By Danica Bennewies
Welcome back to Friday Finds on the CBLB – the weekly series where we share five of the top corporate and securities law news stories from the past week that dominated the headlines, as well as our conversations. Before we get started, we want to wish all of our female-identifying readers a happy International Women’s Day! Now, lets get into this week’s stories – today we’re talking about Lyft’s IPO prospectus, evolutions in the Barrick/Newmont deal, the latest regulatory news, and more.
First, lets check back in with Barrick Gold Corp and Newmont Mining Corp. As we discussed last week, Barrick has launched a US$17.8-million all stock, zero premium takeover bid for Newmont. On Monday, Newmont rejected the offer and instead suggested a joint-venture agreement in Nevada, where the two companies have adjacent mining operations. Barrick and Newmont’s CEOs were scheduled to meet this week to discuss the terms of the potential joint venture. Newmont initially proposed a 55% ownership split in favour of Barrick, with the two companies sharing management responsibilities. Barrick counter-offered with what it claimed to be a more equitable split of 63% ownership in Barrick’s favour. Furthermore, Barrick’s CEO Mark Bristow argued that the joint venture will only work if Barrick is named the sole operator. Its unclear whether the two mining giants will be able to reach a deal, given each company’s respective demands and the history of hostility between their management teams. If a joint venture agreement can’t be reached, then Barrick will switch its focus back to its original all-stock takeover bid. However, Barrick will have to win over Newmont shareholders quickly, as the shareholder vote on Newmont’s US$10-million offer to acquire Goldcorp Inc. is planned for early April. Clearly, there are a lot of moving pieces in play here and you can bet we’ll be keeping a close eye on how this deal develops.
In other industry news, Lyft has filed the prospectus for its initial public offering (IPO). The registration statement (which can be read in full here) seems to focus more on Lyft’s mission rather than its business performance. Perhaps this is to help improve branding and differentiate the ride-sharing company from Uber, whose IPO is also expected this year. However, it also seems to be trying to distract from the fact that Lyft has been losing money every year and there’s little chance of the company turning profitable in the near future. For example, in 2018 Lyft posted revenues of US$2.16-billion, but a net loss of US$43,000. Another possible point of concern for investors is Lyft’s multiple share classes. Lyft’s co-founders will hold supermajority shares with 20 votes each, while the shares issued to the public will have only one vote each. Thus, Lyft’s co-founders will have significant influence over the company’s actions while only being minority shareholders. This share arrangement is common to many tech companies, such as Facebook and Google, and we’ve discussed some of the risks associated with this on the CBLB in the past. However, this doesn’t mean that Lyft won’t have a successful IPO, as many investors will likely still be enticed by the company’s multibillion-dollar valuation and promised growth opportunities.
Moving now to regulatory news, the Ontario Securities Commission (OSC) provided an update on its initiative to reduce regulatory burden this week. In the Fall of 2018, the OSC put together a task force to identify rules that are outdated or unnecessarily burdensome, which could be eliminated in order to save Ontario businesses time and money. The comment period for the initiative came to a close last week, with more than 59 comment letters received from market participants and investors. In a press release issued Monday, the OSC announced that it is reviewing these comments along with ideas proposed through an internal campaign, and it is developing a framework to measure and analyze burden reduction. The OSC also set a public roundtable for March 27th, where this framework will be discussed. Other topics of discussion at the roundtable will include strategies to maximize the impact of burden reduction initiatives and other high-level burden reduction themes that came out of the comment letters. Registration for the roundtable and a preliminary agenda can be found on the OSC Events page.
In the US, a new rule from the Securities and Exchange Commission (SEC) regarding disclosure of hedging policies of SEC registrants came into effect today. Under this new rule, all SEC registrants other than foreign private issuers must disclose any practices or policies regarding the ability of employees, officers, and directors to engage in hedging transactions with respect to company equity securities. These practices must be disclosed in either the company’s proxy statement or information statement. An important distinction to note is that the new rule does not require registrants to have hedging policies in place, but only to disclose them if they do exist. If the company does not have hedging policies or practices in place it must disclose that fact or state that hedging is generally permitted. According to the SEC, this new rule should “bring increased clarity to share ownership and incentives that will benefit our investors, registrants, and our markets.” The final rule can be found here.
Finally, lets talk about an interesting ruling that came out of the Quebec Court of Appeal this week. On Monday, the court found that Charter protection against cruel and unusual punishment can apply to corporations as well as individuals. The case before the court dealt with a company that faced a $30,000 fine (the minimum fine under the provincial Building Act) for acting as a construction contractor without the required license. The company sought to have the fine struck down by invoking Section 12 of the Charter. The majority held that “[a] legal entity may suffer from a cruel fine that manifests itself by its harshness, its severity and a sort of hostility.” Furthermore, the Canadian public would not find it acceptable for a company to be driven into bankruptcy from a disproportionate fine. In contrast, the dissent stated that this Charter right should not be twisted to protect the economic rights of a legal entity. Ultimately, the court did not decide whether the $30,000 fine in this case constituted cruel and unusual punishment, instead referring the question to another judge. It will be interesting to see if and how this new precedent is applied in future cases where corporations face significant fines and, more specifically, if this argument might be used by firms facing significant penalties for securities law violations.
That wraps up this week’s Friday Finds! Thanks again for joining us here on the CBLB and be sure to check back next week for more of the latest corporate and securities law news.