Investor relations week: Biden against takeovers, Ackman vows to short and Shanghai foreclosure sees traders camp out

– CNN reported that the Biden administration wants to discourage stock buybacks, which critics say allow executives to manipulate markets while funneling corporate profits into their own pockets rather than the economy. Last year, S&P 500 companies bought back a record $882 billion of their own shares. This figure is on track to reach $1 billion in 2022, according to data from Goldman Sachs.

The White House has proposed new rules intended to curb stock buybacks as part of its budget plan. The plan would require executives to hold onto their shares for a certain number of years and prohibit them from selling shares for a certain period after a scheduled buyout. The White House did not specify the exact number of years. Executives sell more stock within eight days of their company’s takeover announcement than at any other time, according to SEC data. These buyouts have made up an increasingly large share of corporate profits over the past decade.

– Investor Bill Ackman said he will no longer participate in short-selling campaigns by vocal activists, CNBC reported. “Despite our limited participation in this investment strategy, it generated enormous media attention for Pershing Square. In addition to massive amounts of media success, our two short activist investments managed to inspire a book and a film,” wrote Ackman in his annual letter, “Fortunately for all of us, and just as importantly for our reputation as a supportive, constructive owner, we have retired from this business for good.”

Ackman continued in the letter, “We exited because we believed capital could be better deployed in other opportunities, particularly considering the opportunity cost of our time. The aphorism that you “don’t need to come back like you lost it” has always resonated with us.

– Banks, brokerage firms and asset management firms in Shanghai rushed to call staff to the office ahead of a 5 a.m. lockdown on Monday, with some asking employees to stay for days to maintain operations as the city grapples with its worst Covid outbreak since early 2020, according to Bloomberg (pay wall). Bank of Communications, Huatai Securities and HFT Investment Management were among companies alerting employees to return to the office to avoid getting caught up in the lockdown, the news agency said, citing people familiar with the guidelines.

Many have called on staff to prepare to sleep in the office, as Shanghai announced on Sunday it would lock down the city of 25 million people in two phases to carry out mass testing. The city is suspending public transport and car call services, and banning residents from leaving their homes. The Pudong district, which is home to “a multitude of domestic and international financial institutions as well as the Shanghai Stock Exchange”, was blocked in the first phase.

– In related news, the South China Morning Post reports that more than 30 Hong Kong-listed companies failed to submit even unaudited financial results by yesterday’s deadline, even after the stock exchange made special arrangements for the coronavirus pandemic. The 32 companies include casino and hotel operator Macau Legend Development, pharmaceutical company CStone Pharmaceuticals and media company Bison Finance, as well as several property management companies such as Roiserv Lifestyle Services. The newspaper said the companies blamed the pandemic and sudden shutdowns in mainland Chinese cities such as Shanghai and Shenzhen for their inability to prepare annual results, according to filings with the exchange on Friday.

– The FinancialTimes (paywall) reported that HSBC has repeatedly edited its analysts’ research publications to remove references to a ‘war’ in Ukraine, as the UK bank is ‘resisting pressure to follow rivals in shutting down operations in Russia “. HSBC committees that review all externally published research and customer communications have amended several reports to soften the language used on the subject, including replacing the word ‘war’ with ‘conflict’, the newspaper said, citing two people with direct knowledge of the subject. The changes in language sparked internal debate and strong complaints from some staff, they added. When approached by the FTthe bank declined to comment, referring the newspaper to an earlier statement that read, “Our hearts go out to all those affected by the continuing conflict in Ukraine.”

– In other Russia-Ukraine news, Citywire reported that Fidelity had quietly closed a mid-sized emerging markets fund due to the war in Ukraine. The Emerging Europe, Middle East and Africa Fund stopped accepting new investments on March 22 due to liquidity problems following Russia’s invasion of Ukraine. Closure means that no new money can be invested in the fund. Current investors can sell their positions, but will not be able to make new subscriptions. The fund’s February fact sheet showed it had an 8.6% exposure to Russia, while Russian energy giant Gazprom was one of its top holdings. Its performance was hit hard by the war in Ukraine, the publication said, with its own analysis showing the fund fell 37.3% in the three months to the end of February, ranking it last in the 292 markets category. global emerging.

