Activists Most Active Since Crisis: Business of Law

Hedge fund activists started almost 150 campaigns against companies so far this year, the most since the financial crisis began, according to data compiled by the EY Center for Board Matters of Ernst & Young LLP.

The report found that activist investors increasingly are collaborating with institutional investors and winning more board seats. Companies, in addition, have fewer institutionalized defenses: In 2000, 54 percent of companies had a poison pill in place, while only 12 percent have one now.

Additionally, Ernst & Young found that companies are more frequently talking to investors about governance topics ranging from executive compensation to the composition of the board and issues such as sustainability. From 2010-2014, the number of companies that disclosed “engaging with investors” rose from 6 percent of those on the S&P 500 to 50 percent, according to the report.

The composition of boards continues to be important to shareholders and the report found that the push for the annual election of all directors has taken hold. While 63 percent of boards on the S&P 1500 had staggered elections in 2000, only 32 percent have such boards currently.

The report, written by Allie Rutherford of Ernst & Young, predicts that companies without annual elections and an independent chairman or lead director “may be the focus of shareholder engagement or recipients of shareholder proposals.”

Firm News

O’Melveny, Shearman & Sterling, Hogan Lovells Add New Partners

Edward Hassi, the former chief trial counsel for the Federal Trade Commission’s Bureau of Competition, returned to O’Melveny & Myers LLP as a partner in its antitrust and competition practice group in Washington. An O’Melveny litigator since 2005, Hassi moved to the FTC in 2011.

“Ted has deep knowledge of the FTC’s policies, priorities, and processes,” Richard Parker, chairman of the firm’s antitrust and competition practice, said in a statement. “Combining that with his extensive legal and courtroom experience, both in private practice and for the government, he brings a unique set of skills to O’Melveny’s clients.”

Reena Agrawal Sahni joined the New York office of Shearman & Sterling LLP as a partner in the global financial regulatory practice. Previously counsel at Davis Polk & Wardwell LLP, Sahni focuses on bank regulation, bank insolvency and bank capital markets transactions, including Dodd-Frank Act regulatory reform implementation. She was previously a senior attorney at the U.S. Securities and Exchange Commission.

Albert Stemp joined the Los Angeles office of Hogan Lovells LLP as a partner in the real estate practice. Stemp, who was previously a counsel at Skadden, Arps, Slate, Meagher & Flom LLP represents borrowers and financial institutions, private equity funds, developers, institutional investors and REITs. Additionally, Stemp has advised U.S. investors in international real estate assets and international investors in U.S. real estate assets and debt.

Capital Markets

JOBS Act Rewards U.S. Stock Exchanges With IPOs Amid Criticism

A two-year-old U.S. law designed to make it easier for small companies has turned into a boon for the country’s stock markets.

The Jumpstart Our Business Startups Act has spurred 25 percent more U.S. initial public offerings annually, according to a research paper by economists at Penn State University and the State University of New York at Buffalo. That generates listing fees for the New York Stock Exchange and Nasdaq Stock Market, a rare bright spot for the industry amid allegations that trading venues favor some customers versus others.

The NYSE and Nasdaq Stock Market have reaped rewards from the law even as scrutiny of their business from regulators and lawmakers intensified this year. Rebates that exchanges pay to brokers for stock orders have been attacked in congressional hearings. New York Attorney General Eric Schneiderman is examining relationships between exchanges and traders, evaluating whether markets unfairly cater to some clients.

The law lets companies with less than $1 billion in revenue apply for initial stock offerings confidentially in order to keep proprietary data from competitors if they later cancel plans to go public.

The academic paper found that 90 percent of companies eligible to file confidentially with the U.S. Securities and Exchange Commission since 2012 have done so, among them prominent listings such as Twitter Inc. and GoPro Inc. The submissions must be made public 21 days before the company begins pitching its shares to potential investors.

“It’s become the full-employment act for lawyers, because there’s no downside to filing,” Alan Shapiro, general counsel at Everyday Health Inc., a New York-based company that went public this year, told Bloomberg News.

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