate company. SoftBank, which has already invested around US$10-billion into WeWork and holds a third of the company’s shares, plans to provide US$5-billion of new financing, inject US$1.5-billion in equity and offer to buy up US$3-billion of outstanding shares. The result of this rescue plan will leave SoftBank holding an 80% stake in WeWork. WeWork CEO Adam Neumann will also be getting a substantial amount of money in the deal: SoftBank has offered Neumann US$1.7-billion to step down from his position as chairman. This payout has sparked outrage among employees, who are facing mass layoffs to cut company costs. Masayoshi Son, the chief executive and chairman of SoftBank appeared unphased by WeWork’s financial struggles, saying in a statement following that announcement that “[i]t is not unusual for the world’s leading technology disruptors to experience growth challenges as the one WeWork just faced.”
That brings another Friday Finds to a close. As always, thanks for joining us this week and be sure to come back next Friday for another round up of the Top Five Friday Finds!