– For years, something strange kept happening on Wall Street, noted The Wall Street Journal (paywall), publishing the findings of a new investigation. Before a big shareholder could go through with his plans to sell a handful of shares, the price plummeted. In fact, he found that stock prices fall ahead of 58% of big sell-offs and regulators are now investigating. “It was like other investors knew what was coming,” the newspaper said.

It happened when Bain Capital sold shares of Canada Goose Holdings, “the maker of fashionable parkas”; when 3G Capital sold shares of Kraft Heinz; when Apollo Global Management sold shares of Norwegian Cruise Line Holdings; and when the Alaska State Oil Fund reduced its stake in an artificial intelligence software company. These transactions, known as block transactions, are meant to be secret between the selling shareholders and the investment banks they hire to execute the transactions.

– The SEC has dealt a “hard blow” to special purpose acquisition companies (Spacs), according to Institutional investor. The hype surrounding Spacs – and the resulting investor losses since the Spacs boom began to wane a year ago – has “led the SEC to issue tough new Spacs rules and changes that go beyond what many had originally envisioned,” the post noted. The changes are apparently so “onerous” that Hester Peirce, the only commissioner who opposed them — and the only Republican commissioner at the SEC — told a hearing on Wednesday that the rules “seem designed to stop Spacs in their tracks. momentum”. According to SEC Chairman Gary Gensler, the commission is simply trying to protect investors and erase the arbitrage that exists between IPOs and Spacs, often to the detriment of investors.

– A SEC proposal that would require public companies to publish strict climate reports could significantly increase these companies’ exposure to costly securities litigation, according to the WSJ. Lawyers representing companies and investors said the proposal could be a powerful source of securities fraud litigation, which targets companies over alleged lies or even half-truths told to the investing public.

The underlying premise is simple. Require a company to disclose more information in mandatory disclosures such as annual reports and you’re more likely to catch them in a mistake that could prove lucrative for plaintiffs’ attorneys. “Plaintiffs’ attorneys are waiting in the wings,” said Craig Marcus, partner at law firm Ropes & Gray. ‘Obtain disclosures, settlement and collect fees? Yeah, absolutely.

The rule aims to bring consistency to what has been patchy in climate reporting by different companies. Instead of voluntary sustainability reports using hand-picked metrics, companies should disclose in much greater detail how much carbon they emit and how they plan to address climate risks.

– In related news, the UN announced members of an expert panel that will review corporate pledges to achieve net-zero emissions in a bid to prevent greenwashing as private sector climate plans proliferate, Reuters reported. UN Secretary-General António Guterres said the group of 16 experts will analyze the net zero plans of companies, investors, cities and regions to develop strict and transparent standards to ensure that they keep their promises.

“Despite growing promises for climate action, global emissions are at an all-time high,” said António Guterres. “Stricter net zero standards and stronger accountability around the implementation of these commitments can lead to real and immediate emissions reductions.” The official launch of the group, first announced at COP26 last November, comes as environmental groups sue companies that lack details on their net zero plans and regulators begin to scrutinize climate commitments made by companies. large companies.

– Takeover deals in Asia hit a record in the first quarter, said the FT, as private equity groups scooped up assets in the region, though he added investors are warning the ‘hot streak’ may not last, in part due to intensifying coronavirus lockdowns in China. The value of private equity deals in Asia hit $46.5 billion in the first three months of 2022, up 340% from the same three-month period last year, the newspaper said. , citing data from Refinitiv. This marked a first-quarter record as the region continued to offer a range of acquisition targets despite tumult elsewhere in the world.